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London open: Israel-Iran tensions weigh on stocks early on
Iran’s attack on Israel overnight was weighing on London’s stock market on Monday morning, with the FTSE 100 dropping 0.4% to 7,960 early on.
“Escalating tensions in the Middle East cast a shadow over sentiment,” said Richard Hunter, head of markets at Interactive Investor.
“Apart from the human cost, this has separate implications for economies, where supply shocks and a rising oil price bring further inflationary pressures at a time when central banks are edging towards the final leg of getting inflation down to target levels.”
In a retaliation for a strike on the Iran consulate in Damascus, Iran launched more than 300 drones and missiles at Israel on Sunday evening, though nearly all were intercepted by air defence operations with the help from US, UK, France and Jordan.
Markets will now be watching how Israel responds. The US has warned Israel that it would not join in with any retaliatory action, while UN secretary general Antonio Guterres urged for “maximum restraint”, adding: “Now is the time to defuse and de-escalate. Neither the region nor the world can afford more war.”
In other macro news, Monday’s economic data schedule looked relatively light, with Eurozone industrial production and US retail sales the only major releases of the day.
Market movers
Airlines easyJet and IAG were the best performers on the FTSE 100 after the impact from Middle Eastern geopolitics on oil prices wasn’t as bad as feared. Brent crude, having risen sharply after the past month, was down 1.1% at $89.49 a barrel on Monday morning. As a result, energy producers BP and Shell were both in the red.
Also lower was Fresnillo, the precious metals producer, with investors taking profits after the stock had soared by a third over the past month on the back of record gold prices. Others in the sector, such as Hochschild and Endeavour, were also out of favour.
B&Q and Screwfix owner Kingfisher slipped after revealing that chair Andrew Cosslett will step down after seven years at the helm of the board.
PageGroup shares dropped 5% after the recruitment firm posted lower first-quarter gross profit as the economic slowdown continued to hit the jobs market. Gross profit for the first three months of the year fell 12.9% to £219.7m on an annual basis, with UK and Asia-Pacific operations down 19.2% and 22% respectively.
Shares in Inchcape raced 4% ahead after the car dealer announced the disposal of its UK Retail operations to Group 1 Automotive UK for £346m, and unveiled plans to return £100m to shareholders by way of a buyback programme.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Dcc Plc | +1.62% | +90.00 | 5,660.00 |
| 2 |  |
Tui Ag | +1.35% | +8.50 | 636.00 |
| 3 |  |
Bae Systems Plc | +1.29% | +17.00 | 1,335.50 |
| 4 |  |
Hiscox Ltd | +1.28% | +15.00 | 1,184.00 |
| 5 |  |
Rolls-royce Holdings Plc | +1.06% | +4.30 | 409.00 |
| 6 |  |
Easyjet Plc | +1.02% | +5.40 | 532.40 |
| 7 |  |
Melrose Industries Plc | +0.90% | +5.80 | 649.60 |
| 8 |  |
Rightmove Plc | +0.88% | +4.60 | 527.20 |
| 9 |  |
Prudential Plc | +0.85% | +6.00 | 712.40 |
| 10 |  |
Persimmon Plc | +0.78% | +10.00 | 1,292.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Fresnillo Plc | -3.53% | -22.00 | 600.50 |
| 2 |  |
Bp Plc | -2.89% | -15.60 | 523.50 |
| 3 |  |
Centrica Plc | -1.99% | -2.65 | 130.65 |
| 4 |  |
Shell Plc | -1.94% | -57.00 | 2,880.00 |
| 5 |  |
Glencore Plc | -1.58% | -7.65 | 478.05 |
| 6 |  |
Rentokil Initial Plc | -1.41% | -6.40 | 446.60 |
| 7 |  |
Vodafone Group Plc | -1.34% | -0.90 | 66.32 |
| 8 |  |
Anglo American Plc | -1.32% | -29.00 | 2,172.50 |
| 9 |  |
Bt Group Plc | -1.17% | -1.25 | 105.85 |
| 10 |  |
Flutter Entertainment Plc | -1.15% | -175.00 | 15,045.00 |
US close: Geopolitics, earnings and Fed uncertainty sink stocks
Underwhelming quarterly results from the banking sector and escalating tensions in the Middle East sunk US stocks on Friday, with the Dow falling for the fifth straight day.
Reports of an imminent attack on Israel by Iran sent shockwaves through markets, with Israel said to be readying for a strike that could arrive in next 48 hours. The US government also moved warships into place to defend Israel from a potential attack.
