16th Nov 2015 17:04
LONDON (Alliance News) - Stocks in London shook off a weak open to close broadly higher Monday, with the FTSE 100 and FTSE 250 taking back some of their recent losses, as investors returned to their desks for the first time since the terrorist attacks in Paris on Friday.
"Following Friday's attack in Paris, European indices gapped heavily lower," said Joshua Mahony, market analyst at IG. "Yet, just like people, markets have proven surprisingly resilient," he noted.
The attacks in Paris were "organized, thought out, planned out of Syria," said French Prime Minister Manuel Valls, as prosecutors said that one of the suicide bombers could possibly have come from the war-torn Middle Eastern country. The Islamic State extremist group, which controls territory in Syria and Iraq, has claimed responsibility for the Paris killings.
Following the attack, which left 129 people dead and some 350 injured, the French Defence Ministry launched airstrikes against Islamic State in its stronghold of al-Raqqa in Syria. The strike involved 10 French planes that dropped 20 bombs, destroying a commando position where munitions were stored and a training camp for terrorists.
Ahead of the UK equity market close, French President Francois Hollande said that France will "intensify" air strikes against Islamic State targets in Syria, with continuing strikes in the comping weeks.
Analysts deliberated the economic consequences of the attack on France. Berenberg's chief economist Holger Schmieding said that, in the past, attacks similar to the one seen in Paris, such as the 7/7 bombings in London in 2005, the 2004 attack on Madrid, and 9/11 in the US in 2001, have not derailed economic trends.
Schmieding noted that the attacks likely will see more spending on police and military, but not to such an extent as to make a major difference to short-term aggregate demand.
"Of course, the terror attacks raise profound political issues that can also have longer-term economic consequences," said Schmieding. "While difficult and potentially contentious decisions are ahead, the external threat can also serve as reminder of the ties that bind Europe and its citizens and nations together," he added.
The FTSE 100 ended the day modestly higher, up 0.5% at 6,146.38, as it closed higher for the first time since last Wednesday, while the FTSE 250 closed up 0.4% at 16,844.38 and the AIM All-Share index closed down 0.6% at 728.24.
"On this occasion, investors had the whole of the weekend to digest the news, so the panic trading only lasted a few minutes after the Asian open overnight," said Fawad Razaqzada, technical analyst at FOREX.com.
In Europe, the DAX 30 in Frankfurt closed up 0.1%, while the CAC 40 in Paris ended down 0.1%.
Earlier Monday, Asian stocks closed mixed. The Japanese Nikkei 225 closed down 1.0%, the Hang Seng index in Hong Kong closed down 1.7%, but the Chinese Shanghai Composite ended the day up 0.7%.
"While the total human impact is immeasurable, the economic shock-waves to the French economy could include reduced investment, consumer spending and confidence for an economy that is already under pressure," said IG's Mahony.
In data released from Europe Monday, Eurostat showed that inflation in the eurozone turned positive in October after falling a month ago. Consumer prices gained 0.1% year-on-year, reversing a 0.1% fall in September, coming in slightly higher than the flat reading that economists had been expecting. On a monthly basis, consumer prices edged up 0.1% in October, having come in 0.2% in September.
Still, headline inflation remains well below the European Central Bank's target of "below, but close to, 2%".
In the US, meanwhile, the manufacturing performance in New York State continued to contract in November. The New York Federal Reserve said its Empire State index came in at negative 10.7 for November, compared with the negative 11.36 reading seen in the previous month. Economists' expectations had been for a more marked improvement to negative 5.0.
On Wall Street, at the UK equity market closing bell, the DJIA traded up 0.3%, with the NASDAQ Composite down 0.3% and the S&P 500 up 0.2%.
In the forex market, at the close of the London stock market and following the data, sterling traded at USD1.5192, while the euro stood at USD1.0708. The pound had traded at USD1.5200 at the same time on Friday, with the euro at USD1.0727.
At the individual UK equity level, travel stocks were among the heaviest fallers in the blue-chip and mid-cap indices Monday following the terrorist attack in Paris. FTSE 100-listed TUI AG, International Consolidated Airlines Group, InterContinental Hotels Group, Carnival and easyJet closed down 4.1%, 3.2%, 0.8%, 2.5% and 0.5%, respectively, while FTSE 250-listed Thomas Cook Group ended the day down 4.8%.
Housebuilder Taylor Wimpey, meanwhile, closed up 4.1% as it continued the string of good news from the UK sector as it said the market has continued to be very positive and its sales rate has increased in the second half.
The company said high levels of customer confidence and demand have been converted into increased sales and healthy sales price growth, boosted by a wide range of mortgage products currently available and tighter lending requirements, keeping monthly payments sustainable and affordable.
Thanks to the robust market and its strong performance, Taylor Wimpey said it expects its operating profit margin to improve by 200 basis points in 2015.
Diploma, closing up 17%, was the biggest winner in the FTSE 250. The technical products and services company said its pretax profit and revenue edged higher in its recently-ended financial year, albeit as sales were held back in the second half by softer industrial markets and cost-cutting in the healthcare sector.
Diploma said its pretax profit for the year to the end of September was GBP51.8 million, compared to GBP49.8 million a year earlier, as revenue rose to GBP333.8 million from GBP305.8 million.
The group will pay a final dividend of 12.4 pence per share, up 7.0% year-on-year, bringing its total dividend up to 18.2p from 17.0p.
Building products company SIG was another big mid-cap riser, ending the day up 4.9%, after it said trading improved in October, following the profit warning it issued last month as it was hit by sluggish conditions in its key markets.
The group had downgraded its underlying operating profit guidance for all of 2015 to GBP85.0 million to GBP90.0 million, down from the GBP98.1 million it made a year earlier. On Monday, the group said trading had improved in October and affirmed that reduced full-year guidance.
In the commodities market, gold prices edged marginally higher amid a muted reaction to the terrorist attacks in Paris and subsequent military response by the French in Syria. At the UK equity market close, the precious metal traded at USD1,085.41 an ounce, having stood at USD1,082.40 an ounce at the same time on Friday.
Brent oil, meanwhile, traded at USD43.30 a barrel, having traded at USD44.48 a barrel at the UK stock market close Friday.
In the data calendar Tuesday, investors will be keeping a close eye on the UK's Treasury Committee inflation report hearings at 0900 GMT, with UK retail, producer and consumer price inflation data for October due out at 0930 GMT.
According to FXStreet.com, economists' expectations are for the consumer price index to come in at 0.1% month-on-month in October, having fallen by 0.1% in September, with the retail price index expected to do the same. On a yearly basis, UK CPI is forecast to remain negative at minus 0.1%, while retail prices are expected to grow by 0.9%.
Shortly after, November's ZEW economic sentiment surveys for Germany and the wider eurozone are scheduled to be released at 1000 GMT. In the US, consumer price inflation readings are expected at 1330 GMT, with industrial production and capacity utilization data at 1415 GMT.
Also of note, US Federal Reserve Governor Daniel Tarullo is scheduled to speak after the UK equity market close at 2030 GMT.
In a busy day in the corporate calendar Tuesday, FTSE 100-listed easyJet is scheduled to publish its full-year results, with fellow blue-chip British Land Co due to release half-year results. Smiths Group is due to publish a trading statement.
In the FTSE 250, Enterprise Inns is expected to release full-year results, while Halma, Intermediate Capital Group, Homeserve, Vectura Group and Big Yellow Group are all due to publish half-year results. Mid-caps Crest Nicholson and Spirax-Sarco Engineering are set to release trading statements.
By James Kemp; [email protected]; @jamespkemp
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