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(Alliance News) - Stock prices in London opened lower on Monday, while the pound remained strong ahead of the Bank of England's interest rate decision to come later in the week.
The FTSE 100 index opened down 13.19 points, or 0.2%, at 7,034.48. The FTSE 250 opened down 15.56 points, 0.1%, at 17,901.11 and the AIM All-Share down 1.28 points, 0.2%, at 804.09.
The Cboe UK 100 opened down 0.1% at 702.84 and the Cboe UK 250 down 0.2% at 15,355.19, but the Cboe Small Companies opened up 0.1% at 12,360.21.
The pound was quoted at USD1.1577 at the London equities open Monday, compared to USD1.1593 at the close on Friday.
"Sterling has rallied by more than 3.5% over the past month, having rebounded more than 8% from the post mini-budget nadir," noted ii's Victoria Scholar.
The Bank of England will decide interest rates on Thursday, with the market pricing in a 75 basis point hike to take rates to 3%, according to consensus as cited by FXStreet.
"Muddied by some emergency measures which were brought on by the ill-conceived government announcements of the 'fiscal event', the Bank needs to return to its knitting with measures designed to contain inflationary pressures. This could even result in an aggressive hike of 0.75%, despite a clearly lagging economy which could already be in recessionary territory," Scholar continued.
"Such action could be mildly supportive for the pound, but will leave limited scope for a rally for equities."
In European equities on Monday, the CAC 40 in Paris opened down 0.2%, while the DAX 40 in Frankfurt opened up 0.1%.
The euro stood at USD0.9929 Monday, up against USD0.9943 at the same time on Friday.
In the economic calendar on Monday, there are EU gross domestic product and consumer price index reports at 1000 BST.
Consumer prices in the eurozone are expected to have edged up 0.6% monthly in October, and risen by 9.8% annually, according to FXStreet-cited market expectations. This compares with a monthly increase of 1.2% and an annual rise of 9.9% in September.
GDP is expected to have grown by 2.1% on an annual basis in the third quarter and 0.2% from the second quarter, compared to an annual rise of 4.1% in the second quarter and an increase of 0.8% from the first quarter.
Before the BoE decision on Thursday, there will be an interest rate decision from the US Federal Reserve. According to CME's FedWatch tool, there is an 85% likelihood of 75 basis point rate hike.
"What's more important than the rate hike itself is what the Fed will be doing next. While some Fed members voiced possibility of slowing the pace of rate increases over the past weeks, there is a good chance that Jerome Powell slashes the dovish hopes this week, as he has done earlier this year. If that's the case, we could see positive market vibes evaporate," said Swissquote Bank analyst Ipek Ozkardeskaya.
Against the yen, the dollar was quoted at JPY148.02 early Monday in London, up from JPY147.54 late Friday.
In the FTSE 100, Glencore shed 1.9%. The Financial Times revealed that discussions earlier this year for Tesla to take a stake in the miner and commodities trader failed to lead anywhere.
The electric car maker was seeking to secure supplies of battery materials, such as cobalt, lithium and nickel, the FT explained.
Citing "two people familiar with the matter", the newspaper said talks about Tesla buying a 10% to 20% stake in Glencore began last year and continued until this past March, when Glencore Chief Executive Gary Nagle visited Tesla's factory in Fremont, California.
However, no deal was reached, the two people said, partly over Tesla's concern that Glencore's coal mining operations conflicted with its environmental message and partly over reluctance to take a minority stake.
Centrica added 3.1%. The stock was upgraded to 'buy' from 'hold' by Jefferies.
Among London midcaps, easyJet was up 5.1%. The Times reported that British Airways-owner International Consolidated Airlines Group is eyeing a potential acquisition of the budget airline, as part of renewed plans to consolidate the European airline industry,
IAG also has its eye on Portugal's flag carrier TAP. It already owns Spain's Iberia and Vueling and Ireland's Aer Lingus.
Last week, IAG chief executive said: "We are a platform for consolidation. We will only do what makes sense, but we see there are opportunities to be stronger. We are a group that wants to consolidate the industry."
IAG was up 1.4%.
International Distributions Services, formerly known as Royal Mail, jumped 7.4% in early trade on news that the Communications Workers Union have cancelled a planned strike over the next fortnight.
"The postal service has been struggling with a perfect storm of heavy strike action, a structural decline in letter demand, a fading pandemic parcel boom, pressures from cost inflation and an onslaught of dynamic competitors to the market. While its international business GLS has been robust, its domestic service has struggled with Chair Keith Williams warning in July that the business is losing GBP1 million a day," ii's Scholar commented.
Additionally, IDS said the UK business secretary has confirmed that no further action will be taken with regards to Vesa Equity Investment's 22% stake in IDS. Vesa is a Luxembourg-based company, and its stake was being reviewed under the National Security & Investment Act 2021.
Bodycote lost 2.0%, as it named Ben Fidler as CFO-designate, to be effective from May 1 next year. Fidler will join the thermal processing services provider from jet engine maker Rolls-Royce, where he is currently deputy CFO.
On AIM, TP Group shares surged at the market open, almost tripling in value.
The consulting, software and engineering company has agreed to a GBP17.5 million takeover by Science Group.
TP shareholders will receive 2.25 pence per share in cash, which is almost triple that of the closing price of 0.78p on Friday. Around 11.7% TP shareholders have given a letter of intent to accept the offer. Science Group itself already holds a 28% stake, meaning almost 40% support in total.
Science Group was down 0.7%.
In Asia, the Shanghai Composite closed down 0.8%, and the Hang Seng index in Hong Kong lost 0.8%, as official data showed China's factory activity shrank in October, after industries were hit by strict Covid lockdowns.
The purchasing managers' index – a key gauge of manufacturing in the world's second-biggest economy – came in at 49.2 points, down from September's 50.1 and below the 50-point mark separating growth from contraction, according to data from the National Bureau of Statistics.
The manufacturing PMI has been in contraction territory for six out of the past eight months, as sweeping Covid restrictions paralysed major industrial cities such as Shanghai, Shenzhen and Chengdu and a summer of searing heat hit production.
The Japanese Nikkei 225 index closed up 1.8% in Tokyo. The S&P/ASX 200 stock index in Sydney closed up 1.2%.
Gold was quoted at USD1,641.29 an ounce early Monday, slightly higher than USD1,640.91 on Friday. Brent oil was trading at USD95.25 a barrel, higher than USD93.34.
By Elizabeth Winter; elizabethwinter@alliancenews.com
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