London close: Stocks slip into red on growing Middle East concerns

London’s financial markets closed in the red on Monday, relinquishing earlier gains as geopolitical tensions emanating from the Israel-Gaza conflict hit global sentiment.

The escalation in the region, kicked off by a Hamas incursion and attack on Israel on Saturday, was also leading to persistent highs in oil prices.

At the close, the FTSE 100 was down 0.03% at 7,492.21, while the FTSE 250 suffered a more pronounced decline of 0.9%, settling at 17,572.06.

In the currency market, sterling was last down 0.32% on the dollar to trade at $1.2198, while it edged up 0.14% against the euro to change hands at €1.1576.

“European markets have slipped back as the tremors of the weekend events in Israel continue to reverberate through financial markets,” said CMC Markets chief market analyst Michael Hewson.

“A sharp rise in energy prices, along with concerns over an escalation outside the current counterparties of Hamas and Israel, as Israeli forces hit back hard, is keeping investors on edge, although the FTSE 100 has been a notable outlier due to a strong performance in the energy sector as well as defensives.

“The move higher in oil prices and natural gas prices has seen airlines, as well as other leisure stocks slide, and the big cap oil stocks move higher.”

Eurozone investor sentiment and German industrial production show decline

In economic news, a milder-than-anticipated degradation in eurozone investor sentiment was revealed in data shared earlier.

The Sentix investor sentiment index experienced a modest decline to -21.9 in October from September’s -21.5, surpassing consensus predictions, which anticipated a sharper fall to -24.0.

Despite that, a closer examination of the components revealed a notable decline in the current situation index, which dropped from -22.0 in September to -27.0 in October, while the expectations index witnessed an uplift, moving from -21.0 to -16.8.

“We do not have a full country breakdown but we do know that Germany’s headline rose, to -31.1 from -33.1 in September, on the back of a rebound in the expectations index,” said Melanie Debono, senior Europe economist at Pantheon Macroeconomics.

“Still, the press release notes that the German current situations index - which fell for the sixth straight month - was at its lowest since July 2020, in the midst of the first Covid lockdowns and that the overall index remains much lower than the index for the EZ as a whole.

“In other words, investors think that the German economy will hold back the eurozone average again in the fourth quarter.”

Elsewhere, German industrial production experienced its fourth consecutive monthly fall in August, as per data released by Destatis.

The nation observed a 0.2% monthly decline in factory orders, following a 0.6% decrease in July, slightly underperforming against the anticipated 0.1% reduction.

Annually, orders dropped by 2% in August, exceeding the 1.7% decline witnessed in the preceding month.

A significant portion of this economic downturn was attributed to a substantial 2.4% month-on-month drop in construction production and a sharp 6.6% decline in energy production.

Nevertheless, upon excluding energy and construction from the equation, production experienced a 0.5% uptick compared to July.

“The outlook for German industry is poor. Surveys of manufacturing activity are consistent with a contraction in output in September and although industrial orders rose by 3.9% month-on-month in August, that came after an 11.3% drop in July and left them very low by past standards,” said Franziska Palmas, senior Europe economist at Capital Economics.

“We continue to expect high interest rates and falling demand to lead to a further contraction in German industrial output in the coming months.

“This is one of the reasons why we are anticipating German GDP to contract in both the third and fourth quarters this year.”

Defence and oil plays rise, travel stocks sink on conflict concerns

On London’s equity markets, BAE Systems rose by 4.73%, followed by oil giants BP and Shell, surging by 2.91% and 2.85%, respectively.

Harbour Energy and Diversified Energy rode a similar wave, registering gains of 3.39% and 3.85%.

Elsewhere, catering firm Compass Group experienced a modest uptick of 0.94%, propelled by an upgrade to ‘buy’ at Jefferies.

On the downside, travel equities bore the brunt of the simmering Israel-Gaza conflict, with IAG, InterContinental Hotels, Wizz Air, easyJet, and Carnival plummeting by 5.82%, 2.86%, 6.14%, 5.12%, and 5.9%, respectively.

The geopolitical turmoil hinted at potential travel disruptions, skewing investor sentiment towards caution and risk aversion within the sector.

Energean saw its shares tumble by 17.55% as it grappled with developing a gas field offshore Israel amidst the geopolitical crisis.

Speciality chemicals firm Croda International slid 7.32% after downgrading its full-year profit outlook in the wake of a weaker-than-anticipated third quarter.

The retail domain also registered tremors, with Next dipping by 3.99%, impacted by JPMorgan Cazenove placing the shares on ‘negative catalyst watch,’ coupled with an analogous move for Primark owner Associated British Foods, which edged down by 1.59%.

Outside the FTSE 350, Metro Bank Holdings vaulted 10.94% upwards, following its strategic move to strike a deal with investors to reinforce its balance sheet.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,492.21 -0.03%
FTSE 250 (MCX) 17,572.06 -0.90%
techMARK (TASX) 4,106.69 0.24%

FTSE 100 - Risers

BAE Systems (BA.) 1,025.00p 4.53%
BP (BP.) 520.30p 2.91%
Shell (SHEL) 2,649.00p 2.61%
Imperial Brands (IMB) 1,703.00p 2.04%
Vodafone Group (VOD) 76.10p 1.74%
Fresnillo (FRES) 530.80p 1.41%
National Grid (NG.) 948.80p 1.41%
Compass Group (CPG) 2,044.00p 1.39%
Glencore (GLEN) 450.75p 1.29%
BT Group (BT.A) 115.25p 1.14%

FTSE 100 - Fallers

Croda International (CRDA) 4,444.00p -7.32%
International Consolidated Airlines Group SA (CDI) (IAG) 146.75p -6.14%
Next (NXT) 6,900.00p -4.35%
Spirax-Sarco Engineering (SPX) 9,070.00p -4.16%
Marks & Spencer Group (MKS) 221.00p -4.08%
Hargreaves Lansdown (HL.) 741.60p -3.39%
Halma (HLMA) 1,916.50p -3.38%
JD Sports Fashion (JD.) 138.75p -3.07%
Whitbread (WTB) 3,235.00p -2.91%
Hikma Pharmaceuticals (HIK) 2,015.00p -2.89%

FTSE 250 - Risers

CAB Payments Holdings (CABP) 212.00p 4.95%
Harbour Energy (HBR) 252.00p 4.91%
Diversified Energy Company (DEC) 76.05p 4.61%
QinetiQ Group (QQ.) 318.80p 3.25%
BH Macro Ltd. GBP Shares (BHMG) 380.00p 2.56%
Centamin (DI) (CEY) 81.50p 2.26%
Future (FUTR) 896.50p 1.99%
Spirent Communications (SPT) 93.25p 1.69%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 440.00p 1.38%
Premier Foods (PFD) 116.80p 1.21%

FTSE 250 - Fallers

Energean (ENOG) 855.00p -17.55%
Ceres Power Holdings (CWR) 262.40p -6.29%
Wizz Air Holdings (WIZZ) 1,811.00p -6.19%
TUI AG Reg Shs (DI) (TUI) 409.80p -5.92%
easyJet (EZJ) 423.00p -5.85%
Carnival (CCL) 904.80p -5.69%
Playtech (PTEC) 383.00p -4.73%
Genuit Group (GEN) 303.00p -4.27%
TI Fluid Systems (TIFS) 116.00p -4.13%
Softcat (SCT) 1,419.00p -3.99%