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(Alliance News) - The FTSE 100 in London moved higher at the open on Monday but took a sharp downward turn as sterling continued to rise, the currency getting a boost after former prime minister Boris Johnson bowed out of the Tory leadership race.
"For the UK, sterling found some support as the political drama continued to play out, with Rishi Sunak now being touted as the strongest prime ministerial candidate," said Richard Hunter, head of markets at interactive investor.
"The current level of sterling of over USD1.13 is a comfortable improvement to the level of GBP1.03 which it had briefly touched, but a rampant US dollar this year has eroded the price of the year’s opening level of USD1.35. In spite of the possibility of some political stability being restored, the UK economy remains in a potentially dark place."
The FTSE 100 index was down 24.70 points, or 0.4%, at 6,944.50. The mid-cap FTSE 250 was up 79.70 points, or 0.5%, at 17,286.25, and the AIM All-Share was up 0.67 of a point, or 0.1%, at 786.07.
The Cboe UK 100 was down 0.4% at 693.63, the Cboe UK 250 up 0.4% at 14,750.50, and the Cboe Small Companies down 0.1% at 12,233.88.
In European equities on Friday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both 0.4% higher.
Former chancellor Sunak could be declared the next prime minister within hours after Johnson ruled himself out of the race for No 10, with uncertainty over rival Penny Mordaunt's prospects of securing sufficient support from members of Parliament.
Tory MPs will choose who they want to be their new leader in the first stage of the contest on Monday, should both remaining candidates get the 100 nominations required to reserve a place on the ballot.
If Mordaunt falls short of this total by the deadline of 1400 BST, or pulls out of the contest, Sunak will take charge of the party without the need for a vote.
It comes after Johnson dramatically withdrew from the race – having never officially entered, claiming he had the numbers but admitting he could not unite his warring party. In a statement on Sunday evening, he said there was a "very good chance" he could have been back in No 10 by the end of the week if he had stood.
Sterling was quoted at USD1.1343 early Monday, sharply higher than USD1.1203 at the London equities close on Friday.
In London, housebuilders were crowning the FTSE 100. Persimmon added 2.9%, Taylor Wimpey 2.8%, Barratt Development 2.2% ,and Berkeley gained 2.1%.
Figures from lender Halifax showed cities have driven house price growth in the UK this year, leaving the suburbs lagging behind.
Since the start of the year, as people have gradually returned to the office, property prices across Britain's cities have typically grown by 9.2%, compared with 7.9% growth on average in surrounding areas, Halifax said.
Andrew Asaam, mortgages director at Halifax, said a trend of people looking for greener spaces to move to, which was seen early on in the coronavirus pandemic, had remained.
He said: "That trend didn't disappear completely this year, as house price growth in these areas remained strong. But, as daily life started to get back to normal for many, the opportunity to live in cities became more attractive again, driving up demand."
Pearson was 2.5% higher.
It said trading in the nine months to September 30 was "strong", with underlying sales up 7% year-on-year, allowing the company to reaffirm its full-year sales and adjusted profit outlook.
The London-based education publisher said Assessment & Qualifications sales grew 12% in the nine-month period due to a "continued focus on health and wellness, as well as US Student Assessment and UK & International Qualifications, as exam timetables continue to normalise after Covid-19 disruption".
Virtual Learning sales were up 5%, and English Language Learning sales up 28%. Higher Education sales were down 4%, however, holding back the overall growth.
Looking ahead, Pearson said it is on track to deliver at least GBP100 million of cost efficiencies next year, and it remains on track to deliver group sales and adjusted operating profit in line with consensus expectations for 2022.
At the other end of the blue chips, Shell gave back 2.2%. The UK oil major and QatarEnergy on Sunday announced that Shell will take a 9.375% in a huge gas field extension offshore Qatar for an undisclosed sum.
TotalEnergies last month said it had been selected for a 9.375% participating interest as well. QatarEnergy, which will retain 75% of the project, said a third international partner will be announced "in due course", with a 6.25% stake remaining. TotalEnergies was down 1.4% in Paris.
The North Field South expansion project is expected to have capacity for 16 million tonnes per year of liquefied natural gas.
The overall North Field project, which also includes North Field East, is "the industry's largest ever LNG project", QatarEnergy said. Starting production in 2026, it will add more than 48 million tonnes per annum to world LNG supplies by 2027.
The project has taken on particular significance in recent months, after Russia's invasion of Ukraine restricted gas supply to Europe. QatarEnergy estimates that the North Field, which extends under the Gulf into Iranian territory, holds about 10% of the world's known gas reserves.
On AIM, Pure Gold slumped 48% after it said financing woes will see it suspend operations and place its PureGold mine on care and maintenance immediately.
"This step follows an evaluation of several potential alternative scenarios and has become necessary because the mine has not yet achieved consistent positive site-level cash flow, notwithstanding recent reductions in operating costs and sequential quarter over quarter increases in production," it added.
Pure Gold said if it can not secure additional financing in the short term, it will be forced to default on its debt obligations.
In China, the Shanghai Composite closed down 2.0%, while the Hang Seng index in Hong Kong lost 6.7%.
Xi Jinping on Sunday was confirmed as general secretary of China's Communist Party's for a rare third term, disregarding traditionally respected age and term limits and cementing his grip on power.
A day earlier the National Congress of the Chinese Communist Party, held only every five years, amended the party constitution to more deeply reflect Xi's ideology and enshrine his leadership role.
China's economy grew 3.9% year-on-year in the third quarter, according to official data released on Monday, beating forecasts.
China had been expected to announce some of its weakest quarterly growth figures since 2020, with its economy hobbled by Covid-19 restrictions and a real estate crisis.
In the previous quarter, growth in the world's second-largest economy collapsed to 0.4% compared with the previous year, the worst performance since 2020. The country posted 4.8% growth in the first quarter of 2022.
But Monday's data, published six days later than scheduled, showed a slight rebound, with China posting growth higher than the 2.5% predicted by a panel of experts surveyed by AFP.
The Japanese Nikkei 225 index closed up 0.3%. The S&P/ASX 200 in Sydney ended up 1.5%.
The euro traded at USD0.9844 early Monday, higher than USD0.9802 late Friday. Against the yen, the dollar was quoted at JPY148.94, up versus JPY148.03.
In the US on Friday, stocks ended sharply higher, with the Dow Jones Industrial Average up 2.5%, the S&P 500 up 2.4% and the Nasdaq Composite up 2.3%.
Stocks were boosted by a Wall Street Journal report that said some US Federal Reserve officials want to slow the pace of rate rises after the November central bank meeting.
ii's Hunter said: "Comments from some Federal Reserve members and newspaper reports combined to imply that the pace of rises may need to slow to avoid an unwanted recession in the world’s largest economy.
"A rise of 0.75% in November is still seen as almost certain, but for December there could be a lesser hike as the impacts of the rises hitherto wash through. At the same time, the terminal rate also eased, with markets now pricing in a terminal rate of under 4.9%, edging down from the previously expected 5%."
Gold was quoted at USD1,650.60 an ounce early Monday, higher than USD1,643.70 on Friday evening. Brent oil was trading at USD90.00 a barrel, lower than USD92.84 late Friday.
Still to come Monday, there are PMI readings from Germany at 0830 BST, eurozone at 0900 BST and the UK at 0930 BST, followed by US at 1445 BST.
By Paul McGowan; paulmcgowan@alliancenews.com
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