London close: Stocks finish firmer on US debt ceiling hopes

Stocks in London closed on an upward trajectory on Monday, as investors shifted their attention across the pond towards ongoing discussions in the United States over the federal debt ceiling.

The FTSE 100 closed the day up 0.3% at 7,777.70, while the FTSE 250 gained 0.37% to close at 19,258.75.

On the currency front, sterling appreciated against both the dollar and the euro, last rising 0.53% on the former to trade at $1.2524, and advancing 0.36% against the latter to change hands at €1.1519.

“We’ve seen a modestly subdued session for markets in Europe today, opening higher on the back of the more positive mood coming out of the US, with respect to positive noises coming out from the debt ceiling negotiations at the weekend,” said CMC Markets chief market analyst Michael Hewson.

“With the opening of US markets these gains started to melt away in the afternoon session as markets gave up these gains to slide into the red, although the FTSE 100 appears to be outperforming, due to a modest rebound in commodity prices which is supporting the basic resources and oil and gas sector.”

Industrial production takes a hit in Europe, New York region

There were no major economic releases in the UK on Monday, but on the continent, eurozone industrial production faced a significant downturn in March, defying earlier predictions of a slight decline.

Eurostat reported a 4.1% drop in industrial output, making for the sharpest fall since October 2021.

The wider European Union saw a similar trend, with a decrease of 3.6%.

That downturn neutralised February's gains, in which the eurozone and EU saw an increase in industrial production by 1.5% and 1.4%, respectively.

It also starkly beat the 2.5% drop economists had been anticipating.

“Ireland, where transfer pricing practices of multinationals can lead to big swings in the industrial production figures, led the decline,” said Melanie Debono, senior Europe economist at Pantheon Macroeconomics.

“But there was weakness elsewhere too.

“The data suggest little in the way of a boost to Eurozone industry from China’s reopening, which has been predominantly in services.”

Among the individual EU countries, Germany, the largest economy in the bloc, recorded a 3.1% decline, wiping out the 2.5% increase of February.

France and Italy also experienced declines in industrial production, with decreases of 1.1% and 0.6% respectively.

However, Spain bucked the trend, reporting a 1.4% rise in production.

Elsewhere, the European Commission raised its annual inflation forecasts, saying it now expected inflation to be 5.8% in 2023, and 2.8% in 2024- a hike from its earlier February predictions of 5.6% and 2.5%, respectively.

The report highlighted that while headline inflation was subsiding as oil and gas prices cooled, core inflation - excluding more volatile energy and food costs - was stubbornly high.

Core inflation peaked at 7.6% in March, with an average of 6.1% anticipated this year, dropping to 3.2% in 2024, as increasing wage pressures were absorbed into profit margins and financing conditions turned stricter.

Across the Atlantic, the US economy experienced a severe contraction in factory sector activity in the New York region in May.

The Federal Reserve Bank of New York's regional factory index plunged to -31.8 in May from 10.8 in April, a far cry from the expected -4.0.

New orders took the most significant hit, with the subindex plummeting from 25.1 to -28.0.

However, the price index saw a slight increase from 33.0 to 34.9, indicating a rise in costs borne by firms.

There was a minor improvement in hiring, with the corresponding subindex moving up from -8.0 to -3.3.

Wood Group slides as Apollo retreats, HSBC rises on Asia plans

In equities, oil industry engineer John Wood Group plummeted 34.43% after Apollo Global, a US private equity firm, retracted its proposal for a takeover bid.

Apollo previously made five approaches towards the Wood Group and had until 17 May to make a final offer or withdraw.

Responding to Apollo's decision, Wood Group's board expressed confidence in its strategic direction, citing a transformative 2022 that involved new executive leadership and a revamped strategy.

Meanwhile, ASOS shares fell by 20.69% after analysts from Shore Capital expressed concerns about the fast-fashion retailer's financial stability.

The analysts' forecast suggested that the company might need to raise additional capital soon.

“Despite the recent amendment of the revolving credit facility which has increased to £350m from £250m with only £100m remaining undrawn, we believe a further capital raise is likely,” the broker said in a note.

“This assessment is based on the realisation that the measures implemented may fall short in stabilising the business within the existing macroeconomic context.”

On the upside, precious metals miners Glencore and Anglo American contributed to keeping the FTSE 100 index in positive territory, with their shares rising by 1.13% and 1.82%, respectively.

Banking giant HSBC was ahead 1.88% after it announced plans to enhance revenues in its Asia business.

The bank was facing pressure from top shareholder Ping An to boost its performance across the region, while simultaneously advocating for a spin-off of its Asia business.

HSBC's roadmap included projected growth of up to 9% in Asia's wealth business and around 15% in medium- to long-term lending growth.

Technical products and service provider Diploma was 1.68% firmer after it released a robust report for the first half of its financial year, with revenues up 30% to £582.8m and 10% growth on an organic basis.

Positive forecasts for the latter half of the year led to an increase in full-year guidance.

Finally, electronics retailer Currys saw its shares jump 3.04% after it elevated its full-year earnings guidance, following better-than-expected trading in the final two months of its financial year.

Adjusted pre-tax profit for the year ended 29 April was now expected to be in the range of £110m to £120m, up from the previously-anticipated £104m.

The company cited gross margin improvements and a focus on cost efficiencies as the key drivers behind its encouraging forecast.

Reporting by Josh White for Sharecast.com.

FTSE 100 +23.08 (+0.3%) 7,777.70

RISERS
3i Group +2.6% 1,876p
Centrica +2.44% 117.55p
Segro +2.06% 820.6p
HSBC Holdings +1.88% 611p
Anglo American +1.82% 2,380p
Beazley +1.74% 614.5p
Flutter Entertainment +1.66% 16,185p
Whitbread +1.62% 3,262p
Antofagasta +1.57% 1,419p
Lloyds Banking Group +1.56% 46.27p

FALLERS
Ocado Group -2.36% 431p
Rolls-Royce Holdings -2.16% 145.1p
DCC -1.38% 4,654p
London Stock Exchange Group -1.15% 8,456p
Tesco -0.91% 273.2p
BAE Systems -0.73% 980.8p
Johnson Matthey -0.67% 1,928.5p
Relx -0.64% 2,475p
Imperial Brands -0.64% 1,873p
ConvaTec Group -0.63% 220.6p

FTSE 250 +70.38 (+0.37%) 19,258.75

RISERS
Trainline +5.53% 282.6p
CLS Holdings +4.84% 134.4p
Digital 9 Infrastructure +4.23% 69p
Genuit Group +3.89% 307.5p
Ithaca Energy +3.74% 161p
Bakkavor Group +3.5% 94.6p
UK Commercial Property REIT +3.43% 54.3p
FDM Group Holdings +3.16% 652p
HgCapital Trust +3.16% 375p
Warehouse REIT +3.11% 106p

FALLERS
John Wood Group -34.43% 143.6p
Asos -20.69% 400.5p
Auction Technology Group -5.63% 670p
Coats Group -1.76% 72.4p
Petershill Partners -1.72% 148.4p
Baltic Classifieds Group -1.51% 156.4p
Jupiter Fund Management -1.46% 121.2p
Domino’s Pizza Group -1.46% 298p
Tullow Oil -1.43% 23.46p
AJ Bell -1.32% 313.6p