FTSE outperforms European peers as euro struggles

Stocks in Europe ended Monday mixed, with the FTSE 100 outperforming as political and fiscal worries put France’s CAC 40 on the back foot.

In London, the FTSE 100 Index ended up 35.99 points, 0.3%, at 10,497.94.

The FTSE 250 fell 70.49 points, 0.3%, to 24,123.75, and the AIM all-share declined 3.44 points, 0.4%, to 780.31.

In European equity markets on Monday, the CAC 40 in Paris ended down 0.8%, while the DAX 40 in Frankfurt closed up 0.1%.

A 10% drop in Schneider Electric weighed on the CAC 40 after its 23 billion dollar swoop for industrial software firm PTC.

While analysts could see the strategic rationale behind the deal, they questioned the increased exposure to the software sector at a time valuations are under pressure.

RBC Capital Markets analyst Mark Fielding said: “Valuation of industrial software assets has been under pressure due to AI concerns and while we think this is largely misplaced, it does not change the fact (the deal) will increase Schneider’s exposure to this concern.”

“Also, integration will likely be complicated and it will likely also see the market revisit capital allocation discussions,” he added.

Meanwhile, political and fiscal concerns in Europe kept bond yields elevated and weighed on the euro.

David Morrison, analyst at Trade Nation, explained this comes “as concerns mount over the state of the French economy, as inflation, rising government bond yields, civil unrest and this month’s Budget hove into view”.

“The yield on France’s 10-year government bond (OAT) is now 100 basis points above the German 10-year Bund, and also significantly above those of Italy and Greece,” he added.

Against the dollar, the euro fell to 1.1193 dollars from 1.1260 dollars, while sterling firmed to 1.1792 euros from 1.1750 euros.

In New York, markets were mixed.

The Dow Jones Industrial Average was down 0.1% at the time of the closing bell in London.

The S&P 500 was 0.5% higher, and the Nasdaq Composite advanced 0.7%.

Across the pond, a closely watched report showed the US service sector slowed slightly in September but remained in expansion territory for a 27th consecutive month.

The Institute for Supply Management’s services purchasing managers’ index declined to 54.9 points in September from 55.4 in August.

Employment returned to expansion for the first time in three months, rising to 50.1 points from 47.8, but price pressures strengthened markedly, with the prices index rising to 74.0 points from 72.6, its highest level since July 2022.

Analysts at Barclays said the report points to continued resilience in activity and demand.

“We think the dominant signal is about persistent cost pressures, with prices paid firming amid energy price gains and respondents stressing ongoing supply chain pressures,” it added.

Against the yen, the dollar was trading at 157.99 yen, up from 157.70 yen.

The yield on the US 10-year Treasury was quoted at 5.33% on Monday, stretched from 5.26% at the same time on Friday.

The yield on the US 30-year Treasury was quoted at 5.68%, up from 5.61%.

Back in the UK, a report showed private sector growth cooled last month, as progress in the services economy eased.

The S&P Global composite purchasing managers’ index fell to 52.0 points in September, from 52.5 in August.

The figure was above the 51.7 flash reading but was a three-month low.

S&P Global said: “Softer rates of growth were seen in both the manufacturing and service sectors, with the former posting its weakest upturn for six months.

“New business growth also slowed in September and was only marginal overall.

“Backlogs of work decreased, as has been seen in each month since May 2023.

“Rates of input cost and output price inflation recorded by private sector firms reached the highest since June, largely due to higher energy, fuel and transport bills.”

The pound was quoted at 1.3218 dollars on Monday, down from 1.3233 dollars at the same time on Friday.

On the FTSE 100, Ithaca Energy rose 2.2% as it agreed to buy a portfolio of offshore oil assets in Canada from Suncor Energy for up to 1.11 billion dollars.

The Aberdeen-based oil and gas company operating in the North Sea said it will pay an initial 860 million dollars for the assets, located off the east coast of Newfoundland and Labrador, plus potential oil price-related contingent consideration of up to 250 million dollars.

The deal, expected to be financed through cash, undrawn debt capacity and new Canadian debt finance, is expected to be immediately accretive to earnings, cash flow and dividends.

AJ Bell investment director Russ Mould noted that “significantly, the company is buying its first assets outside of the North Sea”.

He suggested the deal could even represent a “planting the flag moment” in the North American market for Ithaca and act as a precursor to adding further assets in this region.

Metlen Energy & Metals advanced 2.1% as it said it had signed a long-term agreement with a “major” Japanese chemical company regarding the future supply of gallium.

The Athens-based aluminium producer and electricity generator said the deal represents up to 16% of its total annual gallium production from its production facility in Greece, which is currently under construction.

Also in the green was BT Group, up 1.4% as it announced a deal to rescue TalkTalk Telecommunications and PlatformX Communications out of administration.

The London-based telecommunications firm said the total cash impact in financial 2027 arising from the deals will be around £400 million, comprising both consideration and other cash impacts.

The UK Government has asked the Competition and Markets Authority to investigate the deal with a two-week deadline.

Last Friday, the Financial Times reported BT chief executive Allison Kirkby had met with Government officials to gauge whether a move for TalkTalk would lead to a lengthy competition watchdog probe.

On the FTSE 250, CMC Markets recouped Friday’s falls, climbing 6.7%.

The drop had followed a warning from industry peer IG Group, which fell a further 0.4% on Monday after a 23% slump on Friday.

CMC Markets chief executive Peter Cruddas delivered a vote of confidence in the business, disclosing he had picked up £1 million worth of shares on Friday.

Brent oil was quoted at 102.32 dollars a barrel in London on Monday, up from 100.50 dollars late on Friday.

Gold was quoted at 4,137.43 dollars an ounce, down from 4,143.18 dollars.

The biggest risers on the FTSE 100 were Standard Chartered, up 56p at 2,246p, Ithaca Energy, up 6p at 281.4p, Metlen Energy & Metals, up 1.02p at 49.62p, Anglo American, up 83p at 4,180p and Scottish Mortgage Investment Trust, up 30.5p at 1,620.5p.

The biggest fallers on the FTSE 100 were 3i Group, down 143p at 2,412p, Barratt Redrow, down 9.3p at 308.9p, Balfour Beatty, down 26.5p at 911p, Halma, down 72p at 3,528p and International Consolidated Airlines Group, down 7.2p at 434p.

There are no significant events scheduled in Tuesday’s local corporate calendar.

Later in the week, oil major Shell releases a trading statement, and food retailer Tesco publishes half-year results.

Tuesday’s global economic calendar includes eurozone retail sales figures, French industrial production data, German factory order numbers and a US trade report.

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