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LONDON MARKET CLOSE: FTSE 100 rally takes breather as US data looms

London’s FTSE 100 ended lower in quiet trade on Monday, with the latest development in the Anglo American-BHP saga providing some excitement, as investors look to Wednesday’s US inflation data for fresh impetus.

The FTSE 100 index ended down 18.77 points, 0.2%, at 8,414.99. It ends a six-day win streak for the large-cap index.

The FTSE 250 closed down 85.04 points, 0.3%, at 20,560.34, and the AIM All-Share ended down 3.21 points, 0.4%, at 786.66.

The Cboe UK 100 lost 0.4% at 840.35, the Cboe UK 250 fell 0.3% to 17,879.69, and the Cboe Small Companies gave back 0.6% at 16,036.69.

In European equities on Monday, the CAC 40 in Paris fell 0.1% and the DAX 40 in Frankfurt ended down 0.2%.

Sterling was quoted at $1.2552 late Monday afternoon, higher than $1.2513 at the London equities close on Friday. The euro traded at $1.0791, up from $1.0769 late Friday. Against the yen, the dollar was quoted at JP¥156.21 up from JP¥155.87.

According to FXStreet cited consensus, the US inflation rate is expected to have ebbed to 3.4% in April, from 3.5% in March. A hotter-than-expected reading, however, could support the dollar.

‘The BoE and ECB seem on course to ease in June but another firm inflation print in the US looks set to keep the Fed higher for longer,’ analysts at Barclays commented.

‘We expect a firm print, with core CPI decelerating only slightly to 0.34% month-on-month. We retain our baseline of a single rate cut from the Fed this year, no sooner than September, with December almost as likely. The final euro-area inflation print for April (Friday) should strengthen the case for a June cut from the ECB.’

The US central bank should keep interest rates at their current ‘restrictive’ levels until it sees real progress in the fight to lower inflation, a senior Fed official said Monday.

‘In light of the attenuation in progress in terms of getting inflation down to our target, it is appropriate that we maintain the policy rates in restrictive territory, which it is right now,’ Fed Vice Chair Philip Jefferson said at an event in Cleveland, Ohio.

‘We continue to look for additional evidence that inflation is going to return to our 2% target,’ he said, adding that ‘until we have that, I think it is appropriate to keep the policy rate in restrictive territory.’

Jefferson’s comments on Monday echo those of Fed Chair Jerome Powell, who told reporters in early May that ‘it is likely that gaining such greater confidence will take longer than previously expected.’

In New York, the Dow Jones Industrial Average traded a touch lower at the time of the European equities close. The S&P 500 was down 0.1%, though the Nasdaq Composite was 0.2% higher.

In the FTSE 100, Anglo American lost 2.4%. It said the latest bid proposal from mining peer BHP Group continues to ‘significantly undervalue’ it and its ‘future prospects.’

Anglo American Chair Stuart Chambers said: ‘The latest proposal from BHP again fails to recognise the value inherent in Anglo American.’

He said Anglo American shareholders are ‘well positioned’ to benefit from increasing demand from future enabling products while the increasing capital intensity to bring greenfield supply online makes proven assets with world class resource endowments ever more attractive.

He said the BHP proposal also continues to have a ‘highly unattractive structure.’

Earlier Monday, BHP confirmed it made an improved offer to buy Anglo American last week, but said the offer was rejected by the Anglo board on Monday.

The new all-share offer from Melbourne-based BHP values London-based Anglo at £34 billion, up from £31.1 billion under its previous offer. BHP is offering 0.813 of a BHP share for each Anglo share, giving a current value to Anglo shares of £27.53 each, based on BHP’s own price.

The revised proposal represents a 15% improvement in the merger exchange ratio, BHP noted. It increases the holding that Anglo shareholders would have in the combined entity to 16.6% from 14.8% previously.

BHP also offered Anglo two positions of the board of the combined company.

BHP shares closed down 0.5%.

Diploma shares climbed 4.1%. The London-based supplier of specialised technical products impressed analysts with better-than-expected half-year results, which prompted an increase to annual guidance.

Diploma now expects constant-currency revenue growth of 16% for all of financial 2024, which ends on September 30, up 0.5% from the company’s previous guidance.

Diploma also anticipates an improved operating margin of 20.5%, an increase of 0.8 percentage points from its previous forecast, as well as EPS growth of 15%.

The improved outlook came as Diploma reported pretax profit of £77.8 million for the six months that ended March 31, down 1.1% from £78.7 million a year before.

Revenue was £638.3 million, up 9.5% from £582.8 million.

Elsewhere in London, tracking and monitoring systems provider t42 IoT Tracking Solutions jumped 54%. It secured a $4.5 million deal to provide 30,000 monitoring systems to a ‘leading company in Brazil within the transportation and logistics security tracking sector’.

The deal is three years long.

t42 added: ‘Under the agreement, following acceptance by the client of the system development, the client is due to place an initial order with t42 for 10,000 tracking units, with a non-refundable deposit payment having been received by the company. Revenues from the initial order, once placed, are expected to be received commencing in FY 2024.’

Gold was quoted at $2,333.92 an ounce at the time of the London equities close Monday, lower than $2,362.94 at the same time on Friday. Brent oil was trading at $83.07 a barrel, lower than $83.66 late Friday.

Tuesday’s economic calendar has a UK unemployment reading at 0700 BST, before US producer price index data at 1330 BST.

The local corporate calendar has full-year results from telecommunications firm Vodafone and first-quarter results from bookmaker Flutter.

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