LONDON MARKET OPEN: FTSE up on peace hopes; Rolls-Royce returns gains

(Alliance News) - European markets opened solidly higher on Monday, despite more Covid-19 lockdowns in China and the ongoing war between Russia and Ukraine, which is continuing to "cast a shadow" over the world's economy.

Monday's economic calendar is quiet, with traders likely to focus on comments from Bank of England Governor Andrew Bailey, who speaks in Brussels at 1200 BST. The UK moved into daylight savings time over the weekend.

The FTSE 100 index was up 32.91 points, or 0.4%, at 7,516.26 early Monday. The mid-cap FTSE 250 index rose 141.59 points, or 0.7%, to 21,097.80. The AIM All-Share index was up 3.20 points, 0.3%, at 1,039.22.

The Cboe UK 100 index was up 0.4% at 747.60. The Cboe 250 was up 0.8% at 18,656.24, and the Cboe Small Companies climbed 0.1% to 15,157.31.

In mainland Europe, the CAC 40 in Paris rose 0.9%, while the DAX 40 in Frankfurt rallied 1.0%.

"The war in Ukraine continues to cast a shadow over the global economy, particularly with the impact of rising prices – particularly for energy items – raising concerns over the outlook for consumer spending across major economies," analysts at Lloyds Bank commented.

"Ahead of the resumption of negotiation talks between Ukraine and Russia later this week, the US White House has continued its efforts of tempering comments made by the US president, insisting that the US wasn't seeking a regime change in Russia."

It remains to be seen whether talks will be hampered by US President Biden's shock declaration that Putin "cannot remain in power".

The ad-libbed remark sparked outrage in Moscow and sowed widespread concern in Washington and abroad, seeming to undercut Biden's own efforts on a European visit to underscore a carefully crafted unity in support of Kyiv.

Monday's positive open for equities was put down to traders hopeful of a peace deal, said Interactive Investor analyst Victoria Scholar .

"European markets have started the week on a positive footing, clinging to hopes that a peace deal between Ukraine and Russia could be in sight. The FTSE 100 is lagging behind the wider region, dragged down by Rolls-Royce and Barclays," Scholar explained.

In Asia on Monday, the Japanese Nikkei 225 index fell 0.7%. In China, the Shanghai Composite inched up 0.1%, while the Hang Seng Index in Hong Kong was up 1.4%. The S&P/ASX 200 in Sydney closed up 0.1%.

Millions of people in China's financial hub were confined to their homes on Monday as the eastern half of Shanghai went into lockdown to curb the nation's biggest Covid outbreak.

Authorities announced late on Sunday that it would carry out a two-phased lockdown of the city of around 25 million people to carry out mass testing.

The news weighed on oil prices at the start of the week.

Brent oil was trading at USD116.36 a barrel, down from USD120.08 late Friday.

Swissquote analyst Ipek Ozkardeskaya commented: "The new shutdown measures due to Covid are expected to be short-term road bumps on a long up-trending road, as the impact of the lockdowns on medium-term oil demand will certainly remain limited, whereas the tight supply concerns – which are amplified by the tensions in Saudi with the Houthi rebels should keep oil prices under a decent positive pressure."

While oil prices were subdued, the dollar climbed, amid the geopolitical tensions.

Sterling was quoted at USD1.3155 early Monday in London, down from USD1.3185 at the London equities close on Friday.

The euro traded at USD1.0955 early Monday, lower than USD1.0987 late Friday. Against the yen, the dollar rose to JPY123.75 versus JPY122.06.

In early UK corporate news, ownership of lender NatWest crossed an important threshold, as the UK government early Monday said it has reduced its stake below 50%, more than a decade after a taxpayer bailout during the financial crisis.

The Treasury said it sold just under 550 million shares back to NatWest in an off-market transaction at 220.5 pence per share, netting GBP1.21 billion.

NatWest shares were 1.5% higher early Monday, among the best large-cap performers.

NatWest will cancel the share that were purchased. After this, the government's stake will be 48.1%, falling from 50.6%.

At the other end of the FTSE 100, Rolls-Royce fell 6.8%, having risen 19% on Friday.

Betaville Intelligence, a blog that describes itself as a "cheeky website" about deals and dealmakers, said late Friday that Rolls-Royce could be involved in a "significant corporate transaction".

The posting, published roughly 15 minutes before the end of trading, sent shares in the jet engine maker surging late Friday.

Betaville did not name a suitor. The blog is edited by Ben Harrington, a former Daily Telegraph M&A and markets editor.

Barclays shares fell 2.5%. It warned of a GBP450 million hit, due to the over-issuance of structured notes and exchange traded notes.

The bank said securities issued as part of its US shelf registration statement during a period of roughly one-year exceeded the registered amount.

Some purchasers now have a right of rescission, which would require Barclays to buy back the instruments at the original purchase price. Barclays expects rescission losses of GBP450 million, net of tax. The charges will be reflected in its first quarter earnings.

It also means its GBP1 billion buyback will now kick off in the second quarter.

"Barclays Bank PLC intends to file a new automatic shelf registration statement with the [US Securities & Exchange Commission] as soon as practicable. Barclays remains committed to its structured products business in the US," the company said.

Shares in Ted Baker fell 3.5% to 121.75p, giving it a market capitalisation of GBP225.2 million.

The fashion retailer confirmed it received, and rejected, two unsolicited, non-binding takeover proposals from Sycamore Partners Management.

The first offer was for 130 pence per share on March 18, with a second coming four days later at 137.5p per share. Ted Baker's stock closed at 125.81p on Friday, giving the retailer a market capitalisation of GBP232.3 million.

Ted Baker rebuffed both offers.

"The board of Ted Baker carefully reviewed both of Sycamore's proposals with its advisers and concluded they significantly undervalued Ted Baker and failed to compensate shareholders for the significant upside that can be delivered by Ted Baker as a listed company. Ted Baker is a leading global brand with a strong future. The management actions taken over the last two years have put the business on a firm footing, and it is now well on the way to recovery following a turbulent period. The board is focused on delivering value for Ted Baker's shareholders well in excess of the price offered by Sycamore," the company said.

On AIM, shares in Brighton Pier rose 9.2% as its annual earnings jumped, bolstered by "record summer trading".

The company which operates Brighton Marine Palace as well as bars and indoor mini-golf sites, posted revenue of GBP22.8 million in the year ended December 26, up sharply from GBP8.2 million.

Pretax profit multiplied to GBP6.6 million from GBP2.7 million.

"Record summer trading period boosted by pent-up demand and disposable incomes accrued during lockdown," Brighton Pier said.

Gold was quoted at USD1,933.22 an ounce early Monday in London, falling from USD1,955.60 on Friday.

By Eric Cunha; ericcunha@alliancenews.com

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