Stock markets in German and France were sharply lower on Monday, after Russia turned off gas supplies indefinitely.
Adding to the investor gloom was private sector survey results suggesting the eurozone service sector fell into contraction last month. The double knock to the eurozone economy comes ahead of a European Central Bank interest rate decision on Thursday.
The UK stock market was performing only slightly better, ahead of the announcement of a new Conservative party leader, who also will be the new UK prime minister. Liz Truss was pronounced the UK’s new leader at 12.38pm.
Truss becomes the UK’s third female prime minister following Theresa May and Margaret Thatcher. The 47-year-old has consistently been ahead of 42-year-old Sunak in polling among the estimated 200,000 Tory members eligible to vote.
Wall Street is closed for a holiday on Monday.
On Friday, Gazprom said that a gas pipeline to Germany - which was due to reopen at the weekend - would remain shut until a turbine is repaired, cutting off indefinitely an energy supply route to Europe.
‘Predictably, wholesale gas prices are soaring, raising the prospect of even higher energy bills for businesses and consumers and sending the pound and the euro to new multi-year lows against the dollar,’ AJ Bell investment director Russ Mould said.
The euro traded at $0.9936 midday Monday, down from $1.0027 late Friday. Sterling was priced at $1.1510, down from $1.1575.
The FTSE 100 index was down 51.56 points, or 0.7%, at 7,229.63 midday Monday. The mid-cap FTSE 250 index was down 219.21 points, or 1.2%, at 18,634.01. The AIM All-Share index was down 5.08 points, or 0.6%, at 861.11.
The Cboe UK 100 index was down 0.7% at 722.49. The Cboe 250 was down 1.1% at 15,981.03, and the Cboe Small Companies down 0.3% at 13,682.72.
In mainland Europe, the CAC 40 in Paris was down 1.7%, while the DAX 40 in Frankfurt was 2.4% lower.
‘Bullish market drivers are becoming increasingly difficult to find for stock traders, especially in Europe where the energy crisis ramped up again following Gazprom’s decision to halt gas deliveries to the EU through one of its key pipelines, as a retaliation measure against the oil purchase price cap set up by leaders of the G7 nations,’ Pierre Veyret, technical analyst at ActivTrades, said.
‘This decision added pressure to an already uncertain macro context and will likely continue to drive [equities] prices down in the short-term.’
Brent oil was trading at $95.51 a barrel, higher than $94.00 late Friday.
Oil also was being bid up as the OPEC+ countries are expected to agree a modest increase in oil production at a meeting on Monday,
The 13 members of the Organization of the Petroleum Exporting Countries cartel, led by Saudi Arabia, and their 10 partners, led by Russia, are meeting to adjust their quotas for October. Talks were scheduled to start at 1200 BST.
Adding to the downbeat mood was a report showing the eurozone’s private sector fell into decline in August, as a drop in demand and cost-of-living concerns led to weakness in business activity.
The S&P Global eurozone services purchasing managers’ index swung down to 49.8 points from 51.2 points in July, passing below the neutral mark of 50.0 points to indicate a contraction. The reading for August marked a 17-month low.
As well, the UK services sector’s growth slowed in August, as sales took a hit from growing economic uncertainty and reduced client confidence.
The headline seasonally adjusted S&P Global/Chartered Institute of Procurement UK services PMI business activity index fell to 50.9 points in August from 52.6 in July.
Despite being in growth territory, the print came in well short of market expectations, according to FXStreet, of 52.5.
S&P Global noted August’s reading was the softest in 18 months.
In London, miners were in the green. Glencore was up 4.1%, Antofagasta 2.0%, Anglo American 1.1% and Rio Tinto was 1.0% higher.
Anchored to the bottom of the FTSE 100 was Dechra Pharmaceuticals, down 9.0%.
The veterinary products firm reported higher full-year profit and revenue, though it warned that growth rates are normalising as pandemic tailwinds ease.
In the financial year that ended June 30, Dechra reported revenue of £681.8 million, up 12% from £608.0 million the year before. Pretax profit increased 4.9% to £77.6 million, compared to £74.0 million in 2021.
With financial year 2022 revenue and profit rising, Dechra lifted its annual payout by 11% to 44.89p from 40.50p a year earlier.
However, Dechra noted that revenue in the second half of the year normalised to historic levels of growth, as the benefit of increased spending on pets seen during the Covid-19 restrictions slowed down.
Among London midcaps, Countryside Partnerships was the best performer, advancing 5.5%.
The housebuilder agreed to be acquired by peer Vistry Group.
The cash-and-shares deal, worth about £1.25 billion, values Countryside shares at 249 pence each, a 9.1% premium to its closing price on Friday.
Vistry is offering 0.255 of a share and 60 pence cash for each Countryside share. The merger is expected to close in the first quarter of 2023.
Vistry added it expects the combination to be return-on-capital-employed enhancing from 2024.
Countryside shareholders will own about 37% of enlarged firm. ‘The combination would create one of the country’s leading homebuilders, comprising a top tier housebuilder and a leading partnerships business, with capability across all housing tenures, and delivering much needed affordable housing,’ Vistry explained.
Vistry expects the combined revenue to increase to over £3 billion per year, much higher than its medium term target of around £1.6 billion.
Vistry was 0.3% higher.
Heading in the opposite direction, sports car maker Aston Martin shed 9.9%.
It confirmed its plan for the launch of a rights issue to raise £575.8 million, supported by a fund controlled by Saudi Arabia’s de facto leader.
Aston Martin noted Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, Lawrence Stroll’s Yew Tree Consortium, and fellow car maker Mercedes-Benz are taking up their full entitlements, amounting to 45% of the total rights issue.
Aston will issue 559 million new shares as part of its rights issue, on the basis of four new shares for every one existing share. The shares will be issued at a price of 103 pence each, reflecting a 79% discount to the company’s closing price on Friday last week at 480p.It was trading at 437.46p around midday on Monday.
Looking ahead to the open in New York, the Dow Jones Industrial Average is called up 0.4%, the S&P 500 is called up 0.3%, and the Nasdaq Composite is seen opening 0.1% higher.
Against the yen, the dollar was quoted at JP¥140.48, up from JP¥140.05.
Gold was quoted at $1,714.10 an ounce early Monday, up from $1,713.90 on late Friday.
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