London close: Stocks mixed as investors prep for busy week

London stocks closed in a mixed state on Monday, as investors prepared for a busy week featuring rate announcements from the US Federal Reserve and the Bank of England.

The FTSE 100 ended the session up 0.66% at 7,094.53, while the FTSE 250 was down 0.15% at 17,889.93.

Sterling was in negative territory, last trading down 1.16% on the dollar at $1.1480, and weakening 0.26% against the euro to €1.1625.

“While Wall Street edges lower in early trading, the FTSE 100 has managed to rise to a one-month high,” said IG chief market analyst Chris Beauchamp.

“Banks have been a major player here, as expectations of tighter interest rates boost income forecasts for the sector, a point highlighted by several major players in their results.

“Meanwhile, the pound’s drop today back below $1.15 has provided another tailwind for the index, but the modest losses in the US might be a harbinger of things to come if the Fed is more hawkish than expected this week.”

In economic news, mortgage approvals fell sharply in September according to official data, as interest rates continued to climb.

The Bank of England’s latest money and credit report showed mortgage approvals for house purchases - a key indicator of future borrowing - decreased "significantly" to 66,800 from 74,400 a month earlier.

It was, however, not as sharp a decline as some had feared - most analysts had expected approvals to fall to around 63,700.

The effective interest rate, meanwhile, on newly-drawn mortgages jumped 29 basis points to 2.84% - the largest monthly increase since December 2021, when the current rate-increasing cycle began.

Net borrowing of mortgage debt remained steady at £6.1bn in September, above the six-month average of £5.7bn.

Gross lending rose to £27bn from £25.9bn in August, while gross repayments were little changed at £20.6bn.

Net consumer credit borrowing also increased, but by less than in August, when it rose by £1.2bn.

Consumers borrowed an additional £0.7bn last month, the lowest since December 2021 and below consensus for around £1.0bn.

The slowdown was entirely attributed to credit card borrowing, which fell to £0.1bn from £0.7bn month-on-month.

In contrast, households added £8.9bn to their savings, well above the 2018-2019 average of £4.9bn.

“Households are acting with caution when deciding whether to save less or borrow more to maintain their real level of consumption amid the surge in inflation,” said Gabriella Dickens, senior UK economist at Pantheon Macroeconomics.

“Looking ahead, we think households will remain wary given that consumer confidence is on the floor.

“Note too that households likely will become even more cautious when unemployment starts to rise in the coming months as businesses seek savings in response to the surge in their borrowing costs.”

Elsewhere, the school half-term helped boost UK footfall by 8.2% in the week ended 29 October, providing retailers with a much-needed uplift amidst the cost-of-living crisis.

According to Springboard, British consumers visited retail destinations for experiential days out, as coastal and historic towns saw "significant" footfall rises of 18.2% and 10.8%, respectively, while footfall increased across all UK regions and destination types - the greatest rise since Easter.

Footfall was up 10.7% in shopping centres, 8.7% in high streets and 4.2% in retail parks.

On a year-on-year basis, the 3.2% uptick was more modest than the 4.8% annual increase in the week before last, while the gap from 2019 of -13.2% was wider than the -11.1% print of the prior week.

“The school half term last week delivered a welcome boost to UK retail destinations, with the largest increase in footfall from the week before since Easter week in April 2022,” said Springboard's insights director Diane Wehrle.

“Customer activity increased in all three key destination types, however, high streets and shopping centres performed better than retail parks, both of which benefited from twice the uplift in retail parks.”

On the continent, economic growth in the eurozone slowed in the third quarter according to a flash estimate from Eurostat.

GDP rose by 0.2% on the previous quarter, down from 0.8% growth in the second quarter of the year.

Compared with the same quarter a year earlier, eurozone GDP increased 2.1%, down from 4.3% in the second quarter.

Eurozone annual inflation, meanwhile, hit a new record high of 10.7% in October, according to a flash reading, as energy and food prices continued to soar.

The rise was higher than the 10.3% estimated by economists.

Energy costs surged to 41.9% from 40.7%, followed by food, alcohol and tobacco at 13.1%, up from 11.8% in September, while industrial goods inflation picked up to 6% and services to 4.4%, said Eurostat.

Elsewhere, German retail sales picked up unexpectedly last month, with Destatis reporting that retail turnover rose 0.9% month-on-month in September in real terms, partially reversing August’s 1.9% decline.

On a non-price adjusted basis, retail turnover rose by 1.8% month-on-month - analysts had been expecting a small fall of around 0.3% in price-adjusted terms.

Across the pond, factory sector activity in the Chicago area worsened slightly in October, with the Chicago Business Barometer declining to 45.2 in October from a reading of 45.7 for September.

That was a tad worse than the 47.7 point print that analysts had expected.

Output at factories in Texas, meanwhile, continued to grow in October, albeit at a slightly reduced pace.

A Dallas Federal Reserve sub-index linked to companies' level of production fell to 6.0 in October from a reading of 9.3 for September.

Another sub-index for general business activity, meanwhile, slipped to -19.4 from -17.2, for a sixth consecutive decline.

Finally on data, China’s economy continued to come under pressure last month according to official data, as rolling Covid-19 lockdowns and weakening international demand weighed heavily.

