LONDON MARKET CLOSE: Weaker pound, banks and IAG help FTSE outperform

(Alliance News) - London's FTSE 100 ended solidly higher on Monday, closing out the month strongly despite trepidation elsewhere in global markets, as investors look forward to a key week for monetary policy.

With decisions from the Federal Reserve, Bank of England and Reserve Bank of Australia to come during the week, all eyes are on central banks. A slower economic growth but hotter inflation reading put the European Central Bank back into focus, days after it lifted interest rates by 75 basis points.

London's flagship FTSE 100 managed to withstand the uncertain mood on Monday. It was helped by share price gains for International Consolidated Airlines Group on M&A prospects, a recovery for banking stocks and a rise for British Gas owner Centrica after a broker rating increase.

The FTSE 100 index closed up 46.86 points, 0.7%, at 7,094.53. The FTSE 250 ended down 26.74 points, 0.2%, at 17,889.93, though the AIM All-Share added 0.76 of a point, 0.1%, at 806.13.

The Cboe UK 100 closed up 0.9% at 710.24, the Cboe UK 250 ended down 0.1% at 15,365.31, and the Cboe Small Companies ended down 0.1% at 12,335.58.

For the whole of October, the FTSE 100 added 2.9%, its first monthly gain since July. In September, the index gave back 5.4%.

In European equities on Monday, the CAC 40 in Paris ended down 0.1%, while the DAX 40 in Frankfurt added 0.1%.

In New York, stocks were lower at the time of the closing bell in London. The Dow Jones Industrial Average was down 0.2%, the S&P 500 down 0.5% and the Nasdaq Composite 0.7% lower.

"Uncertainty sums up the feeling in the markets at the moment and that is perfectly highlighted by the moves seen on the opening day of the week," Oanda analyst Craig Erlam commented,

"There's going to be a lot to take in this week, from the Fed on Wednesday, to the jobs report on Friday, BoE on Wednesday, earnings season, and much more. Perhaps it's not surprising to see some jitters creeping back in."

The pound was quoted at USD1.1500 late Monday in London, down from USD1.1593 at the equities close on Friday. A weaker pound acts as a tailwind for the FTSE 100, which is stacked with foreign earners.

Providing the focus for the week ahead, there will be interest rate decisions from the US Federal Reserve on Wednesday and the Bank of England on Thursday. Both are expected to enact 75 basis point hikes.

For the Fed, investors are on the lookout for any suggestions that the central bank will take the foot off the gas at its final meeting of the year in December.

City Index and FOREX.com analyst Fawad Razaqzada commented: "While a 75 basis points hike is likely at this meeting, the market is quite unsure about what type of a signal the Fed will provide in terms of future rate hikes. For the December 14 meeting, for example, the market is spilt between 50 and 75 basis points. So, it is all about what whether the Fed will manage expectations lower for that meeting, or whether it will signal that another aggressive hike will be on the way."

The RBA is on Tuesday expected to hike by 25 basis points again.

The euro stood at USD0.9885 on Monday, down slightly against USD0.9943 late Friday.

The single currency struggled to make headway after data showed economic growth in the eurozone slowed. However, an inflation reading was hotter-than-expected.

According to a flash estimate from Eurostat, on a seasonally-adjusted annual basis, the eurozone economy grew 2.1%, slowing from 4.1% in the second quarter.

Meanwhile, eurozone consumer prices are predicted to have risen 10.7% annually in October, speeding up from a 9.9% hike in September. The reading was ahead of consensus of 10.2%, as cited by FXStreet.

In London, IAG added 4.9%.

The Times reported that British Airways-owner is eyeing a potential acquisition of budget airline easyJet, as part of renewed plans to consolidate the European airline industry.

IAG also has its eye on Portugal's flag carrier TAP. It already owns Spain's Iberia and Vueling and Ireland's Aer Lingus.

easyJet shares closed up 6.1%. TAP Air Portugal is currently state-owned.

Share price recoveries for banking stocks also boosted the FTSE 100. NatWest, among the best of the lot, rose 4.6%. The stock had slumped 9.2% on Friday on poorly-received quarterly results. Lloyds rose 1.8% on Monday, reversing some of Friday's 3.5% fall.

Centrica climbed 4.4%. Jefferies lifted the British Gas owner to 'buy' from 'hold'.

Royal Mail owner International Distributions Services also closed 4.4% higher, as it received two bits of good news.

The Communications Workers Union has cancelled a planned strike over the next fortnight, in a long running dispute over pay and conditions.

Additionally, IDS said the UK business secretary has confirmed that no further action will be taken with regards to Vesa Equity Investment's 22% stake in IDS. Vesa is a Luxembourg-based company, and its stake was being reviewed under the National Security & Investment Act 2021.

Vesa is controlled by Czech billionaire Daniel Kretinsky, who also owns stakes in West Ham United football club and Sainsbury's.

Elsewhere in London, TP Group shares soared to 2.18 pence, from 0.78p on Friday.

The consulting, software and engineering company has agreed to a GBP17.5 million takeover by Science Group.

TP shareholders will receive 2.25 pence per share in cash, which is almost triple that of the closing price of 0.78p on Friday. Around 11.7% TP shareholders have given a letter of intent to accept the offer. Science Group itself already holds a 28% stake, meaning almost 40% support in total.

Science Group added 4.9%.

Gold was quoted at USD1,638.60 an ounce at late on Monday, slightly lower than USD1,640.91 on Friday. Brent oil was trading at USD92.24 a barrel, lower than USD93.34.

Against the yen, the dollar was quoted at JPY148.61 late Monday in London, up from JPY147.54 late Friday.

Tuesday's economic events calendar has a slew of manufacturing PMI readings, including the UK at 0930 GMT and the US at 1345 GMT.

The local corporate calendar has third-quarter results from oil major BP and a trading statement from pest control and hygiene firm Rentokil Initial.

By Eric Cunha; ericcunha@alliancenews.com

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