(Alliance News) - Equity trade was subdued in London on Monday with markets in the US closed for Martin Luther King day, resulting in thin volume and low volatility.
Though the FTSE 100 index was lower, BAE Systems climbed after making some acquisitions in the US, while housebuilders were higher on an upbeat Rightmove report on December's UK housing market. On AIM, highly rated Fevertree slumped on a profit warning.
The FTSE 100 was down 32.81 points, or 0.4%, at 7,641.75. The FTSE 250 was down 37.81 points, or 0.2%, at 21,848.27, and the AIM All-Share was down 0.9% at 966.10.
The Cboe UK 100 was down 0.4% at 12,947.45, the Cboe UK 250 down 0.2% at 19,709.42, and the Cboe Small Companies down 0.2% at 12,481.13.
In European equities on Monday, the CAC 40 in Paris was down 0.3%, while the DAX 30 in Frankfurt was flat.
"European equity markets are marginally lower this morning as there has been a lack of major macroeconomic news to spark interest from traders...Trading volumes as well as volatility are likely to be low as it is a public holiday in the US," said David Madden at CMC Markets.
"On Friday the FTSE 100 hit its highest level since July, and the DAX isn't too far from its all-time- high, so later this week when activity picks up again, we might see the wider bullish sentiment continue," Madden added.
Bucking the overall trend among London large-caps, BAE Systems was up 2.8% after the defence contractor announced two acquisitions in the US, purchasing the military global positioning system from a United Technologies unit and Raytheon's Airborne Tactical Radios business.
The Farnborough-based aerospace firm is acquiring a military GPS business from Collins Aerospace - a unit of US aircraft manufacturer United Technologies - for USD1.93 billion in cash. BAE is also buying US defence contractor Raytheon's Airborne Tactical Radios business for USD275 million in cash. These deals are subject to the closure of the merger between Raytheon and United Technologies.
Auto Trader was 2.0% higher after Goldman Sachs raised the stock to Buy from Neutral.
Housebuilders such as Barratt Developments, Berkeley Group and Persimmon were up 1.6%, 1.2% and 1.1% respectively after Rightmove reported a surge in house prices in December.
Prices increased 2.3% in December, which Rightmove said is the largest monthly rise it has ever recorded at that time of year. Nearly 65,000 properties were marketed between December 8 and January 11, with sellers feeling a "surge of optimism", said Rightmove.
In the period stretching December 13 to January 15 - beginning immediately after the election - enquiries to estate agents were up by 15% compared to the same period a year ago. This then led to a 7.4% increase in the number of sales agreed over that same period.
Rabobank commented: "It seems that the increase in political clarity offered by last month’s UK election has unleashed a wave of buyers into the UK property market. That said, political uncertainty could yet return.
"Comments from UK Chancellor Javid over the weekend that there would be no alignment with EU regulation after Brexit increased the likelihood that the talks between the UK and EU on the future relationship could be difficult. This emphasises the risk that a disorderly Brexit could still occur at the end of the transition phase in December," Rabobank added.
UK Chancellor Sajid Javid over the weekend vowed that there will be no alignment with EU regulations after Brexit.
The Treasury would not lend support to manufacturers that favour EU rules as the sector has had three years to prepare for Britain's transition, Javid said in an interview with the Financial Times. Javid admitted that some businesses may not benefit from Brexit, but added that the UK economy would ultimately continue to thrive in the long-term.
Javid will have the opportunity to sell his vision for Britain's economy post-Brexit when he travels to Davos later this week for the World Economic Forum.
The pound was quoted at USD1.2995 at midday Monday, lower compared to USD1.3030 at the equities close on Friday.
Elsewhere in forex, the euro stood at USD1.1084 at midday Monday, down slightly from USD1.1094 late Friday. Against the yen, the dollar was trading at JPY110.18, flat on JPY110.17.
"The safe haven JPY has found little net benefit from the news that two large crude oil production bases in Libya have begun to shut down amid a military blockade. Oil prices have edged higher, retracing a small part of their recent fall," said Rabobank.
Brent oil was quoted at USD65.24 a barrel midday Monday from USD64.74 late Friday.
Meanwhile, safe haven asset gold was quoted at USD1,560.29 an ounce in Monday's subdued trade, firm against USD1,556.62 at the close on Friday.
Back in London, Capita in the FTSE 250 was down 2.9% after UBS cut the outsourcer to Sell from Neutral.
On London's junior AIM market, Fevertree Drinks slumped 25% on a profit warning.
For 2019, the the premium tonic water maker expects total revenue of GBP260.5 million, which would represent a 9.7% increase on the GBP237.4 million generated in 2018.
Fevertree, in spite of the "soft" trading, said it continued to invest in the business. As a result, its margins will end 2019 behind expectations.
The company expects earnings to fall by about 5% from 2018. Fevertree reported adjusted earnings before interest, tax, depreciation and amortisation of GBP78.6 million in 2018.
"Fevertree's past successes mean expectations are high. Year-on-year growth of 9.7% would be music to the ears of many consumer goods groups, but Fevertree's rating means investors demand more of it, and if it loses its sparkle the shares will quickly go flat – as they have been today" said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
Meanwhile, Sirius Minerals was up 2.1% at 5.51 pence after Anglo American made a formal GBP405 million bid for the firm.
Anglo American is offering 5.50 pence per share in the London-listed potash mine developer, which reflects a 34% premium to the Sirius closing price of 4.10p on January 7, the last day before the start of the offer period.
Earlier in January, Anglo American had said it was in advanced talks for the acquisition of Sirius Minerals, stating that it identified the North Yorkshire polyphalite project as "being of potential interest some time ago, given the quality of the underlying asset in terms of scale, resource life, operating cost profile and the nature and quality of its product".
Anglo American was down 0.2% at midday.
By Lucy Heming; lucyheming@alliancenews.com
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