According to the National Bureau of Statistics, the official manufacturing purchasing managers’ index fell to 49.2 in October from 50.1 a month previously, below forecasts for around 50.0.

Output fell to 49.6, from 51.5, while new orders slipped to 48.1 from 49.8.

On London’s equity markets, banks were on the rise following a report that the government was denying suggestions of a windfall tax on the sector as one means of closing the budget hole.

According to the Times, prime minister Rishi Sunak and chancellor Jeremey Hunt played down the notion that they were looking at new taxes on banks.

It was understood that Hunt was likely to cut the current 8% surcharge for financial institutions to 3%, which would mean that if the corporate tax rate went up to 25%, banks would face a 28% tax rate.

NatWest Group was up 4.4%, Lloyds Banking Group added 1.82%, and Barclays advanced 0.9%, with NatWest also recovering from heavy losses last week on the back of results.

British Gas owner Centrica jumped 4.72% after an upgrade to ‘buy’ at Jefferies, while Drax Group powered ahead 1.76% after the same upgrade.

Centrica was also boosted after Citi reiterated its ‘buy’ rating on the shares.

International Distribution Services shot 4.39% higher after strikes planned by Royal Mail workers over the next two weeks were called off.

EasyJet ascended 6.06% after a report that British Airways and Iberia owner IAG was renewing plans to consolidate the sector.

The Times said speculation was mounting that IAG could look to buy smaller rivals such as easyJet or Portugal's TAP.

IAG itself added 5.45%, and Wizz Air gained 6.46%.

Russ Mould, investment director at AJ Bell, said easyJet as a takeover target for IAG made "perfect sense".

"Owning easyJet would significantly boost IAG’s position in the leisure market and give it access to many prized airport landing slots," he said.

"The key challenge is funding such a deal - IAG is already ladened with large debts and shareholders may prefer it to pay down these borrowings rather than spend billions on buying another airline such as easyJet."

Harbour Energy reversed earlier losses to close up 1.04% even after a report that the windfall tax on energy companies could be raised to 30% and extended by three years.

According to the Times, under options being considered by Jeremy Hunt, the energy profit levy would increase by up to five percentage points.

On the downside, Bodycote slumped 2.44% after appointing Ben Fidler as chief financial officer, succeeding Dominique Yates who announced his intention to retire earlier this year.

Fidler is currently the deputy CFO of Rolls-Royce, a position he had held since January 2021.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend, Iain Gilbert and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,094.53 0.66%
FTSE 250 (MCX) 17,889.93 -0.15%
techMARK (TASX) 4,237.82 0.06%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 121.56p 5.45%
Centrica (CNA) 76.62p 4.73%
NATWEST GROUP (NWG) 234.80p 4.40%
Flutter Entertainment (CDI) (FLTR) 11,580.00p 2.98%
Coca-Cola HBC AG (CDI) (CCH) 1,902.50p 2.73%
BT Group (BT.A) 129.50p 2.49%
Pershing Square Holdings Ltd NPV (PSH) 2,835.00p 2.16%
Sainsbury (J) (SBRY) 194.40p 2.07%
Vodafone Group (VOD) 101.64p 1.83%
Lloyds Banking Group (LLOY) 42.02p 1.82%

FTSE 100 - Fallers

Intertek Group (ITRK) 3,654.00p -2.77%
Croda International (CRDA) 6,760.00p -1.54%
Mondi (MNDI) 1,462.50p -1.52%
RS Group (RS1) 958.50p -1.39%
Spirax-Sarco Engineering (SPX) 10,750.00p -1.38%
Berkeley Group Holdings (The) (BKG) 3,471.00p -1.36%
Taylor Wimpey (TW.) 93.78p -1.24%
Halma (HLMA) 2,115.00p -1.08%
Unite Group (UTG) 891.00p -1.00%
Dechra Pharmaceuticals (DPH) 2,620.00p -0.91%

FTSE 250 - Risers

Helios Towers (HTWS) 124.80p 9.89%
Wizz Air Holdings (WIZZ) 1,715.00p 6.46%
easyJet (EZJ) 351.50p 6.06%
Carnival (CCL) 696.20p 5.17%
TUI AG Reg Shs (DI) (TUI) 131.80p 4.77%
International Distributions Services (IDS) 202.30p 4.39%
W.A.G Payment Solutions (WPS) 81.20p 3.67%
OSB Group (OSB) 414.80p 3.60%
Mitchells & Butlers (MAB) 116.20p 3.38%
Abrdn (ABDN) 159.65p 2.75%

FTSE 250 - Fallers

Petrofac Ltd. (PFC) 107.70p -6.27%
Bridgepoint Group (Reg S) (BPT) 199.30p -4.64%
Oxford Instruments (OXIG) 1,914.00p -4.54%
Coats Group (COA) 60.50p -4.27%
Genus (GNS) 2,554.00p -3.70%
Discoverie Group (DSCV) 745.00p -3.50%
Balanced Commercial Property Trust Limited (BCPT) 83.40p -3.36%
Rathbones Group (RAT) 1,874.00p -3.20%
Tritax Eurobox (GBP) (EBOX) 59.00p -2.96%
HGCapital Trust (HGT) 348.00p -2.93%