LONDON MARKET CLOSE: Shell and ex-dividend stocks take FTSE 100 down

Thu, 07th Apr 2022 17:09

(Alliance News) - Stocks around Europe struggled on Thursday as a couple of central banks cast a large shadow over markets.

The hawkish commentary from the US Federal Reserve and European Central Bank increased the odds of a recession over the next couple of years, Oanda analyst Craig Erlam noted.

"The soft landing that the Fed so desires is easier said than done, especially in an environment when inflation is so high and energy prices are through the roof. And when you consider the kind of tightening that's being proposed, the economy is going to have to display incredible resilience to weather the storm," he continued.

On Wednesday evening, the US Federal Reserve confirmed that it is looking to tighten its monetary policy, the minutes from its most recent Federal Open Market Committee showed, and strongly considered a 50 point rise in March.

At their March policy meeting, several Fed officials supported raising interest rates by half a percentage point in the future to combat inflation, the meeting minutes highlighted.

This was followed on Thursday afternoon, by European Central Bank minutes showing policymakers disagreed last month on how to respond to runaway inflation and economic uncertainty caused by the Ukraine war.

The revelation comes as markets are looking for signs that the ECB could soon announce the first interest rate hike in over a decade.

"A large number of members held the view that the current high level of inflation and its persistence called for immediate further steps towards monetary policy normalisation," the minutes read.

The hawkish turn from the Fed and ECB were sending stocks in Europe and the US lower.

The FTSE 100 index closed down 35.89 points, or 0.5%, at 7,551.81. The mid-cap FTSE 250 index ended down 62.93 points, or 0.3%, at 21,037.80. The AIM All-Share index gained 2.95 points, or 0.3%, to finish at 1,050.72.

The Cboe UK 100 index closed down 0.5% at 751.26. The Cboe 250 ended down 0.4% at 18,464.25, and the Cboe Small Companies closed down 0.7% at 15,337.35.

In mainland Europe, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 0.5%.

In the US, Wall Street was painted red. The Dow Jones Industrial Average was down 0.8%, the S&P 500 down 0.6%, and the Nasdaq Composite down 0.9%.

Adding to the selling pressure in London was a number of stocks going ex-dividend.

At the bottom of the FTSE 100, Aviva, Barratt Developments, Entain and abrdn lost 4.9%, 4.3%, 4.1% and 3.8%, respectively, after the stocks went ex-dividend, meaning new buyers no longer qualify for the latest payout.

Mondi gave back 2.4%, DS Smith 2.0% and Lloyds Banking 1.9% as they also went ex-dividend.

Entain also said it made a strong start year with a good performance across all areas of the business, and is confident in its financial performance for the year ahead.

For the three months to March 31, net gaming revenue was up 31% compared to the first quarter last year, supported by the easing of Covid-19 restrictions. Retail arm volumes were within 5% to 10% of pre-Covid levels. However, first-quarter online net gaming revenue was down 8% on an annual basis, though it said this was in line with expectations.

Smaller peer 888 Holdings was the standout performer in the midcaps, up 28%, after the gambling firm unveiled plans for a bookbuild to help fund its acquisition of some William Hill assets, also adding the purchase price of the deal has been cut.

The Gibraltar-based firm said the enterprise value of the William Hill assets has been cut to between GBP2.0 billion and GBP2.1 billion from GBP2.2 billion previously. 888 and Caesars have amended their September purchase deal, with the cash consideration due at closing reduced to GBP584.9 million from GBP834.9 million before.

888 intends to conduct a placing of up to 70.8 million new shares, representing around 19% of its issued share capital. The placing will be conducted through an accelerated bookbuild process which will be launched immediately. The price at which the shares are to be placed will be determined following the close of the process, it explained.

At current market prices, the fundraise would be worth around GBP160 million. 888 said the placing replaces its previous intention to raise around GBP500 million in the issue of new equity.

Back in the FTSE 100, Shell was also weighing around the neck of the blue chip index, losing 2.2%, after the oil major said it will book an impairment of between USD4 billion and USD5 billion in the first quarter of 2022 after exiting its operations in Russia.

"These charges are expected to be identified and therefore will not impact adjusted earnings. Details of the accounting treatment and impact of ongoing developments will be provided at the first quarter 2022 results announcement," the company said.

Shell last month said it would withdraw from involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas, following Russia's attack on Ukraine.

In addition, Shell said operating cash flow is expected to be hurt by "very significant" working capital outflows, as price increases impacting inventory have led to a cash outflow of around USD7 billion.

The pound was quoted at USD1.3057 Thursday evening, down from USD1.3073 at the London equities close Wednesday.

The euro was priced at USD1.0900, lower against USD1.0906. Against the yen, the dollar was trading at JPY123.85 in London, firm from JPY123.77.

Brent was quoted at USD99.08 a barrel Thursday evening, down sharply from USD104.01 Wednesday evening and falling below USD100 for the first time since February.

Oanda's Craig Erlam said: "Oil prices are slipping again today after falling more than 5% on Wednesday. The combination of the IEA reserve release and EIA inventory data sent prices tumbling yesterday and suddenly a world of double-figure oil looks possible."

The European Parliament on Thursday called for an immediate halt to oil, coal, gas and nuclear fuel imports from Russia, as well as the complete abandonment of the Nord Stream 1 and Nord Stream 2 gas pipelines.

A majority of members of the European Parliament voted in favour of the respective amendment, also calling on the European Commission and EU member states to present a plan for securing the bloc's energy supplies in the short term.

Some 413 MEPs voted in favour of the measure, 93 voted against it and 46 abstained.

Gold stood at USD1,931.30 an ounce, higher against USD1,927.10 late Wednesday.

The main data print on a quiet Friday will be wholesale inventories from the US at 1500 BST.

In the local corporate calendar, online trading platform CMC Markets and iron miner Ferrexpo will issue trading statements.

By Paul McGowan; paulmcgowan@alliancenews.com