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(Alliance News) - Stocks in London ended lower on Tuesday with housebuilders weighing on the FTSE 100, as investors look ahead to Thursday's European Central Bank rate decision.
The FTSE 100 index ended down 34.43 points, or 0.5%, at 7,152.75. The mid-cap FTSE 250 index closed down 150.87 points, or 0.6%, at 24,097.48. The AIM All-Share index lost 6.08 points, or 0.5%, to 1,307.98.
The Cboe UK 100 index ended down 0.5% at 711.30. The Cboe 250 ended down 0.7% at 21,889.40, and the Cboe Small Companies rose 0.1% to 15,587.50.
In mainland Europe, the CAC 40 stock index in Paris closed down 0.3% and the DAX 30 in Frankfurt closed down 0.6%.
CMC Markets analyst Michael Hewson said: "After yesterday's positive start, European markets have had an altogether softer tone on fairly light volume today after German ZEW investor expectations for September fell more than expected from 40.4 in August to an 18-month low of 26.5.
"There's not been a great deal to get excited about today, with this week's ECB rate meeting looming large, and some chatter the central bank might start to look at discussing the tapering of its bond buying program when it meets on Thursday."
In the FTSE 100, DS Smith ended the best performer, up 2.8%, after the corrugated packaging manufacturer said box volumes are higher than pre-pandemic levels but cautioned on input cost pressures.
DS Smith said box volumes had grown "very strongly" in the period since May 1, rising annually and topping levels seen in 2019. It affirmed that Covid-19 has accelerated a drive to sustainability and e-commerce.
At the other end of the large-caps, housebuilders were among the worst performers following industry data from Halifax, which showed the pace of annual growth continues to slow.
Berkeley Group ended down 3.0%, Barratt Developments down 0.8%, Taylor Wimpey down 1.0% and Persimmon down 1.6%.
The average UK house price rose 0.7% monthly in August to GBP262,954. The annual growth was 7.1%, slowing from 7.6% in July.
In the FTSE 250, Marks & Spencer ended up 3.3% after UBS raised the high street stalwart to Buy from Neutral.
At the other end of the midcaps, Meggitt ended the worst performer, down 12% at 737.29 pence, after TransDigm Group Inc bowed out of the running to acquire the aerospace and defence components maker. this leaves Parker-Hannifin Corp firmly in the driving seat with its GBP6.3 billion offer.
Cleveland, Ohio-headquartered aerospace manufacturer TransDigm made an approach in August, mulling a bid of 900 pence per share, valuing Meggitt at GBP7.03 billion. Though not a firm offer, TransDigm's offer was a 13% premium to Parker-Hannifin's 800p per share bid.
TP ICAP ended down 9.7% after the interdealer broker reported a declining profit in the first half of 2021, as a lack of volatility in financial markets hurt the firm.
Pretax profit narrowed substantially to GBP28 million for the six months ended June 30, from GBP78 million a year before. First-half revenue fell 1.2% year-on-year on a constant currency basis to GBP936 million from GBP947 million, the company said. On a reported basis, revenue fell 5.5% from GBP990 million.
TP ICAP cut its interim dividend to 4.0 pence per share, down from 5.6 pence a year before.
Sterling was lower against the greenback after the UK government announced a fresh tax hike to pay for health and social care.
The pound was quoted at USD1.3780 at the London equities close, down from USD1.3820 at the close Monday.
UK Prime Minister Boris Johnson broke an election promise as he announced a GBP12 billion a year tax raid to address the funding crisis in health and social care.
The PM insisted the new health and social care levy, based on a 1.25 percentage point increase in National Insurance contributions, was "the reasonable and the fair approach". Downing Street said a typical basic rate taxpayer earning GBP24,100 would pay GBP180 a year, while a higher rate taxpayer on GBP67,100 would pay GBP715 as a result of the new tax.
As well as providing extra funding for the NHS to deal with the backlog of cases built up during the Covid-19 pandemic, the new package of GBP36 billion over three year will also reform the way adult social care in England is funded.
Johnson entered Downing Street in 2019 claiming he had a clear plan to fix the social care crisis and proceeded to declare a snap UK general election in December of 2019.
As part of the Conservative Party's election manifesto, Johnson pledged not to raise the rate of income tax, National Insurance contributions and value added tax, which subsequently helped the PM secure his 80-seat majority.
Admitting that pledge had been scrapped, Johnson said: "No Conservative government ever wants to raise taxes and I will be honest with the House, yes, I accept that this breaks a manifesto commitment, which is not something I do lightly.
"But a global pandemic was in no-one's manifesto and I think the people of this country understands that in their bones and they can see the enormous steps this government and the Treasury have taken."
Initially, main rate National Insurance contributions will increase by 1.25 percentage points from 12% to 13.25% from April 2022 as systems are updated.
In the run-up to the announcement Tory MPs have been critical of the plan to raise National Insurance, while economists highlighted the historically high tax burden. A vote on Wednesday could provide a focal point for any revolt, although former health secretary Jeremy Hunt said a rebellion large enough to defeat the government was unlikely.
Analysts at Rabo Bank commented: "It is possible that this will create a back-bench rebellion insofar as the tax hike would break a manifesto pledge. That said. Johnson's strong parliamentary majority suggests that he, and therefore GBP, has a large buffer of protection against political uncertainty. That said, in terms of the extra cost implied by a tax hike, many businesses and consumers may be feeling a lot less protected."
The euro stood at USD1.1840 at the European equities close, down from USD1.1860 late Monday. Against the Japanese yen, the dollar was trading at JPY110.20, up from JPY109.85.
On the economic front, the ZEW Survey of economic sentiment in the euro area September missed estimates by a long way. The index dropped to 31.1 from last month's 42.7, versus FXStreet-cited consensus for a rise to 52.2. The current situation index rose to 22.5 from 14.6.
For Germany, the ZEW economic sentiment gauge fell to 26.5 from 40.4, the fourth consecutive month of decline and a miss versus consensus for 30. It implies German growth in the next six months will be only slightly higher than its current rate, ZEW said. The current situation index rose to 31.9 for September from 29.3 in August, missing consensus for 34.
Stocks in New York were mostly lower at the London equities close, reopening on Tuesday after the long Labor Day weekend, in the wake of Friday's disappointing US jobs data.
The DJIA was down 0.8%, the S&P 500 index down 0.4% and the Nasdaq Composite was up 0.1%.
Boeing was the worst Dow performer, down 2.7%, after Irish carrier Ryanair said price negotiations with the US defence giant, for an order of MAX 10 aircraft, ended without agreement.
September is traditionally one of the weakest months of the year for US stock market performance.
Brent oil was quoted at USD71.67 a barrel at the equities close, down from USD72.20 at the close Monday.
Gold was quoted at USD1,794.50 an ounce at the London equities close, lower against USD1,822.55 late Monday, as the dollar strengthened.
The economic events calendar on Wednesday has Japan GDP figures overnight and the Bank of Canada interest rate decision at 1500 BST.
The UK corporate calendar on Wednesday has annual results from home furnishings retailer Dunelm Group and interim results from sandwich maker Bakkavor Group. Car parts and bicycle retailer Halfords Group puts out a trading statement.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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