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LONDON MARKET CLOSE: Europe boosted by bullish open in New York

16th Oct 2023 16:53

(Alliance News) - European equities found their groove in afternoon dealings, supported by a decent start in New York, with the lack of an escalation in Middle East tensions enough for investors to buy into equities again.

The situation in Israel and Gaza is still precarious, however, and an aggravation in the conflict could hit equities hard.

Investors will also have one eye on monetary policy, with speeches from more US central bankers on the docket this week. There is also a UK inflation reading on Wednesday, which could set the tone ahead of the next Bank of England decision on November 2.

The FTSE 100 index rose 31.03 points, 0.4%, at 7,630.63. The FTSE 250 ended up 65.17 points, 0.4%, at 17,519.39, and the AIM All-Share fell 2.86 points, 0.4%, at 686.81.

The Cboe UK 100 closed up 0.5% at 762.58, the Cboe UK 250 climbed 0.3% to 15,198.81, though the Cboe Small Companies fell 0.1% to 12,794.77.

In European equities, both the CAC 40 in Paris and the DAX 40 in Frankfurt climbed 0.3%.

Stocks in New York had a positive open. The Dow Jones Industrial Average was up 1.1% at the time of the European close. The S&P 500 also added 1.1%, while the Nasdaq Composite climbed 1.2%.

The Nasdaq Composite led the way after suffering successive declines at the end of last week on renewed inflation worries. The tech-heavy index will be in focus this week, with streaming service Netflix releasing results on Wednesday.

Elsewhere in the US corporate calendar this week, there are third-quarter results from Bank of America, Goldman Sachs and pharmaceutical firm Johnson & Johnson on Tuesday. Results from Morgan Stanley and Tesla follow on Wednesday.

Sterling was quoted at USD1.2194 late Monday afternoon, higher than USD1.2135 at the London equities close on Friday. The euro traded at USD1.0546, up from USD1.0498. Against the yen, the dollar was quoted at JPY149.56, down versus JPY149.66.

Gold was quoted at USD1,921.22 an ounce, lower than USD1,922.99 on Friday. Brent oil was trading at USD90.19 a barrel, rising from USD89.59 late Friday.

Shares in Shell and BP rose 1.1% and 0.2% in London, tracking the North Sea benchmark higher.

CMC Markets analyst Michael Hewson commented: "The FTSE 100 is edging higher helped by resilience in basic resources and energy with Shell seeing its share price hit a new record high. This move would appear to justify the recent decision by new CEO Wael Sarwan to refocus new capex on the company's key revenue earners of oil and gas, which while slightly weaker today is probably likely to remain well supported while the Middle East tensions remain.

"It is also becoming increasingly obvious given the challenges facing the global economy that the fixation on net-zero will eventually have to collide with reality and be managed in a more economically sustainable way in the face of exponentially rising costs. BP shares on the other hand have lagged as the look for a new CEO in the aftermath of the departure of Bernard Looney continues."

Murray Auchincloss stepped in as BP's interim CEO last month after Looney left under a cloud over undisclosed personal relationships with colleagues.

It was a good day for London-listed water utilities. Severn Trent added 2.8% and Pennon rose 3.2%. Jefferies double-upgraded the duo to 'buy' from 'underperform', while United Utilities was lifted to 'buy' from 'hold'. United Utilities shares rose 1.9%.

Hipgnosis Songs Fund slumped 9.3% after it pulled a previously declared interim dividend.

Hipgnosis said it now expects to receive "significantly lower retroactive payments" of songwriter royalties for 2018 to 2022. Due to the expected decision by the US Copyright Royalty Board for that period, Hipgnosis plans to reduce its retroactive accrual to USD9.9 million from the USD21.7 million it had accrued at the end of March.

To ensure compliance with a covenant of its revolving credit facility, Hipgnosis will withdraw its interim dividend payment. It also will discuss the royalties issue with its lenders.

The decision comes ahead of the company's annual general meeting in 10 days, which will see shareholders vote on two key motions, a planned disposal and the company's continuation.

Putting further pressure on the firm, shareholder called on investors to vote against its continuation and the planned disposal.

Asset Value Investors, which manages London-listed AVI Global Trust, believes a "reset" is needed at Hipgnosis. Asset Value Investors manages a 5% stake in Hipgnosis.

Asset Value Investors said it is looking for answers from HSF in respect to the pulled dividend. It noted HSF shares have already gone ex-dividend, a cut-off date which means new investors would not qualify for the latest payout.

Asos and boohoo rose 2.0% and 2.8% respectively. Frasers Group lifted its stakes in the online clothing retail duo, according to filings on Monday.

The Sports Direct owner increased its holding in Asos to 22.8% from 19.7%, and raised its stake in boohoo to 15.1% from 13.4%.

Both online fashion businesses have suffered share price declines over the past year, potentially providing an attractive buying opportunity.

AJ Bell analyst Russ Mould commented: "Frasers loves a bargain and clearly sees an opportunity to have influence over boohoo's strategy, possibly as another avenue to sell its range of athleisure brands. But equally, Frasers might be viewing this simply as a way to make a quick buck – a chance to buy shares on the cheap and then flip them should see the online retailer be successful in its turnaround efforts."

Frasers shares climbed 0.5%.

Tuesday's economic calendar has a US retail sales reading at 1330 BST.

The UK corporate calendar has full-year results from housebuilder Bellway and a trading statement from price comparison website Still to come on Monday is a trading statement from miner Rio Tinto around 2230 BST.

By Eric Cunha, Alliance News news editor

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