LONDON MARKET CLOSE: FTSE squeezes gains but traders eye virus worries

(Alliance News) - M&A prospects added impetus to the London trading session on Monday, an otherwise tepid day for European equities, as Covid-19 fears weighed on the oil and travel sectors.

Share price gains at SSE helped lift the utilities sector in London, while FTSE 250-listed Vectura rose again as the race to acquire the respiratory medicines maker took another twist on Monday.

"Markets are firmly into the dog days of August, as the limited range of today's moves testifies," IG analyst Chris Beauchamp said.

The FTSE 100 index closed up 9.35 points, or 0.1%, at 7,132.30. The mid-cap FTSE 250 index slipped just 2.72 points to 23,453.44. The AIM All-Share index fell 0.52 of a point to 1,261.11.

The Cboe UK 100 index closed up 0.2% at 710.82. The Cboe 250 ended marginally lower at 21,246.98, and the Cboe Small Companies closed marginally higher at 15,409.53.

In mainland Europe, the CAC 40 in Paris and DAX 30 in Frankfurt both closed down 0.1%.

OANDA analyst Craig Erlam commented: "Meanwhile, oil prices have tumbled again as the spread of delta and restrictions that come with it, particularly in China, is causing real concern. We're seeing surges in a variety of countries which will likely weigh on the recovery in the coming months, just as it was starting to gather pace."

Brent oil was quoted at USD68.80 a barrel at the London equity market close on Monday, down from USD70.92 late Friday.

In London shares in BP, fell 0.5%, while at fellow oil major Royal Dutch Shell, 'A' shares and 'B' shares fell 0.8%. In New York, Chevron and Exxon Mobil were down 1.6% and 0.9%, respectively.

On Wall Street, equity markets were mixed. The Dow Jones Industrial Average was down 0.3% at the time of the London market close. The S&P 500 was 0.2% lower, though the Nasdaq Composite gained 0.1%.

Back in Europe, the travel sector was hurt by virus fears, with easyJet down 2.6%, among the worst-performing mid-cap equities in London. Cruise ship firm Carnival ended down 1.4%, while in Paris, aerospace firm and commercial aircraft manufacturer Airbus closed 1.8% lower.

Hargreaves Lansdown tumbled 9.0%, the worst-performer on London's blue-chip benchmark. The wealth management platform posted an annual performance which fell short of consensus expectations, despite adding a record number of new clients over the year.

For the financial year that ended June 30, revenue rose 15% to GBP631.0 million from GBP550.9 million last year, but pretax profit was GBP366.0 million, down 3.0% from GBP378.3 million. The revenue and profit figures missed consensus estimates from Jefferies of GBP636.7 billion and GBP383.0 million, respectively.

SSE rallied 5.0%. The Mail on Sunday reported over the weekend that US activist investor Elliot Management has secretly built up a large stake in the UK electricity utility.

The newspaper reported that Elliot's stake could mean a possible takeover bid of around GBP20 billion for SSE. However, the report noted it was not clear how large Elliott's shareholding in SSE was and why it has taken the position in the London-listed energy provider.

British Gas owner Centrica rose 0.6% on Monday. Severn Trent and United Utilities rose 0.9% and 0.7%, respectively.

Vectura shares closed 5.3% higher at 173.00p, adding to the stock's 6.4% gain on Friday. Vectura has a market capitalisation of GBP1.04 billion.

Vectura noted Philip Morris International's increased takeover offer, which values the firm at over GBP1 billion, and subsequently withdrew its backing for Carlyle's bid made on Friday.

Philip Morris shares were down 0.5% in New York.

However, Vectura decided not to back Philip Morris's new offer and instead an auction was set by the UK Takeover Panel, the regulatory body which deals with takeovers and mergers. This will start on Wednesday and run for five days.

Vectura, Philip Morris and Carlyle have all agreed to the auction, the Takeover Panel said.

The Marlboro cigarettes maker bested Carlyle's previously-recommended bid from Friday.

On Friday, when setting out its recommendation for the private equity firm's bid, Vectura said it "may be better positioned under Carlyle ownership to meet both the company's existing strategy, and the interests of a number of its current stakeholders".

The pound was quoted at USD1.3856 late Monday, down from USD1.3862 at the London equities close Friday. The euro was priced at USD1.1748, lower from USD1.1760. Against the Japanese yen, the dollar was trading at JPY110.24, down slightly from JPY110.30.

The dollar was largely higher against major currencies, continuing its climb against the pound and the euro in the wake of the latest US nonfarm payrolls report at the end of last week.

The strong jobs report from Friday could foster the US Federal Reserve to view progress being made in the labour market as substantial, therefore bringing forward the timing of the tapering of economic support.

"The publication of the positive data had an immediate effect on the sentiment of investors, who now expect the tapering of the Fed's asset purchases to start in the not-too-distant future as concerns over the state of the labour market start to fizzle-out," ActivTrades analyst Ricardo Evangelista commented.

Gold was trading at USD1,730.32 an ounce late Monday, down from USD1,764.55 on Friday.

OANDA's Erlam said gold is in "bad shape" after Friday's US jobs report.

"While there's still plenty of data to come over the next month that could sway the FOMC, it's looking inevitable that a taper announcement is not far away, probably in September. That's naturally bad news for gold prices," Erlam explained.

The dollar will be in focus on Wednesday, when US consumer price index figures are posted.

Tuesday's economic calendar has the ZEW economic sentiment indicator for Germany at 1000 BST, after the latest British Retail Consortium-KPMG UK retail sales monitor just after midnight.

Tuesday's local corporate calendar has half-year results from Paddy Power owner Flutter Entertainment, investment and asset manager Abrdn and savings and investments firm M&G. Swiss watch seller Watches of Switzerland releases a trading statement.

By Eric Cunha; ericcunha@alliancenews.com

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