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LONDON MARKET CLOSE: European stocks fall but dollar rises on unease

27th Sep 2023 17:00

(Alliance News) - European stocks suffered another underwhelming day on Wednesday, with sizeable uncertainty hanging over global equity markets as the final quarter of a tricky year approaches.

"Last week was action-packed and it seems investors are still piecing it all together in the absence of much else happening. While I often refer to them as eternal optimists, when faced with the prospect of recession in Europe, a sluggish recovery in China, and a [US Federal Reserve] that's seemingly determined to push the economy to the edge despite huge progress already without much pain, it would appear investors are struggling to see the upside," Oanda analyst Craig Erlam commented.

The FTSE 100 index fell 32.50 points, or 0.4%, at 7,593.22. The FTSE 250 closed down 116.42 points, or 0.6%, at 18,220.23, and the AIM All-Share lost 1.62 points, 0.2%, at 728.53.

The Cboe UK 100 ended down 0.5% at 757.33, the Cboe UK 250 fell 0.7% at 15,863.81, and the Cboe Small Companies fell 0.6% at 13,457.53.

In European equities on Wednesday, the CAC 40 in Paris ended marginally lower, while the DAX 40 in Frankfurt closed down 0.3%.

The pound was quoted at USD1.2140 at the time of the closing bell in London on Wednesday, down from USD1.2163 on Tuesday. The euro stood at USD1.0517, lower against USD1.0576. Against the yen, the dollar was trading at JPY149.42, higher compared to JPY148.91.

Equities have been hurt by the expectation that interest rates in major economic will be higher for longer, as inflation, despite cooling, remains robust.

Stoking inflationary pressure further recently has been a rise in oil prices.

Brent oil was quoted at USD95.52 a barrel late Wednesday afternoon in London, up markedly from USD92.37 at the London equities close on Tuesday.

Stocks in New York were mixed at the time of the European close. The Dow Jones Industrial Average was down 0.2%, the S&P 500 index flat, and the Nasdaq Composite up 0.1%. The major indices in New York suffered on Tuesday, analysts at Tower Bridge Advisors commented.

Tower Bridge analysts explained: "Stocks fell sharply amid a series of negative events. Bad momentum, an extended auto strike, the likelihood of a partial government shutdown, higher interest rates, you name it. The news was all bad, and the stock market reflected it. Meanwhile, 10-year treasuries traded over 4.5% and threatened to move ever higher.

"With all this said, this is not a repeat of September 2008. The economy is still growing, there is no Lehman-like failure on the horizon, and financial markets are still functioning properly. Thus, let's look at today's market through a proper lens. The economy is weakening. Consumers are running through excess savings. Higher oil and gasoline prices are hurting confidence. As for Washington, it's pure absurd theatre."

In London, shares in BP and Shell rose 1.4% and 1.2%, benefitting from the higher oil price.

Also on the up, Ithaca Energy surged 8.5%, the best FTSE 250 performer. Alongside Equinor UK, it will invest USD3.8 billion on the development of Rosebank on the UK continental shelf.

The oil field was approved by the UK government's regulator, the North Sea Transition Authority. The UK government expects billions of pounds to be added into the economy from the project, which has been criticised by environmentalist groups.

"The Rosebank field will produce in excess of 21 million square cubic feet of natural gas every day, the equivalent to the daily use of Aberdeen city," Ithaca said.

First production is anticipated between 2026 and 2027.

Centrica, meanwhile, lost 4.9%. Morgan Stanley cut the British Gas-owner to 'equal-weight'.

Also sliding, online grocer and warehouse technology provider Ocado slumped another 9.6%. Speculation over a possible takeover helped take shares to a year-to-date high of 1,017.00 pence in July, though it has declined some 40% since.

Pendragon added 11% amid robust half-year results, as another outfit threw its hat in the ring to acquire the car dealer. Revenue in the six months to June 30 rose 13% to GBP2.09 billion from GBP1.85 billion a year prior. Pendragon's pretax profit increased 11% to GBP36.4 million from GBP32.9 million.

There are three proposals for Pendragon to mull over. Two bids are for the company to be acquired in its entirety. A third, which has been accepted, is for the firm to sell its entire UK motor and leasing business.

Though Pendragon last week Monday said it agreed to sell its entire UK motor business and leasing business to Lithia Motors, its fate is far from certain. That deal would mean it will operate as a standalone Pinewood business, making it a pure-play software as a service business. Pinewood is a dealer management system.

Since the start of last week, Pendragon has attracted takeover interest. On Friday, it revealed that it received a revised takeover tilt from Hedin Mobility Group AG and PAG International Ltd, or Penske.

The new offer is for 32 pence per share, up 14% from the 28p per share offered previously, which Pendragon had rejected, saying it fundamentally undervalued the company. The new offer values Pendragon at around GBP447.0 million.

Pendragon is also mulling another 32p per share bid. AutoNation made an unsolicited proposal, Pendragon said late Tuesday.

Also attracting M&A interest, Alfa Financial Software surged 14% after it confirmed it is in preliminary discussions with Thomas H Lee Partners regarding a possible takeover offer.

The software developer noted that there is no certainty that a firm offer will be made. It did not disclose any further details.

Over in Zurich, UBS shares fell 3.0%. Bloomberg reported that the US Department of Justice has stepped up its probe into Credit Suisse Group and UBS over suspected compliance failures that allowed Russian clients to evade sanctions.

Gold was quoted at USD1,880.42 an ounce at the time of the London equities close on Wednesday, lower against USD1,903.23 on Tuesday.

Thursday's economic calendar has a US gross domestic product reading at 1330 BST, after German inflation data at 1300 BST.

A busy local corporate diary has a trading statement from All Bar One owner Mitchells & Butlers and tool and equipment rental firm HSS Hire Group.

By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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