Equities in Europe kicked off the week on the up, shaking off some tame inflation data out of China, though it is a US consumer price index reading on Wednesday which could dictate sentiment for the remainder of the week.
Among individual shares, M&A news boosted DWF, while water utilities rose on the back of a reassuring Thames Water update.
The FTSE 100 index closed up 16.85 points, 0.2%, at 7,273.79. The FTSE 250 ended up 23.99 points, 0.1%, at 18,027.96, and the AIM All-Share closed down 0.4%, or 2.99 points, at 738.72.
The Cboe UK 100 ended up 0.3% at 725.29, the Cboe UK 250 closed up 0.2% at 15,792.54, and the Cboe Small Companies ended down 0.5% at 13,434.23.
In China, some unexpectedly soft China inflation figures on Monday painted a disconcertingly weak picture of the country’s economy, strengthening the case for an economic stimulus.
The consumer price index for June was flat, coming down from the 0.2% seen in May, according to the National Bureau of Statistics, and was worse than expected as domestic demand slowed.
Producer prices – which measure the cost of goods at the factory gate – tumbled 5.4% on-year, following a 4.6% slide in May. Economists polled by Bloomberg had expected prices to sink 5%.
Still to come this week, US consumer price inflation data is due out at 1330 BST on Wednesday. It might offer some hints on the US Federal Reserve’s interest are move this month.
The reading will follows Friday’s US jobs report. According to the US Bureau of Labor Statistics on Friday, total non-farm payroll employment increased by 209,000 in June, decelerating from a revised rise of 306,000 in May.
June’s figure came below expectations. According to FXStreet-cited consensus, 225,000 jobs were expected to be added last month.
The data came a day after numbers from payroll processor ADP showed US private sector employment grew by almost half a million jobs. Employment grew by 497,000 in June, rising from 278,000 in May.
Markets largely expect the Federal Reserve to hike by 25 basis points when it meets later this month.
The pound was quoted at $1.2828 at the London equities close Monday, down slightly from $1.2832 at the stock market close on Friday.
The euro stood at $1.0984 at the European equities close Monday, higher against $1.0949. Against the yen, the dollar was trading at JP¥141.52, down compared to JP¥142.27.
On the FTSE 100, BT lost 0.1%.
The London-based telecommunications company said its Chief Executive Philip Jansen is resigning.
Jansen said he will step down from his role, at the appropriate moment, over the next 12 months.
Since joining BT, Jansen has re-shaped the company by announcing a reduction in the workforce by 55,000 employees by the end of the decade, and investing in high-speed broadband; setting a target of connecting 25 million homes by the end of 2026.
‘Sadly, Jansen is not going to be remembered for being the person who breathed life back into BT. It’s still the slow, creaking juggernaut today that it was before he joined. Earnings are forecast to go into reverse this financial year and show minimal progress over the following two years,’ said AJ Bell analyst Russ Mould.
‘Shareholders have suffered big time: more than £10 billion has been wiped off the value of the business under Jansen’s leadership, and BT is now nearly one-quarter owned by a French billionaire who has taken advantage of the weak share price to build a strategic stake.’
FTSE 100-listed water utility companies were up, after news of a cash injection in Thames Water. Severn Trent and United Utilities ended up 1.7% and 1.0%, respectively.
Thames Water Utilities said its shareholders have agreed to pump in another £750 million in funding, but it warned that another £2.5 billion will be needed by 2030 as the water supplier struggles under a £14 billion debt mountain.
Thames Water said the initial funding agreement to the end of March 2025 is a ‘major milestone’, although it is less than the £1 billion expected, and the company admitted that ‘significantly’ greater support will be needed in following years for its turnaround to be delivered.
Thames Water is the UK’s biggest water supplier with 15 million customers, serving households across London and the South East.
Among London’s main market small-caps, DWF surged 34% to 87.80p. It confirmed a Bloomberg report that it was in talks about a potential takeover with Inflexion Private Equity Partners.
The Manchester-based legal business said the potential offer would be for a total consideration of 100 pence per share. This could comprise 97p in cash, and a 3p special dividend for the six months to April 30.
‘Discussions between DWF and Inflexion are ongoing and there can be no certainty that an offer will be made, even if the pre-conditions are satisfied or waived,’ the company said.
On the back of this, Liberum upped its ’sell’ rating for DWF to ’hold.’ It doubled its target price to 100p from 50p.
‘The shares are trading at discount to the potential offer price, reflecting risks to the deal due to the forced announcement and the number of stakeholders involved; investors might be wise to sell into the share price strength. The potential offer from Inflexion indicates renewed interest in the professional services space and we see a number of firms as vulnerable,’ said Liberum’s James Allen & Nick Anderson.
On AIM, Totally plunged 25%, after the firm guided for lower revenue and earnings in the year ahead.
Totally provides frontline healthcare services in the UK and Ireland.
The company reported a pretax loss of £1.8 million in the year ended March 31, up from £1.3 million the year prior. Revenue in the year increased 6.5% to £135.7 million from £127.4 million.
Looking forward, Totally said it expects revenue in the year ahead to be lower than the year just reported amid ‘increasingly challenging’ operating conditions.
In European equities on Monday, the CAC 40 in Paris and the DAX 40 in Frankfurt both ended up 0.5%.
Stocks in New York were higher at the London equities close, with the Dow Jones Industrial Average up 0.5%, the S&P 500 index up 0.1%, and the Nasdaq Composite was flat.
Brent oil was quoted at $78.48 a barrel at the London equities close Monday, higher from $75.23 late Friday. Gold was quoted at $1,923.22 an ounce at the London equities close Monday, higher against $1,909.01 at the close on Friday.
In Tuesday’s UK corporate calendar, there will be a trading statement from veterinary products firm Dechra Pharmaceuticals, as well as full-year results from business recovery company Begbies Traynor Group.
The economic calendar for Tuesday has a UK unemployment reading and inflation data from Germany at 0700 BST.
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