LONDON MARKET CLOSE: Stocks stage fight back despite more banking woes

(Alliance News) - Stocks in London fought back on Monday, after hitting two-month lows on Friday, although a fall in HSBC shares kept a lid on further progress.

Investors also have one eye on this week's central bank decisions in Japan, the US and the UK, with US non-farm payrolls to close the week out on Friday.

The FTSE 100 index closed up 36.11 points, 0.5%, at 7,327.39. The FTSE 250 ended up 151.36 points, 0.9%, at 17,017.59, and the AIM All-Share closed up 4.11 points, 0.6%, at 678.57.

The Cboe UK 100 ended up 0.5% at 730.62, the Cboe UK 250 closed up 1.1% at 14,776.31, and the Cboe Small Companies ended up 0.6% at 12,637.87.

The Bank of Japan kicks off the interest rate triple-header on Tuesday, with the US Federal Reserve rate decision on Wednesday and the Bank of England following on Thursday.

ING Economics economist Chris Turner said markets expect no change in the BoJ's ultra-loose policy "but we still see a slightly higher chance of another tweak to the yield curve control policy, with forward guidance adjustments. Policy decisions aside, the BoJ's latest outlook will drive market moves".

There is broad consensus that US and UK interest rates will be left unchanged, although analysts will be scouring the accompanying guidance for any shift in language towards future monetary policy.

The pound was quoted at USD1.2144 at the London equities close on Monday in London, lower compared to USD1.2149 on Friday. The euro stood at USD1.0607, up against USD1.0594. Against the yen, the dollar was trading at JPY149.13, lower compared to JPY149.59.

In London, HSBC fell 3.0% after the Asia-focused bank missed profit expectations, although a USD3 billion buyback was better than hoped.

The lender said third-quarter pretax profit soared to USD7.71 billion from USD3.23 billion a year before, which HSBC said reflected the positive impact of a higher interest rate environment.

However, the figure fell short of company-compiled analyst estimates of USD8.10 billion.

Net interest income rose 15% to USD9.25 billion from USD8.01 billion, as net fee income increased 5.3% to USD3.00 billion from USD2.85 billion. Net operating income climbed 45% to USD15.09 billion from USD10.44 billion, which was short of analyst estimates of USD16.24 billion.

Shares in fellow lender NatWest fell a further 1.9%, after sliding 12% after Friday's results. Broker Jefferies downgraded the bank to 'underperform' from 'buy' and set a 150 pence price target.

"Lowered capital return expectations and earnings downgrades limit a re-rating as the market re-assesses the investment case," the broker said.

But there was better news for investors in Pearson, where shares rose 2.9%, after it raised operating profit guidance.

The education publisher said revenue in the third quarter rose 2% year-on-year on an underlying basis. It now expects group revenue growth, excluding online programme management and strategic review businesses to be at the higher end of its existing low-to-mid-single-digit guidance, and upgraded guidance for adjusted operating profit to a range of GBP570 million to GBP575 million, which is around GBP20 million higher than prior guidance.

Airtel Africa was the best performing stock in the FTSE 100, rising 4.9%. It reported a higher operational profit amid increased revenue, while statutory profit fell after the Nigerian naira devalued sharply in June.

The Africa-focused telecommunications company said in the six months to September 30, operating profit rose 1.5% to USD885 million from USD872 million a year ago. Earnings per share before exceptional items improved 3.2% to 7.0 US cents from 6.8 cents a year prior.

Revenue climbed 2.3% to USD2.62 billion from USD2.57 billion. Earnings before interest, tax, depreciation and amortisation grew 3.7% to USD1.30 billion from USD1.26 billion, while Ebitda was 21% higher at constant currency.

In the FTSE 250, Ascential surged 24%.

The business-to-business media and events company reported a proposed sale of its Digital Commerce and WGSN units for cash proceeds of GBP1.2 billion. It plans to sell the first to Omnicom Group, and the second to fund advised by Apax Partners. Once complete, it plans to distribute around GBP850 million to shareholders.

Asos rose 1.0% following reports that it is exploring a sale of the Topshop brand it bought from Philip Green's collapsed retail empire less than three years ago.

Sky News said the online retailer, which will publish its delayed full-year results this week, is at the early stages of a process that could see it offload what was once one of the best-known names on the high street.

Shore Capital analyst Eleonora Dani said while the sale could offer Asos "a financial lifeline," these developments raise questions about the firm’s long-term viability.

Dani explained Topshop has been a key growth driver for Asos since its acquisition and selling it now could severely impede the company’s recovery efforts.

On AIM, Neometals lost 13%, after the sustainable battery materials producer informed Critical Metals, its partner in a Finnish vanadium recovery project, that it does not wish to proceed with the construction of the facility.

This was due to cash concerns amid the current state of the global financial markets, Neometals said.

Brent oil was quoted at USD88.31 a barrel at the London equities close on Monday, up from USD87.74 late Friday.

Gold was quoted at USD2,000.32 an ounce, higher against USD1,981.94.

Stocks in New York were up sharply at the London equities close, with the Dow Jones Industrial Average up 1.1%, the S&P 500 index up 0.8%, and the Nasdaq Composite up 1.0%.

In European equities, the CAC 40 in Paris ended 0.6% higher, while the DAX 40 in Frankfurt closed up 0.2%.

In Tuesday's UK corporate calendar, BP reports third quarter results.

Tuesday's global economic calendar sees a eurozone gross domestic product reading and flash consumer price index data at 1000 GMT.

By Jeremy Cutler, Alliance News reporter

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