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(Alliance News) - European equities largely recovered from a slow start to post cautious gains on Monday ahead of a busy week of corporate earnings, economic data and a US Federal Reserve interest rate decision.
The DAX 40 in Frankfurt was the laggard, however, finding Russian gas supply worries and a poor business survey in Germany too much to bear.
The FTSE 100 ended up 29.93 points, or 0.4%, at 7,306.30. The FTSE 250 index lost 21.78 points, or 0.1%, at 19,802.99. The AIM All-Share index ended down 3.22 points, or 0.4%, at 901.87.
The Cboe UK 100 index ended up 0.3% at 728.87. The Cboe 250 fell 0.1% at 17,259.00. The Cboe Small Companies closed up 0.5% at 13,649.49.
In mainland Europe, the CAC 40 stock index in Paris rose 0.3%, though the DAX 40 in Frankfurt ended 0.3% lower.
"European markets started the new trading week on a bit of a downswing in the wake of the late sell-off in the US on Friday," CMC Markets analyst Michael Hewson commented.
More "resilient" trading followed in the afternoon, Hewson noted, though the DAX 40 faced late session selling pressure on news that Gazprom is cutting daily gas deliveries via the Nord Stream pipeline.
The Russian state energy company will lower gas flows through the Nord Stream 1 pipeline to Germany to 20% of maximum capacity, citing repairs of another turbine.
The company said that gas flows through the pipeline that runs under the Baltic Sea from Russia to Germany would drop to 33 million cubic metres on Wednesday.
Sentiment in Germany was already fragile after a warning from a business poll that showed Germany is on "brink of recession"
The German Ifo business climate index fell to 88.6 points in July from a revised reading of 92.2 in June and missed expectations of a score of 90.1.
"Companies are expecting business to become much more difficult in the coming months. They were also less satisfied with their current situation. Higher energy prices and the threat of a gas shortage are weighing on the economy. "Germany is on the cusp of a recession," commented ifo President Clemens Fuest.
The euro struggled on Monday. The single currency faded to USD1.0215 at the time of the European equities close, down from USD1.0224 late Friday.
The pound was on the up, however, rising to USD1.2041 from USD1.2028. Against the yen, the dollar climbed to JPY136.71 from JPY136.11.
It is a mixed start to the week for the greenback so far, though City Index and FOREX.com analyst Fawad Razaqzada said the buck could struggle as the week progresses.
Razaqzada commented: "With the Fed's rate hike potentially coming across as not-so-hawkish (given that at some point 100 bp hike was priced in), coupled with the recent softening of US data and speculation about a potential recession, there is a real possibility we will see yields start to fall more noticeably. If that happens, then the dollar is likely to come under some selling pressure, especially against the likes of the Japanese yen, which has been falling consistently this year."
A key policy decision by the US Federal Reserve comes on Wednesday. The central bank is widely expected to jack up rates by 75 basis points.
Another market focus this week is earnings from trillion-dollar tech names. Google owner Alphabet and computer software and consumer electronics maker Microsoft report quarterly earnings on Tuesday, before e-commerce firm Amazon and iPhone maker Apple on Thursday.
Reports from the tech sector so far have been mixed. Results from streaming service Netflix were well-received, though Snapchat owner Snap disappointed.
On Friday, Twitter reported a heavy second quarter loss as it counts the costs of a protracted and messy takeover battle with Tesla boss Elon Musk.
US equities started the week mixed. The Dow Jones Industrial Average was up 0.3%, the S&P 500 up 0.2%, though the Nasdaq Composite was down 0.4%.
In London, the banking sector enjoyed a decent start to the week, with StanChart rising 3.1%, NatWest climbing 2.3% and Barclays adding 1.8%.
Barclays reports second quarter numbers on Thursday, before NatWest and StanChart on Friday.
IG analyst Joshua Mahony commented: "UK banking stocks are enjoying a welcome boost today, despite the looming earnings risk that could soon see such gains eroded later in the week. With the Fed expected to raise rates by 75-100 basis points on Wednesday, we are set for a timely reminder that banking margins will continue to improve as we move throughout this year. However, while banking stocks typically benefit from higher rates as they often come against a strong economic backdrop, financial stocks are at risk given the looming recession that is widely anticipated."
Elsewhere in London, Ferrexpo jumped 14% after the iron ore pellet producer said it completed an external assurance process for the reporting of crucial safety metrics and scope 1 and scope 2 greenhouse gas emissions for its performance in 2021.
In addition, Credit Suisse upgraded Ferrexpo to 'outperform' from 'neutral'.
Molten metal flow engineer Vesuvius surged 9.9% as it said trading for the months of May and June remained stronger than anticipated.
Vesuvius expects to report a trading profit for the first half of 2022 of GBP127.4 million. This would be sharply higher than the GBP73.3 million reported a year before.
Looking ahead, it now expects its full-year trading profit to be towards the top end of the range of current analysts' expectations of GBP155 million and GBP199 million. This compares to GBP142.4 million in 2021.
The London-listed travel sector struggled in a negative read-across after peer Ryanair warned could not "ignore the risk" of new Covid variants in Autumn.
The budget carrier pointed to its experience with Omicron last November and the Ukraine invasion to demonstrate how "fragile the air travel market remains".
Ryanair said the strength of any recovery will be dependent on there being no adverse or unexpected developments over the remainder of its financial year.
In the first quarter ended June 30, revenue was EUR2.60 billion, multiplied from EUR370 million in the first quarter last year. This helped swing the Dublin-based carrier to a profit after tax of EUR170 million from a EUR273 million loss a year before.
Shares in easyJet, which reports a trading statement on Tuesday, ended 0.8% lower. British Airways owner International Consolidated Airlines Group lost 0.9% and Jet2 fell1.3%.
Ryanair ended down 0.1% in Dublin.
Brent oil was quoted at USD104.78 a barrel late Monday, largely flat from USD104.74 at the European equities close on Friday. Gold stood at USD1,718.56 an ounce, down sharply against USD1,731.12.
Tuesday's economic calendar has minutes from the Bank of Japan's latest meeting released overnight. The Fed's latest meeting kicks off on Tuesday, meanwhile.
The local corporate calendar has half-year results from consumer goods firm Unilever, power generation firm Drax and newspaper publisher Reach.
By Eric Cunha; ericcunha@alliancenews.com
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