11th Nov 2024 17:04
(Alliance News) - London's FTSE 100 closed higher on Monday as gains in UK high street banks helped halt a recent run of losses.
The FTSE 100 index rose 52.80 points, 0.7%, at 8,125.19. The FTSE 250 closed up 203.57 points, 1.0%, at 20,721.49. The AIM All-Share gained 3.57 points, 0.5%, at 737.93.
The Cboe UK 100 rose 0.7% at 815.50, the Cboe UK 250 advanced 1.1% at 18,160.09 but the Cboe Small Companies fell 0.4% to 16,177.81.
In European equities on Monday, the CAC 40 in Paris and the DAX 40 in Frankfurt both jumped 1.2%.
US stocks were higher, building on Friday's record highs. The Dow Jones Industrial Average was up 0.8%, the S&P 500 added 0.3%, and the Nasdaq Composite was up 0.1%.
The dollar saw renewed support as investors weighed the implications of a looser fiscal stance and possible tariffs from incoming President Donald Trump.
"The Trump trade was turbo charged at the end of last week," said Kathleen Brooks at XTB, with the question now can it continue?
"Trump has been talking tough on tariffs in recent days and addressing illegal immigration. Both are inflationary policies: one through rising tax rates, and the other through reducing the labour supply," she noted.
"This has taken some of the enthusiasm out of the Fed Fund Futures market. The probability of a rate cut in December has fallen to 64%, before the election this was 80%. Due to this, the Trump trade could morph in the coming days. The frenzied rally in the aftermath of the win for Trump, could face some headwinds," Brooks suggested.
Analysts at Brown Brothers Harriman expect further dollar strength.
"Looking beyond the 'Trump Trade', the US economy is in a sweet spot and outperforming other advanced economies. Moreover, the prospect for looser fiscal policy under a Trump administration and limited Fed easing room point to a stronger dollar."
The pound was quoted at USD1.2875 late on Monday afternoon in London, compared to USD1.2926 at the equities close on Friday. The euro stood at USD1.0654, down against USD1.0731. Against the yen, the dollar was trading higher at JPY153.81 compared to JPY152.62.
On London's FTSE 100, NatWest climbed 3.7% after buying back GBP1 billion worth of its shares from HM Treasury, as the UK government continues to sell down its stake in the lender.
The government now has a 12% stake in NatWest, having owned 84% following a taxpayer bailout of what was then Royal Bank of Scotland Group during the financial crisis of 2008 and 2009.
As recently as 2018, HM Treasury held a 62% stake in NatWest, but it has been selling this down progressively since. NatWest said it will cancel all the repurchased shares. It continues to target a CET1 ratio of 13% to 14%.
Russ Mould at AJ Bell said the decision to sell NatWest stock at close to a nine-year high vindicates Chancellor Rachel Reeves' decision in July to scrap a 'Tell Sid' public offer of the government's remaining stake.
"Ditching the share sale was one of the first things she did after Labour won the general election, saying it was 'a bad use of taxpayers' money' as the initiative – created by the previous government – was expected to offer the shares at a potentially large discount to the market price to incentivise take-up by the public."
Mould noted borrowing increases unveiled in budget pushed up gilt yields and had changed the outlook for interest rate expectations.
"The market now thinks rates could stay relatively higher for longer, which creates a more favourable backdrop for banks' ability to charge higher rates for lending," he said.
This as reflected in gains for Barclays, up 3.6%, and Lloyds Banking Group, up 3.1%.
Leading the FTSE 100 rises was Croda, up 5.2%, after a reassuring trading update.
In a trading update, the Yorkshire-based speciality chemicals firm said third quarter sales rose 5% to GBP407 million from GBP387 million a year ago.
Its full-year outlook remains unchanged, with the firm eyeing an adjusted pretax profit of between GBP260 million and GBP280 million at constant exchange rates. Adjusted pretax profit in 2023 totalled GBP308.8 million.
"The shares have had a tough year so the third-quarter sales growth and retained profit guidance contained in its latest update were well received by relieved investors," observed AJ Bell's Mould.
But analysts at Citi noted with a rise in the pound means implies a total adjusted pretax profit of GBP256 million, 2% below company consensus.
Furthermore, Citi said financial 2025 pretax profit consensus of GBP309 million implies around 20% growth and may prove challenging without a further recovery in the demand environment given the implied second half run-rate.
"We see risk to the downside to 2025 consensus earnings estimates," Citi concluded.
A hefty fall in the price of gold put Endeavour Mining and Fresnillo on the back foot, down 3.9% and 1.7% respectively.
The yellow metal was quoted at USD2,617.20 an ounce late Monday afternoon, down sharply USD2,685.63 at the same time on Friday.
Fawad Razaqzada at City Index noted the dollar’s rise has made gold more expensive for foreign buyers, potentially stifling demand, while higher bond yields increase the opportunity cost of holding non-yielding assets like gold and silver.
"Although gold's rally has been significant, recent price action might be a sign of a natural and necessary correction from overextended levels. Against this backdrop, the short-term gold forecast has turned modestly bearish," he added.
On the FTSE 250, Kainos shone rising 6.2%.
The London-based IT services company said profit increased more than 10% in the first half of its current financial year and announced the launch of a GBP30 million share buyback.
Also in favour, Trustpilot rose 4.7% as Deutsche Bank started coverage with a 'buy rating.
On AIM, shares in Aquis Exchange more than doubled after it agreed to be taken over by Six Group, the Swiss exchange operator.
The 727 pence per share cash bid from Zurich-based Six Exchange values Aquis at GBP225 million on a fully diluted basis.
For its part, Aquis said it recognised the European exchange market remains highly competitive and requires ongoing investment in technology and distribution. It said it agreed to the Six offer after extensive talks and "several unsolicited proposals" from Six.
"Aquis will be better placed to deliver on its strategy of developing innovative capital market solutions from a position of further scale," it said in a statement.
Brent oil fell to USD71.76 a barrel at the time of the London equities close on Monday, down from USD73.58 late Friday.
Tuesday's local corporate calendar sees third quarter results from pharmaceutical firm, AstraZeneca, gambling operator Flutter Entertainment and half-year results from telecommunications company Vodafone.
The global economic calendar has UK unemployment and wage growth figures at 0700 GMT and German CPI data also at 0700 GMT.
By Jeremy Cutler, Alliance News reporter
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