All eyes were on the pound early Monday, after it tumbled to a new record low against the dollar in response to the package of tax cuts unveiled by the new UK government on Friday.
However, with its complement of foreign-currency earners, the FTSE 100 initially outperformed an otherwise mostly down start for European equities.
Sterling fetched $1.0736 shortly after the London equities open, still down from $1.0869 late Friday, but bouncing from below the $1.04 mark.
The UK currency fell to an intraday low of $1.0349 earlier Monday, its worst ever level against its US counterpart.
‘The pound has continued its disorderly fall today. Since a U-turn on freshly-announced fiscal measures seems unlikely just yet, many are calling for more significant tightening by the Bank of England. However, an FX-related hike may prove unsuccessful. Cable may soon hit parity,’ analysts at ING commented, referring to the pound-dollar rate.
The FTSE 100 index was up 17.13 points, or 0.2%, at 7,035.73 early Monday. The mid-cap FTSE 250 index was down 61.62 points, or 0.3%, at 17,911.07. The AIM All-Share index was down 1.58 points, or 0.2%, at 832.01.
The Cboe UK 100 index was up 0.4% at 702.95. The Cboe 250 was down 0.7% at 15,269.08, and the Cboe Small Companies was up 0.4% at 13,076.30.
The CAC 40 stock index in Paris was flat early Monday, while the DAX 40 in Frankfurt was down 0.3%.
In Tokyo, the Nikkei 225 ended 2.7% lower. In Sydney, the S&P/ASX 200 lost 1.6%. In China, the Shanghai Composite ended down 1.2%, while in Hong Kong, the Hang Seng Index was down 0.4% in late trade.
Sterling has struggled since UK Chancellor Kwasi Kwarteng announced a series of tax cuts and spending plans in a 'fiscal event' on Friday. Kwarteng failed to win the market's confidence, however.
The UK chancellor hinted more tax cuts will follow those he announced last week.
Kwarteng, who has launched a review of all tax rates ahead of a formal budget, is reportedly considering abolishing a charge for parents who earn more than £50,000 and claim child benefit, increasing the annual allowances on pension pots, and a tax break for people who stay at home to care for children or loved ones.
The euro inched up to $0.9694 early Monday from $0.9691 late Friday. Against the yen, the dollar rose to JP¥143.70 from JP¥143.28.
Italy's right-wing alliance led by Giorgia Meloni and her nationalist Brothers of Italy party has won the national election, according to projections.
Meloni spoke of a ‘night of pride’ and said ‘Italy has elected us’ in comments early Monday morning. As leader of the strongest party, Meloni could now lead the future coalition government as Italy's first female prime minister.
Italy's social democrats meanwhile conceded defeat and said they would go into opposition.
In Milan, the MIB index of large-cap stocks was trading 1.0% higher in early dealings.
In London, Unilever shares rose 2.7%. The consumer goods company said Chief Executive Alan Jope will step down at the end of next year, after five years in the post.
‘As I approach my fifth year as CEO, and after more than 35 years in Unilever, I believe now is the right time for the board to begin the formal search for my successor. Growth remains our top priority, and in the quarters ahead, I will remain fully focused on disciplined execution of our strategy, and leveraging the full benefits of our new organisation,’ Jope said.
Jope's position came under pressure earlier in 2022 after Unilever's failed takeover of GSK's consumer health business. The Dove soap maker then added prominent shareholder Nelson Peltz to its board in May, raising expectations of a shake-up at the company.
Berenberg, prior to the CEO departure being announced, lifted Unilever to 'buy' from 'hold' on Monday.
RPS Group rose 12% to 231.00 pence as it backed a £636 million takeover offer from Tetra Tech and withdrew its recommendation for a bid by Toronto-listed consultancy firm WSP Global
Nasdaq-listed consultancy and engineering services firm Tetra will pay 222 pence in cash for each RPS share, a 7.8% premium to the 206p offered by WSP. The WSP deal valued RPS at £591.1 million.
WSP urged RPS shareholders to take no action.
RPS currently has a market capitalisation of £643.8 million.
Pendragon is mulling a takeover proposal of its own. The car dealer said it has received an approach from vehicle showrooms operator Hedin Mobility Group.
Hedin has offered 29p per Pendragon share, giving it an equity valuation of around £405 million. The bid is a 28% premium to Pendragon's 22.7p closing price on Friday.
Pendragon shares rose 21% to 27.50p early Monday. It has a market value of £385.6 million.
Hedin has a 'put up or shut up' deadline of October 24.
In March, Sky News reported that Pendragon had rejected a £400 million takeover approach from Hedin. In August, Pendragon said a ‘large international corporate’ bidder for the car dealership chain decided against pursuing takeover talks, following due diligence.
Elsewhere in London, musicMagpie slumped 44%. It warned growth will be weaker than expected, as the used-technology reseller faces tough market conditions.
For the year ending November 30, it expects profit to be below market expectations.
‘The group now expects that revenue generated in the second half will show lower growth over the first half than previously expected,’ it added.
Even the key Black Friday trading period is expected to provide little joy.
musicMagpie added: ‘Historically, October and November have been material contributors to overall group performance, with heightened activity and consumer interest around the Black Friday sales period, in particular. Whilst the group continues to expect that Black Friday will prove to be a peak trading period, it now believes it is prudent to reduce its expectations for contribution from this period due to the worsening economic outlook and increasing cost of living pressures on the UK consumer.’
Gold was quoted at $1,645.93 an ounce early Monday, up from $1,643.77 at the London equities close on Friday. Brent oil was trading at $85.41 a barrel, down from $86.34.
Still to come on Monday's economic calendar is a German business climate index at 0900 BST.
Copyright 2022 Alliance News Limited. All Rights Reserved.
