CLOSURE OF THE LONDON MARKET: the pound climbs as the government reneges on its tax plan
London’s FTSE 100 gained confidence on Monday, reversing a slow start to end higher as sentiment was bolstered by a strong start in New York.
The pound was also on the rise, trading at post-mini-budget highs, after a humiliating U-turn on fiscal policy by the Conservative government.
The FTSE 100 index closed up 14.95 points, or 0.2% at 6,908.76 on Monday. The FTSE 250 ended up 116.54 points, or 0.7%, at 17,284.88. AIM All-Share closed up 2.35 points, or 0.3%, at 808.73.
The Cboe UK 100 ended up 0.1% at 689.93, the Cboe UK 250 closed up 1.0% at 14,793.62 and the Cboe Small Companies ended up 0.2% at 12,053.01.
British Prime Minister Liz Truss and Chancellor Kwasi Kwarteng have scrapped a plan to abolish the top income tax rate for top earners in a stunning U-turn.
The Chancellor acknowledged their desire to scrap the 45% rate on incomes over £150,000 as part of a pay-by-borrowing decision had become a ‘distraction’ amid widespread criticism.
He issued a statement, hours before he was due to defend the plans at the Conservative Party conference, saying: ‘We are not proceeding with the abolition of the 45p tax rate.
The couple had been under pressure, including from senior Tory MPs, to reverse the measure announced in the September 23 mini-budget.
The mini-budget saw the pound hit an all-time low last week, but the pound rallied sharply after the U-turn.
The pound was listed at $1.1309 at the close of London stocks on Monday, falling from $1.1149 at the close on Friday.
In the FTSE 100, B&M European Value Retail closed 2.1% higher after Bank of America raised the retailer from ‘buying’ to ‘neutral’.
Vodafone added 2.6%. Hong Kong-based conglomerate CK Hutchison has confirmed it is in talks with the company over a possible merger of Three UK and Vodafone UK.
CK Hutchison said the proposed transaction would involve the two companies combining their UK businesses with CK Hutchison owning 49% and Vodafone owning 51% of the combined business.
He said the combination will ensure Three and Vodafone gain “the scale needed to be able to accelerate the rollout of full 5G in the UK and extend broadband connectivity to rural communities and small businesses”.
However, Vodafone noted there was “no certainty” that a deal between the two companies will be agreed.
Meanwhile, Endeavor Mining fell 1.6%, although it said its operations in Burkina Faso, West Africa, were unaffected by recent political unrest.
Burkina Faso’s military leader Paul-Henri Damiba was overthrown in a coup on Friday and “religious and community” leaders said he had formally agreed to step down.
This is the second coup this year, in both cases the country’s security situation and the inability to deal with the Islamist insurgency have been blamed.
In the FTSE 250, Telecom Plus climbed 24%. The multi-utility provider has raised its full-year profit forecast after a “record” number of UK households signed up to try and save on their energy bills.
Net customer additions were 86,004, compared to 67,980 in the second half of fiscal 2022. This brought its total customer base as of September 30 to 814,684.
The company said it saw a reduction in the previously expected cost of multi-service discounts in the second half of the year and an improved energy affordability outlook.
Telecoms now expects full-year earnings to be “significantly above” current market expectations.
Essentra jumped 16%. The component, packaging and filter maker said its Filters business was sold to a wholly owned subsidiary of Centaury Management Ltd for an enterprise value of around £262.1 million.
The board said it intended to use the cash from the sales to prepay some of the US private placement debt and make a small contribution to the company’s defined benefit pension plans. company.
He added that he planned to return £150million to shareholders through a special dividend once the Filters divestiture was completed.
“Following the completion of the sale of the Filters business, Essentra will be established as a pure play components business, with a healthy balance sheet, providing the flexibility to pursue organic and inorganic growth opportunities,” the company said. .
Elsewhere in London, Tortilla Mexican Grill plunged 25% as it said a tough summer and continued macro headwinds caused poor interim earnings performance.
In the first half to July 3, Tortilla recorded a pre-tax profit of £300,000, down 88% from £2.6 million a year earlier. This despite higher revenues, which rose 30% to £26.9m from £20.8m.
Managing Director Richard Morris said that although times were tough, he was “confident in our ability to navigate our way through these industry-wide challenges while continuing to deliver on our growth strategy. ambitious”.
Protein costs, which account for nearly a third of Tortilla’s spend on sold products, are expected to increase by 40%. This is expected to result in a decline in gross profit margin of around £1.8m.
In European equities on Monday, the CAC 40 in Paris ended up 0.6%, while the DAX 40 in Frankfurt ended up 0.8%.
The euro zone’s manufacturing sector fell deeper into negative territory in September, suffering its worst performance in more than two years, according to figures from S&P Global.
The latest S&P Global Eurozone Manufacturing Purchasing Managers Index fell to 48.4 points in September from 49.6 in August. The PMI slipped further below the 50.0 mark unchanged, suggesting an accelerating contraction.
It was the lowest PMI score since May 2020, which was during the first wave of Covid-19 lockdowns.
The euro was trading at $0.9834 at the close of European stocks on Monday, down from $0.9796 at the same time on Friday.
Against the yen, the dollar was trading at JP¥144.35 on Monday night, down from JP¥144.68 on Friday night.
Stocks in New York were firmly in the green as stocks closed in London, with the Dow Jones Industrial Average up 2.2%, the S&P 500 index up 2.0% and the Nasdaq Composite up 1.5%.
The expansion of the US manufacturing sector continued in September, according to new figures from S&P Global.
The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index was 52.0 in September, down from 51.5 in August. This was also broadly in line with the previous flash estimate of 51.8.
The growth rate was the fastest since May, although slower than the series trend and only marginal.
Brent oil was quoted at $88.30 a barrel at the close of London stocks on Monday, down from $86.35 late Friday.
Oil prices jumped on Monday amid reports that OPEC and other major producers were considering cutting output.
Bloomberg News said officials were discussing a million barrel-a-day production cut, which would be the biggest since the start of the pandemic, when crude prices crashed.
The oil majors Shell and BP all benefited from the rise in the price of Brent, up 2.8% and 0.5%.
Gold was listed at $1,690.38 an ounce at the close of London stocks on Monday, down from $1,672.50 at the close on Friday.
In Tuesday’s UK business calendar, there’s a trade statement from UK bakery chain Greggs and half-year results from medical technology providers Inspiration Healthcare.
In the economic calendar, the British Conservative Party’s annual conference continues with a speech by Chancellor Kwarteng at 5.45pm BST.
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