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(Alliance News) - The DAX 40 took the plaudits on Monday on a mixed day for European stock prices following the election result in Germany.
The FTSE 100 index closed down just 0.39 of a point at 8,658.98. The FTSE 250 ended down 129.50 points, 0.6%, at 20,484.39, while the AIM All-Share closed down 7.14 points, 1.0%, at 710.88.
The Cboe UK 100 ended down 0.1% at 866.11, the Cboe UK 250 closed down 0.7% at 17,811.80, while the Cboe Small Companies fell 0.2% at 15,814.50.
In European equities on Monday, the CAC 40 in Paris ended down 0.8%, while the DAX 40 in Frankfurt rose 0.6% after Sunday's election result.
The election outcome showed a shift to the right in Germany as the conservative Christian Democratic Union and Christian Social Union bloc secured a clear victory, while the far-right Alternative for Germany recorded its best-ever performance.
The election paves the way for conservative leader Friedrich Merz to become the next German chancellor, succeeding Olaf Scholz.
Holger Schmieding at Berenberg said the election can "put an end to a long period of debilitating political uncertainty," although the "messy" outcome may leave the incoming chancellor with "little fiscal space".
AJ Bell Investment Director Russ Mould said how the market response develops will likely depend on whether the CDU party only needs one other coalition partner to achieve a majority – making for more stable government – or if it will need to rely on support from other parties to get policy changes through."
Also in Europe, investors weighed news that eurozone consumer price inflation picked up last month.
According to Eurostat, the euro area consumer price inflation rate accelerated to 2.5% year-on-year in January, from 2.4% in December, in line with the latest flash estimate. In the broader European Union, annual inflation picked up to 2.8% from 2.7%.
By sector, services made the largest contribution to eurozone inflation. Nonetheless, the pace of service price inflation abated to 3.9% in January from 4.0% in December.
The pound was quoted at USD1.2634 at the London equities close Monday, down slightly from USD1.2641 at the close on Friday. The euro rose to USD1.0471 against USD1.0450.
Against the yen, the dollar was trading higher at JPY149.64 compared with JPY149.45 late Friday.
US financial markets were mixed at the time of the London close. The DJIA was up 0.4%, the S&P 500 was 0.1% higher, but the Nasdaq Composite declined 0.5%.
This week sees fourth quarter earnings from Nvidia on Wednesday and core PCE inflation data on Friday - the Fed's preferred inflation measure.
"We expect another robust performance and "clear beat and raise special" this week from Nvidia that should calm the nerves of investors," Dan Ives at Wedbush Securities said.
Stocks in the US slumped on Friday after a batch of soft economic data but UBS sees the weakness as a buying opportunity.
"We see the S&P 500 rising to 6,600 by the end of the year, although the journey up is likely to be accompanied by heightened volatility. Portfolio diversification and hedging approaches are key, and we think capital preservation strategies can help manage drawdown risks in equities," said Mark Haefele, chief investment officer, UBS Global Wealth Management.
Back in London, BAE Systems led the FTSE 100 risers, up 3.2%, on the likelihood of higher defence spending in Europe in the wake of any peace deal in Ukraine.
On the FTSE 250, bid speculation pushed John Wood and Chemring higher.
John Wood leapt 32% after it said it has received an approach from Dar Al-Handasah Consultants Shair & Partners Holdings Ltd, known as Sidara, in relation to a possible offer for the company.
Talks between the two firms broke down last year after Sidara made a series of attempts to buy the Aberdeen-based engineering and consulting business. Sidara's final tilt, priced around 230p per share, valued John Wood at GBP1.58 billion.
In May 2023, John Wood rejected the fifth in a series of bids from Apollo Global Management, with the final approach worth 240p per share, or around GBP1.7 billion.
In a brief statement, John Wood advised shareholders to take no action in relation to the proposal.
The Financial Times had earlier reported talks between the two firms were "ongoing".
Chemring jumped 4.3% after Sky News reported Bain Capital has lodged at least one proposal to acquire the firm in recent weeks.
Sky sources suggested that an initial offer may have been tabled at 390 pence per share.
Shore Capital analyst Jamie Murray said a bid at that level would be "too low".
"We believe this offer does not credit the exceptional growth opportunity over the medium term. Instead, we stand by our view that Chemring’s on-the-market fair value is 490p, and so a take-private bid would need to exceed 500p to provide shareholders with adequate value. If a bid for 390p becomes official, we would encourage shareholders to reject it," Murray added.
Elsewhere, B&M European Value Retail slid 6.0% after it said Chief Executive Alex Russo intends to leave the company at the end of April, after warning that full-year profit will be lower than expected.
The Luxembourg-based variety goods value retailer now expects full-year adjusted earnings before interest, tax, depreciation and amortisation between GBP605 million from GBP625 million, down from its previous guidance of GBP620 million to GBP650 million.
This reflects the current trading performance of the business, an uncertain economic outlook, and the potential impact of exchange rate volatility on the valuation of stock and creditor balances, B&M said in a statement.
AJ Bell's Russ Mould said time has "run out" for Russo to get B&M back on track.
"The market has lost faith in the business amid a slowdown in growth over multiple consecutive quarters. Someone had to take the blame and it's inevitable that the CEO falls on their sword."
"Russo's exit is framed as retirement, yet the lack of a successor and a mere two-month lead time until departure imply a different story," Mould added.
B&M said it is in the "advanced stages" of a recruitment process to appoint a new CEO.
Brent oil was quoted at USD74.85 a barrel at the London equities close on Monday, down a touch from USD74.89 late Friday.
Gold was quoted higher at USD2,942.87 an ounce at the London equities close on Monday against USD2,935.51 at the close on Friday.
Tuesday's UK corporate calendar has results from Croda, Smith & Nephew and Unite.
By Jeremy Cutler, Alliance News reporter
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