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LONDON MARKET MIDDAY: FTSE 100 in post-budget slump before US data

31st Oct 2024 12:02

(Alliance News) - European equities were weaker on Thursday, with the mood uncertain following the UK budget, underwhelming earnings from both sides of the Atlantic and ahead of a US inflation reading in the afternoon.

The FTSE 100 index traded down 60.96 points, 0.8%, at 8,098.67. The FTSE 250 was down 179.75 points, 0.9%, at 20,514.37, and the AIM All-Share was down 2.96 points, 0.4%, at 741.56.

The Cboe UK 100 was down 0.8% at 812.22, the Cboe UK 250 lost 0.9% at 18,101.54, and the Cboe Small Companies was down 1.1% at 16,460.63.

In European equities on Thursday, the CAC 40 in Paris was down 1.0%, while the DAX 40 in Frankfurt fell 0.6%.

The pound was quoted at USD1.2977 early Thursday afternoon, down from USD1.3006 at the London equities close on Wednesday, but up from an overnight low of USD1.2944. The euro stood at USD1.0866, rising slightly from USD1.0863. Against the yen, the dollar was trading at JPY152.79, down from JPY153.03 at the time of the European equities close on Wednesday. The yen was on the up after a Bank of Japan decision. The BoJ left rates unmoved on Thursday.

UK Chancellor Rachel Reeves has said she does not want to repeat the GBP40 billion tax rises she implemented in her first budget "ever again".

The fiscal announcement was a chance to "wipe the slate clean" following the Conservatives' time in power, the Chancellor told broadcasters as she defended the Budget on Thursday morning.

Choices made by Reeves will see the overall tax burden reach a record 38.3% of gross domestic product in 2027-28, the highest since 1948.

The post-budget reaction saw UK bond yields higher. The yield on the 10-year gilt spiked above 4.40% on Thursday.

The bond market action hit stocks in interest rate sensitive sectors. Retailer Next shed 4.1% and housebuilder Persimmon fell 4.5%. Kingfisher, the DIY retailer that owns B&Q and Screwfix, declined 4.4%. Homewares seller Dunelm gave back 3.6%, while property firm Hammerson lost 2.8%.

It was a better day for lenders, however, as they thrive in an environment of robust interest rate. NatWest added 1.7%, while Lloyds climbed 0.5%. A regulatory filing, meanwhile, showed the UK government's stake in NatWest has been reduced to below the 15% mark, from just under 16% previously.

Evoke continued its surge, with the 888 owner adding 5.5% to its rally, after a 12% jump on Wednesday. The gambling sector was spared from a feared tax raid in the budget.

Also on the up in London, Coca-Cola HBC rose 2.2% and Shell added 1.5%, as earnings from the duo were well-received.

Soft drink bottler HBC upped its outlook. Oil major Shell announced a new USD3.5 billion buyback, but reported an earnings fall on dwindling refining margins.

Anglo American rose 1.4% after BHP suggested it may not have "moved on" from an M&A saga after all.

BHP clarified comments made by its chair at the miner's annual general meeting, suggesting they should not be interpreted as a sign that the firm no long intends to make an offer for smaller peer Anglo American.

Chair Ken MacKenzie said at the miner's annual general meeting in Brisbane on Wednesday that BHP believed the two companies could have created "something unique and special". He described a BHP-Anglo tie-up as a "one plus one equals three opportunity".

"Unfortunately, Anglo American shareholders had a different view, and they thought there was more value in the plan that their management wanted to execute. And so they moved on. And quite frankly, so have we," MacKenzie added.

BHP explained on Thursday: "The UK Takeover Panel Executive has confirmed that the comments made will not be treated as a statement of intention not to make an offer in respect of Anglo American."

BHP's pursuit of Anglo American was rebuffed in May. UK takeover rules mean BHP is now unable to make another approach for Anglo American until late-November. That would be six months after it said in May that it did not intend to make a firm offer for Anglo.

BHP shares were down 1.2%.

Smith & Nephew tumbled 14% as it cut its outlook amid China woes. The medical devices maker said its third-quarter performance was "held back by China, where we have seen a period of reduced end-customer demand".

The group cut its forecast for full-year underlying revenue growth to around 4.5%, from a previous range of 5.0% to 6.0%.

Over in mainland Europe, lenders Societe Generale and BNP Paribas moved in opposite directions.

SocGen added 9.3% as it reported improved third-quarter earnings and announced a series of management changes, which will see Chief Executive Officer Slawomir Krupa take "direct" handling of the firm's French retail banking activities.

The lender said net income in the third-quarter of 2024 more than doubled to EUR1.37 billion from EUR295 million a year prior. Net banking income improved 11% to EUR6.84 billion from EUR6.19 billion.

Fellow Paris listing BNP Paribas, however, lost 5.0%. It reported in-line third-quarter earnings, but a decline in a key capital adequacy metric put the bank's shares under pressure.

The Paris-based lender said attributable net income rose 7.9% to EUR2.87 billion from EUR2.66 billion, in line with a company-compiled consensus for EUR2.86 billion.

Revenue climbed 3.1% to EUR11.94 billion from EUR11.58 billion.

BNP's common equity tier 1 ratio stood at 12.7% as of September 30, down by 30 basis points compared to June 30 but above the 12% group objective. This was below the 12.9% market consensus.

The poorly-received earnings from BNP Paribas followed reports from New York-listed Meta and Microsoft, which put European markets on the backfoot at the start of the day.

Meta and Microsoft were down 2.3% and 3.7% in pre-market dealings across the Atlantic.

Stocks in New York are called to open lower. The Dow Jones Industrial Average is called down 0.5%, the S&P 500 0.7% lower and the Nasdaq Composite is called to open down 0.9%.

The US personal consumption expenditures reading for September is released at 1230 GMT. The headline data is expected to show the pace of PCE inflation abated to 2.1% last month, from 2.2% in August.

The core data, the Federal Reserve's preferred inflation measures, is forecast to ebb to 2.6% from 2.9%.

Recent developments have suggested the Fed is more focused on the labour market, however, so Friday's nonfarm payrolls could be this week's main event.

According to FXStreet cited consensus, the US labour market is expected to have added 115,000 jobs in October, down from 254,000 in September.

Gold was quoted at USD2,778.23 an ounce on Thursday afternoon, falling from USD2,786.80 at the London equities close on Wednesday. Brent oil fetched at USD72.66 a barrel, rising from USD72.17.

By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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