London Stocks Close Lower Amid Middle East Tensions and Mixed Economic Signals
By Jeremy Cutler, Alliance News Reporter
On Monday, the London stock market experienced a downturn, closing in the red as renewed tensions in the Middle East overshadowed earlier investor optimism. The initial excitement, driven by China’s recent interest rate cuts, quickly dissipated as the day progressed, leaving major indices in negative territory.
Market Overview
The FTSE 100 index closed down 40.01 points, or 0.5%, settling at 8,318.24. Similarly, the FTSE 250 ended the day down 242.98 points, or 1.2%, at 20,906.60, while the AIM All-Share lost 5.74 points, or 0.8%, closing at 734.95. The Cboe UK 100 and Cboe UK 250 also reflected this downward trend, closing down 0.4% and 1.1%, respectively.
Across Europe, the sentiment was similarly bleak, with the CAC 40 in Paris and Frankfurt’s DAX 40 both falling by 1.0%. In the United States, the Dow Jones Industrial Average dropped 0.9%, the S&P 500 fell by 0.6%, and the Nasdaq Composite declined by 0.5%. Economists at Citi noted that limited data this week would keep US markets focused on two primary risks: the upcoming presidential election and the forthcoming jobs report.
Economic Influences
The day began with a boost from China’s decision to cut its one-year loan prime rate from 3.35% to 3.1%, a move aimed at stimulating economic growth. This reduction, which also included a cut to the five-year LPR from 3.85% to 3.6%, initially supported mining stocks in London. However, as the session wore on, attention shifted to escalating conflicts in the Middle East, particularly in Lebanon, where heavy clashes were reported.
Israel’s airstrikes targeting Hezbollah-linked sites in southern Lebanon contributed to rising oil prices, which in turn provided some support for energy stocks. BP and Shell saw gains of 1.5% and 0.6%, respectively, as Brent crude oil prices climbed to USD73.85 a barrel, up from USD72.45 at the end of the previous week. Gold also continued its upward trajectory, with prices reaching USD2,723.74 an ounce.
Corporate Earnings and Market Reactions
In the corporate sector, the London Stock Exchange saw a modest increase of 0.8% after Bank of America reiterated a ‘buy’ rating. Conversely, Intertek faced a decline of 3.9% following a downgrade from RBC Capital Markets. Lloyds Banking Group, which is set to kick off the UK banking reporting season on Wednesday, eased by 0.8%. Analysts expect the bank to report revenues of GBP4.61 billion and profits of GBP1.20 billion, both reflecting growth from the previous quarter.
On the FTSE 250, Future rebounded by 7.0% after a significant drop on Friday, following the announcement of CEO Jon Steinberg’s impending departure. Analysts at JPMorgan maintained an ‘overweight’ rating, suggesting that despite the leadership change, the company’s valuation holds potential for recovery.
Hollywood Bowl also reported positive news, with expectations of record annual revenue and profits exceeding market forecasts. The ten-pin bowling operator anticipates reporting GBP230.4 million in revenue for the six months ending September 30, a 7.2% increase year-on-year.
Currency Movements
The currency markets reflected a cautious sentiment, with the pound trading at USD1.2984, down from USD1.3040 at the close of the previous week. The euro also weakened against the dollar, standing at USD1.0825, while the dollar gained against the yen, trading at JPY150.34.
Analysts at ING noted that foreign exchange markets appear to be positioning for a potential Trump victory in the upcoming US presidential election, as October has shown favorable polling for the former president.
Looking Ahead
As the week progresses, investors will be closely monitoring economic indicators, including UK public sector borrowing data and Canadian PPI figures. In the corporate calendar, notable releases include a trading statement from Intercontinental Hotels Group and full-year results from Virgin Wines.
In conclusion, Monday’s trading session in London highlighted the delicate balance between economic optimism and geopolitical risks. As investors navigate these turbulent waters, the focus will remain on corporate earnings and macroeconomic indicators that could influence market sentiment in the coming days.
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