Stocks in London were mixed, with the FTSE 100 dragged down by poor performances from GSK and Shell while the FTSE 250 finished up as IWG rose on reports that CVC Capital is attempting to acquire its digital division.
The FTSE 100 index closed down 34.85 points, 0.5%, at 7,299.99. The FTSE 250 ended up 218.00 points, 1.2%, at 18,559.57, and the AIM All-Share closed up 1.2%, or 9.76 points, at 824.81.
The Cboe UK 100 ended down 0.7% at 730.19, the Cboe UK 250 closed up 1.2% at 16,006.99, and the Cboe Small Companies ended up 0.5% at 12,522.76.
In European equities on Monday, the CAC 40 in Paris ended marginally lower, while the DAX 40 in Frankfurt ended 0.5% higher.
There is a lot for investors to digest over the next week. The US mid-terms take place on Tuesday while in the UK, Chancellor Jeremy Hunt continues preparations for his autumn statement. The cautious mood was not helped by reports from China suggesting it is much further from abandoning its zero-Covid policy than investors had expected.
Last week’s hopes of a reopening in China were dashed on Saturday as China said that it will ‘unswervingly’ stick to its zero-Covid policy. The doubling down had followed recent market optimism that Beijing would cast aside some of its economically damaging virus curbs.
Market sentiment in Europe was cautious ahead of the US mid-term elections on Tuesday, and the CPI report to come on Thursday.
In the US, President Joe Biden pulled out the stops Sunday to mobilize US voters in defence of democracy, hoping to counter a Republican ‘red wave’ in Tuesday’s midterms that could set Donald Trump on a course back to the White House.
Polls in the final stretch put Republicans ahead in the fight for the House of Representatives, and also show them gaining momentum in key Senate races as voters seek to take out frustration over decades-high inflation and rising illegal immigration.
‘The expectation for this week’s midterms is a divided government between the White House and Congress, that could, in return lead to more political impasse and tighter manoeuvre margin for policies, and a slower economic growth,’ said Swissquote Bank’s Ipek Ozkardeskaya.
The dollar was weaker ahead of the elections.
The pound was quoted at $1.1459 at the London equities close Monday, up compared to $1.1301 at the close on Friday. The euro stood at $0.994 at the European equities close Monday, up against $0.9915 at the same time on Friday.
Against the yen, the dollar was trading at JP¥146.56, down compared to JP¥147.16 late Friday.
Meanwhile in the UK, with just 10 days until an autumn statement, UK Chancellor Jeremy Hunt is looking at ways to plug a black hole in UK government finances. The autumn statement is delivered on November 17, though ministers must present crucial parts of the plan to the Office for Budget Responsibility before then so an economic forecast can be prepared.
Hunt is looking at tax rises and spending cuts totalling up to £60 billion as he aims to address the black hole in the public finances. PA reported that Treasury sources confirmed that up to £35 billion of the ‘fiscal tightening’ could come in the form of a reduction in spending, signalling a further squeeze on hard-pressed services.
While the UK government has got to recover its reputation for discipline following Liz Truss’s disastrous premiership, deep cuts to public spending will only exacerbate the already bleak outlook further.
In London, GSK closed the day 4.5% lower.
The pharmaceutical firm said that its blood cancer drug, Blenrep, has failed to meet its primary endpoint of progression-free survival in recent phase three trials.
Blenrep, or belantamab mafodotin, is an antibody drug conjugate designed to treat adult patients with relapsed or refractory multiple myeloma.
Shell shed 0.9% after Goldman Sachs cut the stock to ‘neutral’ from ‘buy’.
Shell and GSK are among FTSE 100’s largest constituents with market capitalisations of £175 billion and £55 billion respectively, which put disproportionate pressure on the blue-chip index.
In the FTSE 250, IWG surged 27%. This followed a Sky News report that CVC Capital Partners approached the office space firm about a potential acquisition of its digital division, Instant Group.
According to Sky, CVC, the private equity backer of Six Nations Rugby, made a £1.5 billion approach for Instant Group.
Citing ‘banking sources’, Sky said Instant Group’s chief executive has been marketing the business to a ‘number of private equity firms’ recently after ‘a string of unsolicited approaches’.
Wizz Air and easyJet were up 8.2% and 2.9% respectively, in positive read-across from Dublin-listed Ryanair. The budget airlines were lifted on strong interim earnings from the Irish carrier.
In the six months to September 30, Ryanair’s revenue trebled year-on-year to €6.62 billion from €2.15 billion. The recent figure was 23% higher than €5.39 billion three years ago, before the Covid-19 pandemic.
Ryanair swung to an interim pretax profit of €1.55 billion from a €99.9 million loss in the first financial half of 2021. This beat pre-pandemic profit of €1.26 billion.
‘To post a record profit so soon after the pandemic is astonishing and speaks to the market share gains the Ryanair has eked out as smaller rivals lose altitude, with the target for passenger numbers increasing significantly,’ said AJ Bell’s Russ Mould.
‘[CEO Michael O’Leary] was notably dismissive of inflation and cost-of-living pressures on the business, suggesting both that Ryanair has got its pricing right but also that people are continuing to prioritise jetting away over other discretionary spending. The company is also benefiting from a return of people travelling for work purposes.’
Ryanair closed up 3.5% in Dublin.
On AIM, Appreciate Group shares surged 57%. The prepaid gift card and voucher provider backed a £83 million buyout from payment services provider PayPoint. PayPoint will pay 33 pence in cash and 0.019 of a new PayPoint share for each Appreciate share. Appreciate shareholders also will receive a 0.8p interim dividend.
Appreciate’s offering boosts PayPoint’s ‘client and retailer proposition’.
PayPoint shares were 4.3% lower.
Stocks in New York were mixed at the London equities close, with the DJIA up 0.5%, the S&P 500 index up 0.1%, and the Nasdaq Composite down 0.2%.
Brent oil was quoted at $98.97 a barrel at the London equities close Monday, up from $97.52 late Friday.
Gold was quoted at $1,678.79 an ounce at the London equities close Monday against $1,672.83 at the close on Friday.
In Tuesday’s corporate calendar, there are annual results from Primark owner Associated British Foods, half-year results from IT consultancy Aveva Group, and natural gas distributor DCC. There are also trading statements from bottling company Coca-Cola HBC, housebuilder Persimmon, food packaging firm Hilton Food Group and Direct Line Insurance.
The economic calendar for Tuesday has Japanese trade statistics overnight, and eurozone retail sales at 1000 GMT. It is Election Day in the US.
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