Bank of England, Threadneedle Street
Political campaigns are picking up speed and there is a Bank of England decision to come / Image source: Adobe

European stocks recovered some poise Monday after a difficult week, though there could more volatility for equities in London and mainland Europe, with political campaigns picking up speed, and a Bank of England decision to come.

Stocks in Asia traded lower, with mixed data from China hurting enthusiasm.

The FTSE 100 index opened up 40.03 points, 0.5%, at 8,186.89. The FTSE 250 was up 118.58 points, 0.6%, at 20,238.94, and the AIM All-Share rose 2.23 points, 0.3%, at 778.27.

The Cboe UK 100 was up 0.4% at 814.53, the Cboe UK 250 was up 0.6% at 17,618.92, and the Cboe Small Companies was up 0.1% at 16,465.91.

In European equities on Monday, the CAC 40 in Paris was up 1.0%, while the DAX 40 in Frankfurt was 0.6% higher.

In New York on Friday, the Dow Jones Industrial Average lost 0.2%, the S&P 500 ended marginally lower, while the Nasdaq Composite rose 0.1%.

In Asia on Monday, shares were lower. The Shanghai Composite ended down 0.6%, and the Hang Seng in Hong Kong was down 0.1% in late trade. Tokyo’s Nikkei 225 fell 1.8%, and over in Sydney, the S&P/ASX 200 ended 0.3% lower.

Hot-on-the-heels of the US Federal Reserve and Bank of Japan last week, the Reserve Bank of Australia and Bank of England announce rate decisions on Tuesday and Thursday.

Both are expected to leave rates unmoved.

The BoE will have a UK inflation reading to mull over on the eve of its decision, however.

Swissquote analyst Ipek Ozkardeskaya commented: ‘The week will be interesting for the UK. The latest British inflation numbers are due on Wednesday and the Bank of England decision is due on Thursday. Inflation may have eased to the 2% in May in Britain, right to the BoE’s policy target, but the BoE is not expected to cut rates before the July general election, and inflation is seen rebounding toward 2.5% in the second half, anyway.

‘But a sufficiently soft inflation read and a sufficiently soft BoE statement could fuel the expectation of a cut in September - and one more in December, and encourage the sterling bears to push cable into a medium term bearish consolidation zone, as well.’

The pound was quoted at $1.2673 early Monday in London, down from $1.2683 at the time of the European equities close Friday. The euro edged up to $1.0706 from $1.0698, while against the yen, the dollar rose to JP¥157.54 from JP¥157.36.

UK Prime Minister Rishi Sunak returns to the campaign trail on Monday. He is heading to East Yorkshire, the East Midlands and East of England after a pause in campaigning for his prime ministerial duties.

He attended the G7 summit in Italy on Thursday and Friday, followed on Saturday by Trooping the Colour and a major international summit on Ukraine in Switzerland.

Opinion polls continue to show his party crashing to defeat, with one survey published during his absence showing Reform UK edging ahead of the Conservatives for the first time.

Although it was within the margin of error and other surveys since then have showed Nigel Farage’s outfit trailing the Conservatives, it came as a major blow to the Tories and preceded warnings by other pollsters of ‘electoral extinction’ for the party.

France, meanwhile, began less than a fortnight of frenetic election campaigning for snap polls called by President Emmanuel Macron to combat the far right.

Candidates had until Sunday evening to register for the 577 seats in the lower house National Assembly ahead of the official start of campaigning from midnight for the June 30 first round. The decisive second round takes place on July 7.

The snap election call rattled European markets last week.

XTB analyst Kathleen Brooks commented: ‘Politics are a serious threat to financial market stability in 2024. Unexpected results in India and Mexico, along with the prospect of Marine Le Pen’s party winning enough seats in France’s parliamentary elections to form a government, are causing havoc as we move towards the end of the second quarter. ’

In London, miners struggled in early dealings on the back of mixed China data. China is a major buyer of minerals. Rio Tinto fell 1.4%, Anglo American lost 0.9% and Glencore fell 0.5%.

Chinese retail sales picked up in May but industrial production growth slowed, official data showed Monday, suggesting the recovery in the world’s second-largest economy remains uneven.

Leaders have struggled to kickstart growth since an initial burst followed the end in late 2022 of stringent Covid measures that had hammered businesses and consumer activity, while a property crisis and high unemployment has dented investor confidence.

In May, retail sales – a key measure of consumer spending – grew 3.7% year-on-year, rebounding from April’s 2.3% increase, according to the National Bureau of Statistics.

The figure was also higher than the 3.0% increase predicted in a Bloomberg survey of analysts.

However, industrial production growth slowed, with May’s 5.6% expansion well down from 6.7% in April and short of the 6.2% forecast in the Bloomberg survey.

Back in London, Mind Gym shares plunged 29%. The personal and business coaching service reported weaker annual earnings, and expects the new year to be one of ‘recalibration’.

Revenue in the year to March 31 declined 18% to £44.9 million from £55.0 million. It swung to a £12.1 million pretax loss, from profit of £5.3 million.

‘FY25 will be a year of recalibration as we implement the new strategy which will return MindGym to its historic performance levels. Whilst it will take time before the full benefit of this new strategy is realised, the board expects Ebitda profitability and cash generation in FY25,’ it said.

Contango Holdings shot up 44% as it reported it has brought in a Chinese investor for its Muchesu coal project in Zimbabwe.

Wencai Huo, a Zimbabwe-based Chinese national, will buy a 51% stake in the asset. Huo, who has ‘extensive mining and business investments in Zimbabwe’, will enter into a subscription deal to acquire a 20% stake in Contango.

Contango currently holds a 70% stake in Muchesu, with its holding soon rising to just under 75%. Following the stake sale to Huo, Contango will own just under 24% of the asset.

Huo will match Contango’s historic expenditure of around $20 million into Muchesu.

Contango Chief Executive Officer Carl Esprey said: ‘Huo is highly experienced in mining and operating throughout southern Africa. His intention to become a major shareholder in Contango, as well as become the lead partner in the project, is testament to the upside this agreement offers to shareholders. By investing a further $20 million at Muchesu we will be able to quickly ramp up operations and satisfy some of the larger contracts we have been reviewing or are aware of. Our intention has always been to develop our suite of coal products, as well as the manufacture of coke at site.’

Brent oil was quoted at $82.54 a barrel early Monday, largely flat from $82.51 late Friday. Gold was quoted at $2,319.04 an ounce, down from $2,327.27.

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Issue Date: 17 Jun 2024