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(Alliance News) - Stock prices in London closed in the red on Monday, as the prospect of further aggressive interest hikes from the US central bank hit sentiment.
"The impact of Friday's payroll report and its implications for Fed policy and the economic outlook continue to loom large over markets. While Friday's knee-jerk move was perhaps an overreaction in the near-term, the overall outlook remains highly unfavourable to equities," said IG's Chris Beauchamp.
The FTSE 100 index closed 31.78 points, 0.5%, at 6,959.31. The FTSE 250 ended down 227.99 points, 1.3%, at 17,125.29, and the AIM All-Share closed down 10.59 points, 1.3%, at 799.63.
The Cboe UK 100 ended down 0.3% at 696.32, the Cboe UK 250 closed down 1.0% at 14,675.90, and the Cboe Small Companies ended down 3.25 points at 12,621.69.
In European equities on Monday, the CAC 40 in Paris ended down 0.5%, while the DAX 40 in Frankfurt ended marginally lower.
The pound was quoted at 1.1038 USD at the London equities close Monday, compared to USD1.1130 at the close on Friday.
The Bank of England said it has doubled the size of a temporary bond-buying programme, which it kicked off following market turmoil after the UK government's mini-budget announcement last month.
The bank doubled the size of daily auctions to a maximum of GBP10 billion, from GBP5 billion before.
Following the announcement of the mini-budget last month, and the turmoil that ensued, the Bank of England decided to buy up long-dated UK government bonds, or gilts.
It confirmed that the scheme will end this week.
"With the deadline of the emergency plan approaching, investors are concerned there will be increased levels of volatility again once the scheme ends," City Index and Forex.com analyst Fawad Razaqzada commented.
Chancellor Kwasi Kwarteng has agreed to set out his medium-term fiscal plan alongside Office for Budget Responsibility predictions on October 31.
The chancellor had been resisting setting out the details ahead of November 23 after he set out his multibillion-pound package of tax cuts to be paid for by borrowing.
"With the pound remaining weak and government borrowing costs inching up again towards worrying levels, the UK government and the Bank of England have launched a two-pronged attempt to calm markets. Policymakers and politicians are clearly nervous about seeing a repeat of the mini-financial crisis unleashed following the presentation of the Truss administration's slash and spend plans and fresh moves are being made to try and repair the damage," said Hargreaves Landsdown's Susannah Streeter.
Also heaping pressure on the pound was a rising US dollar, following strong US jobs data on Friday.
US employment advanced at a quicker pace than expected in September. This has buttressed the case for another 75 basis point rate hike by the Federal Reserve at its November meeting.
The euro stood at USD0.9700 at the European equities close Monday, down against USD0.9779 at the same time on Friday.
Against the yen, the dollar was trading at JPY145.72, up compared to JPY145.15 late Friday.
Stocks in New York were lower at the London equities close, with the DJIA down 0.2%, the S&P 500 index down 0.6%, and the Nasdaq Composite down 1.0%.
In the FTSE 100, DS Smith shares jumped 12%. It was the best large-cap performer on Monday.
The packaging firm lifted annual guidance, hailing "effective cost mitigation".
DS Smith expects adjusted operating profit of GBP400 million in the six months to October 31, up 45% from GBP276 million a year earlier.
For the full year, DS Smith's performance is "expected to be ahead of our previous expectations".
In a positive readacross, Smurfit Kappa and Mondi added 6.7% and 4.2% respectively.
On AIM, Europa Oil & Gas closed down 42%.
Alongside i3 Energy, it said it has abandoned a North Sea well after "disappointing" drilling results in the Serenity field. The companies said that the SA02 well, in the Serenity field, was drilled to a total depth of 5,630 feet. While over 100 feet of other Captain sands was encountered, these were found to be water wet. The well will now be plugged and abandoned.
i3 energy lost 11%.
In Tuesday's UK corporate calendar, there's a trading statement from Dechra Pharmaceuticals. There will also be full-year results from real estate investor PRS REIT, furniture and flooring retailer SCS Group and research and data analytics company YouGov.
Brent oil was quoted at USD96.99 a barrel at the London equities close Monday, down from USD97.09 late Friday.
Gold was quoted at USD1,668.45 an ounce at the London equities close Monday, down sharply against USD1,702.27 at the close on Friday.
In the economic calendar, there's UK retail sales overnight, and UK unemployment at 0700 BST, with comments from US Federal Reserve officials after the London market close.
By Elizabeth Winter; elizabethwinter@alliancenews.com
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