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LONDON MARKET OPEN: Stocks mixed as equities take pause for breath

6th Nov 2023 08:54

(Alliance News) - European equities edged higher early Monday, though gains were muted as investors digested last week's major data and central bank updates.

London's flagship index had underperformed following the softer US jobs report, amid a stronger pound.

Lifting it in early trade on Monday was Melrose, after inking a bumper deal, and JD Sports, on a bullish assessment from Citigroup. Prudential underwhelmed, however, despite reporting stronger third-quarter numbers.

The FTSE 100 index opened up 5.22 points, 0.1%, at 7,422.95. The FTSE 250 was down 56.31 points, 0.3%, at 17,927.53 and the AIM All-Share was up 0.92 of a point, 0.1%, at 698.17.

The Cboe UK 100 was up 0.2% at 740.61, the Cboe UK 250 was down 0.2% at 15,630.12, and the Cboe Small Companies fell 0.5% at 12,852.68.

In European equities, the CAC 40 in Paris was flat, while the DAX 40 in Frankfurt was up 0.1%.

"Equities were up across the board in Asian markets as hope that interest rates were at a peak continued to support market sentiment. Japanese stocks were among the biggest gainers, partly reflecting some reaction to Friday's soft US labour market report," analysts at Lloyds Bank commented.

There was also some favourable data from Germany to begin the week. New manufacturing orders in Europe's largest economy grew 0.2% on-month in September, beating the FXStreet cited consensus of a 1% decline.

Orders fell 4.3% on-year, Destatis said, easing from August's 6.3% decline.

"Germany reported an unexpected rise in factory orders in September, providing some hope that the country’s beleaguered manufacturing sector may be turning a corner," Lloyds analysts added.

Still to come on Monday is a UK construction PMI at 0930 GMT.

Sterling was quoted at USD1.2405 early Monday, higher than USD1.2369 at the London equities close on Friday. The pound traded at a roughly six-week high.

The euro traded at USD1.0756, edging up from USD1.0730. Against the yen, the dollar was quoted at JPY149.42, rising slightly versus JPY149.37.

Gold was quoted at USD1,986.55 an ounce early Monday, lower than USD1,990.11 on Friday. Brent oil was trading at USD85.95 a barrel, down from USD86.44.

In London, Melrose climbed 3.7%, among the best large-cap performers. It said its said its GKN Aerospace Engines unit has inked a "major new agreement" with GE Aerospace.

Melrose said the total incremental sales from this new deal will be around USD5 billion over the 30-year duration of the GEnx engine programme.

"GKN Aerospace and GE Aerospace have significantly widened their long-term partnership with a new agreement that expands RRSP participation on the GEnx programme, the fastest-selling high-thrust engine. The new agreement also covers new technology insertion, aftermarket repair of high-volume engines structures, and production of fan cases for a range of GE engines," Melrose said.

JD Sports added 1.5% after Citi began coverage of the athleisure retailer with a 'buy' recommendation.

Prudential slipped 0.6%. It reported a surge in new business profit after the third quarter of 2023, continuing first-half "momentum", though it did warn of a tricky macro environment.

The Asia-focused insurer said it saw "ongoing demand for both savings and health and protection products" in domestic and Chinese Mainland visitor customers in Hong Kong. At actual exchange rates, new business sales rose 36% year-to-date to USD4.41 billion. New business profit was 34% higher at USD2.14 billion.

"Our diversified business model and strong capitalisation positions us well to navigate ongoing challenges in the macro-economic and geopolitical environment. Looking forward the environment continues to be challenging but new business momentum has continued into the fourth quarter supported by our multi-market growth engine," Prudential said.

Under pressure Hipgnosis Songs Fund said it does not expect to declare any dividends before the new financial year. The stock tumbled 6.3%.

Hipgnosis Song Management, its investment advisor, has been reviewing the firm's financial position. Catalogue bonus provisions are expected to increase by roughly USD23 million to USD68 million at September 30.

It now expects 10 out of the firm's 146 catalogues will meet "performance hurdles".

Hipgnosis added: "The USD68 million would be payable over a period of three years from 30 September 2023, with USD40 million due within 12 months, USD24 million due within 1-2 years and USD4 million due within 2-3 years. In addition, there are a further nineteen catalogues with active bonus provisions totalling USD75 million, that are unlikely to meet performance hurdles; these are not recognised as provisions but are contingent liabilities and will be disclosed in the forthcoming interim results with associated sensitivity analysis.

"In light of this information, the board has determined that it will not declare dividends before the new financial year. The operating cash flow of the company during this time will therefore be used to ensure that the company has sufficient cash resources to fund the payment of the catalogue bonuses as required."

Last month, two key votes on the music intellectual property rights investor's future, including a poll on its continuation, did not go its way.

Roughly 83% of votes cast were against the company's continuation. Hipgnosis said it will now table put proposals for the reconstruction, reorganisation or winding-up of the fund. In addition, Hipgnosis said around 84% of votes rejected a planned portfolio sale. In September, Hipgnosis said it was selling off 29 of its music catalogues for USD440 million to Hipgnosis Songs Capital.

Elsewhere in London, Strip Tinning jumped 27%. The electrical connectors provider for the automotive sector said its Glazing arm won a "new production nomination".

"The nomination is for the supply of glazing connectors to a range of leading global automotive OEMs including Mercedes, Volkswagen, Toyota and Skoda, for a number of battery and combustion engine-based vehicle programmes. Supply will commence in Q2 2024 and will continue for two to five years, depending on the end of production dates of the individual programmes," the AIM listing explained.

The lifetime sales value of the pact is predicted to be EUR3 million.

By Eric Cunha, Alliance News news editor

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