London share prices started lower on Monday, after a weak reading on the health of China’s economy hurt Asian trade and ahead of a key week for central bank decisions in the US and UK.

The FTSE 100 index opened down 13.19 points, or 0.2%, at 7,034.48. The FTSE 250 opened down 15.56 points, 0.1%, at 17,901.11 and the AIM All-Share down 1.28 points, 0.2%, at 804.09.

The Cboe UK 100 opened down 0.1% at 702.84 and the Cboe UK 250 down 0.2% at 15,355.19, but the Cboe Small Companies opened up 0.1% at 12,360.21.

The pound was quoted at $1.1577 at the London equities open Monday, compared to $1.1593 at the close on Friday.

The Bank of England will decide interest rates on Thursday, with the market pricing in a 75 basis point hike to take rates to 3%, according to consensus as cited by FXStreet.

‘The Bank of England and US Federal Reserve have yet another thing to think about ahead of their respective interest rate decisions later this week as Russia pulls out of a Ukraine grain deal,’ said AJ Bell investment director Russ Mould.

Russia has halted a deal on allowing Ukraine to export grain from ports in the Black Sea after a Russian warship was damaged in the port city of Sevastopol during drone attacks on the Russian-annexed Crimean peninsula. The Russian Defence Ministry cited ‘terrorist attacks’ on its Black Sea Fleet as the reason for suspending the agreement, which was reached three months to stem a global hunger crisis.

‘Wheat prices are soaring off the back of the move on fears the breadbasket of Europe might be squeezed and this only adds to an existing set of inflationary pressures. Commodity prices, which had receded in relevance somewhat since the summer, are now back at the top of the agenda.’

In European equities on Monday, the CAC 40 in Paris opened down 0.2%, while the DAX 40 in Frankfurt opened up 0.1%.

The euro stood at $0.9929 Monday, up against $0.9943 at the same time on Friday.

In the economic calendar on Monday, there are EU gross domestic product and consumer price index reports at 1000 BST.

Consumer prices in the eurozone are expected to have edged up 0.6% monthly in October, and risen by 9.8% annually, according to FXStreet-cited market expectations. This compares with a monthly increase of 1.2% and an annual rise of 9.9% in September.

GDP is expected to have grown by 2.1% on an annual basis in the third quarter and 0.2% from the second quarter, compared to an annual rise of 4.1% in the second quarter and an increase of 0.8% from the first quarter.

Before the BoE decision on Thursday, there will be an interest rate decision from the US Federal Reserve. According to CME’s FedWatch tool, there is an 85% likelihood of 75 basis point rate hike.

‘What’s more important than the rate hike itself is what the Fed will be doing next. While some Fed members voiced possibility of slowing the pace of rate increases over the past weeks, there is a good chance that Jerome Powell slashes the dovish hopes this week, as he has done earlier this year. If that’s the case, we could see positive market vibes evaporate,’ said Swissquote Bank analyst Ipek Ozkardeskaya.

Against the yen, the dollar was quoted at JP¥148.02 early Monday in London, up from JP¥147.54 late Friday.

In the FTSE 100, Glencore shed 1.9%. The Financial Times revealed that discussions earlier this year for Tesla to take a stake in the miner and commodities trader failed to lead anywhere.

The electric car maker was seeking to secure supplies of battery materials, such as cobalt, lithium and nickel, the FT explained.

Citing ‘two people familiar with the matter’, the newspaper said talks about Tesla buying a 10% to 20% stake in Glencore began last year and continued until this past March, when Glencore Chief Executive Gary Nagle visited Tesla’s factory in Fremont, California.

However, no deal was reached, the two people said, partly over Tesla’s concern that Glencore’s coal mining operations conflicted with its environmental message and partly over reluctance to take a minority stake.

Centrica added 3.1%. The stock was upgraded to ‘buy’ from ‘hold’ by Jefferies.

Among London midcaps, easyJet was up 5.1%. The Times reported that British Airways-owner International Consolidated Airlines Group is eyeing a potential acquisition of the budget airline, as part of renewed plans to consolidate the European airline industry,

IAG also has its eye on Portugal’s flag carrier TAP. It already owns Spain’s Iberia and Vueling and Ireland’s Aer Lingus.

Last week, IAG chief executive said: ‘We are a platform for consolidation. We will only do what makes sense, but we see there are opportunities to be stronger. We are a group that wants to consolidate the industry.’

‘Reports that easyJet could be a takeover target for International Consolidated Airlines make perfect sense,’ said AJ Bell’s Mould.

‘The pandemic has created concerns about the future of business travel, with companies globally realising they don’t need to hold so many meetings in different locations. It’s far easier, cheaper and more environmentally friendly to hold many conversations over Teams or Zoom than get on a plane. Therefore, companies like International Consolidated Airlines need to rethink their future sources of revenue as they may find that business travel doesn’t match pre-Covid levels.’

IAG was up 1.4%.

International Distributions Services, formerly known as Royal Mail, jumped 7.4% in early trade on news that the Communications Workers Union have cancelled a planned strike over the next fortnight.

Additionally, IDS said the UK business secretary has confirmed that no further action will be taken with regards to Vesa Equity Investment’s 22% stake in IDS. Vesa is a Luxembourg-based company, and its stake was being reviewed under the National Security & Investment Act 2021.

Bodycote lost 2.0%, as it named Ben Fidler as CFO-designate, to be effective from May 1 next year. Fidler will join the thermal processing services provider from jet engine maker Rolls-Royce, where he is currently deputy CFO.

On AIM, TP Group shares surged at the market open, almost tripling in value.

The consulting, software and engineering company has agreed to a £17.5 million takeover by Science Group.

TP shareholders will receive 2.25 pence per share in cash, which is almost triple that of the closing price of 0.78p on Friday. Around 11.7% TP shareholders have given a letter of intent to accept the offer. Science Group itself already holds a 28% stake, meaning almost 40% support in total.

Science Group was down 0.7%.

In Asia, the Shanghai Composite closed down 0.8%, and the Hang Seng index in Hong Kong lost 0.8%, as official data showed China’s factory activity shrank in October, after industries were hit by strict Covid lockdowns.

The purchasing managers’ index - a key gauge of manufacturing in the world’s second-biggest economy - came in at 49.2 points, down from September’s 50.1 and below the 50-point mark separating growth from contraction, according to data from the National Bureau of Statistics.

The manufacturing PMI has been in contraction territory for six out of the past eight months, as sweeping Covid restrictions paralysed major industrial cities such as Shanghai, Shenzhen and Chengdu and a summer of searing heat hit production.

The Japanese Nikkei 225 index closed up 1.8% in Tokyo. The S&P/ASX 200 stock index in Sydney closed up 1.2%.

Gold was quoted at $1,641.29 an ounce early Monday, slightly higher than $1,640.91 on Friday. Brent oil was trading at $95.25 a barrel, higher than $93.34.

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Issue Date: 31 Oct 2022