Shares in London kicked off the week in a muted fashion, though peers elsewhere in Europe were on the up, after numbers showed eurozone inflation cooled and the single currency area’s economy grew.
IAG shares continued to fly higher in London after it reported strong results last week. That was not enough to prop up the FTSE 100, which was hurt by a share price fall for BT. Elsewhere, Marshalls slumped on a weak outlook.
The FTSE 100 index was down 6.06 points, 0.1%, at 7,688.21. The FTSE 250 was down 3.83 points at 19,120.31, and the AIM All-Share was down 1.17 points, 0.2%, at 765.06.
The Cboe UK 100 was down 0.2% at 766.58, the Cboe UK 250 was down 0.1% at 16,776.38, and the Cboe Small Companies was down 0.1% at 13,758.96.
In European equities on Monday, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.1%.
Eurozone inflation fell in line with market expectations, according to data on Monday, as the single currency area also returned to growth during the second quarter of 2023.
Eurostat said the single currency area’s yearly inflation rate faded to 5.3%, according to a flash estimate, from 5.5% in June. The figure was in line with FXStreet consensus.
The eurozone inflation rate faded markedly from 8.9% in July 2022. It peaked at 10.6% in October.
Core inflation remained stubborn, however. Excluding energy, food, alcohol and tobacco, the yearly core inflation rate was 5.5% in July, unchanged from June. The latest July figure topped FXStreet consensus of 5.4%.
‘Overall, the inflation picture looks positive for the coming months,’ ING analyst Bert Colijn commented.
‘Even though energy prices have been increasing recently, base effects will push energy inflation down further. Selling price expectations look encouraging for core inflation, especially for goods. Services inflation is set to trend higher for longer, but also slowing from here on.’
Eurostat said that seasonally adjusted gross domestic product increased by 0.3% in the eurozone in the second quarter of 2023, compared to the first quarter. This preliminary flash estimate comes in ahead of FXStreet consensus of 0.2%.
In the first quarter of 2023, GDP had fallen by 0.1% in the eurozone quarter-on-quarter.
However, Capital Economics Andrew Kenningham noted that the increase in GDP was ‘largely due to one-off increases in France and Ireland’. Kenningham maintained that ‘the economy is heading for recession.’
The pound was quoted at $1.2857 at midday on Monday in London, slightly lower compared to $1.2861 at the equities close on Friday. The euro stood at $1.1037, higher against $1.1030. Against the yen, the dollar was trading at JP¥142.35, higher compared to JP¥140.53.
In the FTSE 100, BT Group lost 2.0%.
It named Allison Kirkby as its new chief executive officer, about three weeks after the company officially started its search for a new CEO.
She will take over from outgoing CEO Philip Jansen around the end of January 2024 at the latest. Jansen will be available to support the handover until the end of March, when BT’s financial year 2024 ends.
Kirkby has been CEO of Telia Co since early 2020. Telia, headquartered in Sweden, is a digital communications and telecommunications provider with around 25 million customers across the Nordic and Baltic region.
IAG rose by 2.8% putting it at the top of the FTSE 100 index.
Oddo BHF raised the British Airways parent’s rating to ’outperform’.
On Friday, IAG reported that it had swung to a pretax profit of €1.04 billion in the six months that ended June 30 from a loss of €843 million a year before, on €13.58 billion in revenue, up 45% from €9.35 billion.
In the FTSE 250, Marshalls dropped 7.8%.
The West Yorkshire-based natural stone and concrete manufacturer expects to report revenue of £354 million for the six months that ended June 30, up 1.7% from £348 million a year before. However, this includes four additional months of contribution from its recent acquisition of Marley.
On a like-for-like basis, revenue fell by 13%, Marshalls cautioned.
Adjusted pretax profit for the half year is expected to be around £33 million, down from £45 million.
Looking ahead, Marshalls said it expects the second half of 2023 to be below its previous expectations, meaning the full year will be as well.
‘Marshalls is getting into the nasty habit of issuing profit warnings and true to form along comes another one. High inflation, rising interest rates and weaker consumer confidence have combined to form a toxic cocktail for companies serving the repair, maintenance and improvement sector and new-build housing market,’ AJ Bell analyst Laith Khalaf commented.
Dr Martens rose 5.5%.
Sky News reported Saturday that activist investment manager Sparta Capital Management has built a stake worth ‘tens of millions’ in the bootmaker.
Sky News added that Sparta has engaged with the Dr Martens board to try and boost the fortunes of the FTSE 250 constituent.
Sparta Capital, based in London and founded by Franck Tuil in 2021, is now a top-10 shareholder in Dr Martens. Tuil founded Sparta after departing from Elliott Investment Management.
On AIM, Aptamer plummeted 39%.
The provider of Optimer binders for use in therapeutics, diagnostics, bioprocessing and research said it has terminated its sale process after announcing it had conditionally completed a £3.6 million fundraise.
The company also revealed that Chair Ian Gilham and Interim Chief Executive Officer & Chief Financial Officer Rob Quinn have resigned, effective from August 21. The company announced that it had appointed Steve Hull as chair from the same date, and promoted Andrew Rapson, current head of finance, to CFO.
Stocks in New York were called to open mixed. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index up marginally, and the Nasdaq Composite down 0.1%.
Brent oil was quoted at $84.88 a barrel at midday in London on Monday, up from $83.67 late Friday. Gold was quoted at $1,957.21 an ounce, down against $1,962.33.
The remainder of Monday’s economic diary is quiet, though the week picks up speed with manufacturing data from across the globe on Tuesday and the latest US nonfarms payrolls data on Friday.
There is also a Bank of England interest rate decision on Thursday. The decision will be accompanied by the latest monetary policy report, which sets out economic analysis and inflation projections.
Deutsche Bank analyst Sanjay Raja expects a 25 basis point hike, which would take the benchmark rate to 5.25%. It will be a close call between that outcome and a chunkier 50 basis point hike, however, the investment bank believes.
‘Beyond next week’s decision, Sanjay sees two more 25bps hikes, with rate cuts potentially starting from Q2-24,’ Deutsche Bank added.
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