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(Alliance News) - European stocks struggled on Monday, but the FTSE 100 outperformed its blue chip peers thanks to an impressive performance from utility stocks which are set to benefit from rising household bills.
"Concerns over new covid restrictions in China, as well as surging natural gas prices have weighed on European markets today. These fears over an extended economic slump in China have also weighed on copper and oil prices," Michael Hewson, chief market analyst at CMC, said.
"Authorities in China have imposed further covid restrictions, which could affect up to 30 million people in the days ahead, as 7-day restrictions were announced for Macau. With infections rising again in Shanghai, fears are growing that growth prospects for Q3 are unlikely to be V-shaped in nature, with this week's Q2 GDP numbers expected to be ugly. "
The FTSE 100 index closed up just 0.35 of a point at 7,196.59 on Monday. The FTSE 250 index ended down 75.97 points, or 0.4%, at 18,836.98. The AIM All-Share index closed down 2.62 points, or 0.3%, at 884.12.
The Cboe UK 100 index closed down 0.2% at 716.56. The Cboe 250 closed down 0.6% at 16,373.67 and the Cboe Small Companies ended slightly at 13,223.75.
In mainland Europe, the CAC 40 stock index in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 1.4%.
IG's Chris Beauchamp added: "But while the FTSE 100's mining contingent is still sharply down on the day the losses in London have been trimmed, thanks to a strong performance from the utilities on hopes that the rise in gas prices will bolster their bottom line, even if they take a hit from opportunistic politicians looking for headlines."
Miners were facing selling pressure with a fresh Covid flare-up in Shanghai fanning fears of another painful lockdown in China's biggest city.
Shanghai recorded more than 120 virus cases at the weekend, having seen its first one of the highly contagious BA.5 Omicron strain, forcing officials to launch another mass testing drive.
With China fixated on its zero-Covid strategy to wipe out the disease, there is increasing concern that authorities will revert to another painful lockdown. Shanghai residents only emerged from a two-month confinement in June.
There have meanwhile been new infections uncovered in other parts of the country, including Beijing.
Anglo American shed 3.5%, Antofagasta 4.1%, Fresnillo 2.8% and Glencore 1.2%.
CMC's Hewson said: "SSE, Centrica and National Grid also received good news today when it was reported that the UK government was not planning to extend the windfall tax to electricity or infrastructure companies, giving the wider sector a welcome boost."
At the other end of the FTSE 100, British Gas owner Centrica gained 3.4%, SSE 3.1% and National Grid 1.5%.
AJ Bell investment analyst Danni Hewson added: "This week sees three catalysts which could shake investors out of their torpor as we get the latest reading of US inflation, GDP figures from China and the big US banks kick-off the second quarter earnings season across the Atlantic.
"There will be plenty of clue hunting going on as we await the latest decision from the US Federal Reserve at the end of this month. The key question is whether Jerome Powell and his colleagues will double up with another 75 basis points rise or if they'll ease off to avoid the medicine for rampant inflation proving worse than the disease."
On Monday, Dechra Pharmaceuticals lost 3.1%. It reported annual revenue progress, though it cautioned that growth rates are normalising as pandemic tailwinds ease.
The veterinary products firm saw a surge in demand due to larger pet care spending during the Covid-19 lockdowns. Revenue growth is slowing, however, as the effects of the pandemic unwind.
For the year ended June 30, revenue increased by 14% at constant exchange rates and 12% at actual exchange rates.
In financial 2021, revenue grew 20% at constant currency and 18% on a reported basis to GBP608.0 million. European Pharmaceuticals revenue growth was 8% at constant currency and 5% at actual exchange rates, while North American Pharmaceuticals revenue growth was 24% at constant currency and 25% at actual exchange rates, Dechra added.
In the midcaps, Wizz Air lost 3.7%. The budget airline expects a "material" profit in the second quarter but cautioned it will trim flight utilisation over the summer as with grapples with recent travel chaos.
The Budapest-based budget airline said it continued to ramp up its operations against a "challenging macro and operational backdrop" during the first quarter of the current financial year.
For the first quarter to June 30, Wizz Air said it registered a EUR285 million operating loss but expects a "material" operational profit in the second quarter on strong summer demand.
However, it warned: "To be able to avoid cancellations and secure a more punctual operation to our customers, we have further improved the agility and resilience of our network including adjusting schedules where we have seen a higher occurrence of issues...In total for the peak summer period we expect to reduce utilization a further 5% versus the plan outlined at the full year results to reduce the impact of ongoing external disruptions."
Peers IAG and easyJet gave back 5.9% and 4.7%.
Hammering home the point made by Wizz Air, Heathrow Airport ordered the cancellation of dozens of flights at short notice on Monday, affecting around 10,000 passengers.
Sixty-one flights were axed as the west London airport did not believe it could have handled the expected number of passengers.
Airlines have been asked not to rebook affected travellers on to alternative flights departing on Monday.
Staying in the UK, the race to become Conservative leader was hotting up as 11 hopefuls announced their intention to run.
Elections are taking place on Monday afternoon for the executive of the 1922 Committee, a powerful backbench panel chaired by Graham Brady which has the ultimate responsibility for setting the rules in any Conservative Party leadership contest.
Ex-chancellor Rishi Sunak currently has the most nominations, followed by trade minister Penny Mordaunt and Foreign Affairs Committee Chair Tom Tugendhat.
Newly-appointed Foreign Office minister Rehman Chishti, who launched an unlikely leadership bid on Sunday, appears to have none so far, while Transport Secretary Grant Shapps has the second-fewest.
Ballots are to be held this Wednesday and Thursday, and next Tuesday and Wednesday, with the candidates with the lowest number of votes eliminated and MPs re-balloted until only two candidates are left.
The pound was quoted at USD1.1898 on Monday evening, down from USD1.2040 at the London equities close Friday.
The euro and yen were struggling mightily on Monday. Both were trading at 20-plus year-lows. The euro was priced at USD1.0087, down from USD1.0185 late Friday, a price not seen since late 2002.
The yen was trading at 24-year lows against the dollar. Against the yen, the dollar was quoted at JPY137.31, higher against JPY135.88 late Friday.
Brent oil was trading at USD106.35 a barrel on Monday evening, up from USD106.00 late Friday. Gold stood at USD1,738.10 an ounce, lower against USD1,744.88.
On Wall Street, the Dow Jones Industrial Average was down 0.3%, the S&P 500 down 0.9% and the Nasdaq Composite was 1.8% lower.
In the international economics calendar on Tuesday, there is the UK BRC retail sales index and a producer price index print in Japan overnight. Later in the day, there is the US Redbook index at 1355 BST.
In the local corporate calendar, there is annual results from online estate agent Purplebricks, online women's fashion brand Sosandar and healthcare service provider Totally.
By Paul McGowan; paulmcgowan@alliancenews.com
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