The worries saw investors ditch equities and pile into bonds – the 10-year US Treasury yield was down 6.3 basis points at 4.532% – as well as drive up the value of the US dollar and gold in a flight to safety.
As such, the Dow finished the session 1.24% lower, with just four stocks putting in gains by the close of play. That resulted in a weekly loss of 2.45% for the index – its worst weekly performance in 13 months. Meanwhile, the S&P 500 dropped 1.46% and the Nasdaq sunk 1.62%.
Markets were also still reeling from Wednesday’s hotter-than-expected inflation reports, which all but guaranteed that the Federal Reserve would wait for longer before starting to cut interest rates, with recent economic data continuing to prove more robust than predicted.
“Once again, the inflation dragon has stirred, sending ripples of uncertainty through financial markets and casting doubts on the Federal Reserve’s interest rate plans,” said Bob Schwartz, senior US economist at Oxford Economics.
“Stock prices tumbled and bond yields spiked in the days following the March consumer price report, which revealed a third consecutive month of higher-than-anticipated inflation. The markets are now pricing fewer rate cuts than the Fed projected at the March policy meeting.”
Also dampening the mood on Friday was Jeffrey Schmid, the head of the Kansas City Fed, who said the central bank could afford to be patient before making any changes to monetary policy. He said the Fed should “wait for clear and convincing evidence that inflation is on track to hit our 2% target before adjusting the stance of policy”.
In US economic data on Friday, the import price index increased at a month-on-month pace of 0.4% (consensus: 0.3%), as fuel imports jumped, while the University of Michigan consumer sentiment index fell to 77.9 in April from 79.4 in March (consensus: 79.0).
Banks disappoint
JPMorgan Chase & Co, Wells Fargo and Citigroup all finished in the red after the release of their first-quarter results.
The largest of the three, JPMorgan, saw shares slide 6% after net interest income rose a less-than-expected 11% to $23.2bn; Wells Fargo topped profit forecasts comfortably but shares were down 0.4% after posting an 8% decline in net interest income; while Citi dropped 1.7% as profits sank 27% on the back of restructuring charges.
Investment banking firm BlackRock also underwhelmed, dropping 2.9% despite beating both earnings and revenue forecasts.
US Steel finished lower after shareholders gave the green light to the controversial $15bn takeover by Nippon Steel, which has drawn criticism from politicians and workers unions.
Monday newspaper round-up: Barclays, Middle East, fuel prices, oil exploration, tax havens
A 20-year-old children’s charity that shut down after an error by Barclays led to its account being closed was offered only £250 in compensation by the bank. JusB, which worked with young people from disadvantaged backgrounds, initially was offered the sum along with an apology for a mistake that resulted in the charity being cut off from its finances for nearly a month last year. This offer was increased later to £525, which Sir Robert Neill, the charity’s constituency MP, called “trivial” and said “bears no relation to the harm done”. – The Times
Motorists are braced for a rise in fuel costs as the escalating crisis in the Middle East threatens to send oil prices close to $100 a barrel. The RAC warned that petrol prices could hit £1.50 a litre for the first time in five months if Iran’s attack on Israel drives up the price of crude. Oil prices are already trading at six month highs but analysts said they are expected to rise on Monday after Iran sent a swarm of missiles and drones to Israel on Saturday night. – Telegraph
Oil and gas companies will have to pay more to drill on public lands and satisfy stronger requirements to clean up old or abandoned wells, according to a final rule issued on Friday by the Biden administration. The interior department’s rule raises royalty rates for oil drilling by one-third, to 16.67%, in accordance with the sweeping 2002 climate law approved by Congress. – Guardian
Tax havens are making “glacially slow” progress in implementing transparency measures designed to tackle economic crime, according to a new report. UK overseas territories and crown dependencies had been expected to create public registers of beneficial owners of companies by 2023, but Gibraltar is the only jurisdiction to have one that is fully operational and open to the public. Research by the UK Anti-Corruption Coalition and Tax Justice UK campaign groups found that the majority remained “some way off” implementing a public register. – The Times
More than 40 Planet Fitness locations across the country have received bomb threats after a conservative movement against the gym’s trans-inclusive locker room policy went viral online. In the weeks since the backlash against the gym chain started in March, at least 43 locations in Connecticut, Florida, Alabama and other states have received bomb threats, according to progressive media watchdog group Media Matters. – Guardian
