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LONDON MARKET CLOSE: Stocks close down amid Middle East fears

Markets were gripped on Monday by concerns over how Israel might respond to Iran’s recent drone strike, with commodity prices falling.

The FTSE 100 index closed down 30.05 points, 0.4%, at 7,965.53. The FTSE 250 ended down 22.35 points, 0.1%, at 19,698.89, and the AIM All-Share closed down 5.63 points, 0.7%, at 750.28.

The Cboe UK 100 ended down 0.5% at 795.31, the Cboe UK 250 closed down 0.1% at 17,104.15, and the Cboe Small Companies ended down 0.1% at 14,843.86.

Events in the Middle East dominated the headlines, as oil prices declined despite the threat of global tensions ratcheting up after further escalation between Iran and Israel.

Investors moved with trepidation amid fears Iran would strike Israel in response to an Israeli strike on the Iranian consulate in Damascus, Syria.

Iran on Saturday launched a wave of missiles and attack drones at Israel. The latter said the vast majority were repelled by air defences.

Israel and Iran accused one another Sunday at the United Nations of being the main threat to peace in the Middle East, each calling on the Security Council to impose sanctions on their sworn enemy.

‘The Iranian response to the targeting of its consulate appeared to be wise and calibrated so as not to drag the region into a wide regional war that cannot be contained. This is what the markets have been expecting over the past few days and are actually pricing in, and this explains the poor performance of the oil markets today,’ said XS.com analyst Samer Hasn.

‘I think that what the markets may fear today is the opposite response from the Israeli side, which may be extremely reckless, unexpected, and without any strategic goal other than keeping Benjamin Netanyahu at the head of the war government, in contrast to the declared goals of the active actors, whether the United States or Iran.’

On Monday, the Iranian Foreign Ministry justified the detention of the MSC Aries container ship on the grounds that it had infringed shipping regulations and failed to provide an ‘appropriate reaction’ to the Iranian authorities.

The ship, which was sailing from the United Arab Emirates to India, had ignored international regulations, Foreign Ministry spokesman Nasser Kanaani said, according to a report by the IRNA state news agency.

Gold miner Fresnillo led FTSE 100 losses, falling 3.9%, followed by oil major BP which fell 2.2%. BP’s rival Shell also closed down 1.6%.

Brent oil was quoted at $89.20 a barrel at the London equities close on Monday, down from $91.05 a barrel late Friday. Gold traded at $2,348.01 an ounce, falling from $2,396.43.

Meanwhile in the US, retail sales ticked up more than expected in March, data from the US Census Bureau showed.

Advance estimates of US retail and food sales edged up 0.7% to $709.6 billion in March from $704.5 billion in February and were 4.0% higher than in March 2023. The monthly growth outperformed expectations cited by FXStreet, which had pencilled in an increase of 0.3%.

However, March’s monthly growth of 0.7% was slower than February’s climb of 0.9%. For the first quarter of 2024, total sales were 2.1% higher than a year prior.

In European equities on Monday, the CAC 40 in Paris and the DAX 40 in Frankfurt both ended up 0.4%.

Eurozone industrial output rose in February from January, though it declined annually, according to data from Eurostat.

Industrial output in the single currency area was up 0.8% in February from January, having fallen 3.0% in January from December. January’s reading was upwardly revised from an initially reported 3.2% fall.

Durable consumer goods saw the sharpest increase of 1.4% in the month, while non-durable consumer goods experienced the largest dip of 0.9%.

On-year, industrial production fell 6.4% in February. In January, output had fallen 6.6% on year.

Annually, production of all goods was weaker, with capital goods dropping most significantly by 8.9%.

‘The surprisingly strong gain in March retail sales, combined with upward revisions to previous months, means that real consumption growth appears to have grown by close to 3% annualised in [the first quarter], an upside risk to our baseline forecast,’ said Oxford Economics analyst Michael Pearce.

‘This is another clear sign of the resilience of the US consumer, which we think will keep growth strong this year and adds to the risk.’

The pound rose to $1.2458 on Monday at the equities close in London, from $1.2451 at the time of the London equities close on Friday. The euro stood at $1.0636, falling from $1.0643. Against the yen, the dollar was trading at JP¥154.32, up from JP¥153.09.

In the FTSE 250, Mitie led gains, rising 6.6%.

The facilities management and professional services firm said it expects to report an 11% rise in revenue to £4.50 billion for the year to March 31, from £4.06 billion. Operating profit of £200 million is expected, a 23% surge from £162.1 million.

Mitie also announced a further £50 million share buyback programme. A share repurchase programme of the same size had been completed last month.

Kainos rose 5.3%, after the IT provider said revenue for the financial year that ended March 31 was slightly below the consensus market expectation.

Adjusted pretax profit was in line with consensus of £76.3 million, it said, noting the range was £71.7 million to £78.6 million.

For financial 2023, Kainos had reported £374.8 million in revenue and £67.6 million in adjusted pretax profit, so financial 2024 consensus would have represented increases of 6.9% and 13%, respectively.

Kainos will release its annual results on May 20.

PageGroup led mid-cap losses, falling 9.1%, after the recruitment firm said it is being hit ‘from every angle’ as harsh conditions in recruitment markets continued into 2024.

Gross profit in the three months to March fell 13% to £219.7 million from £263.0 million the year prior. Chief Executive Nicholas Kirk said the slower end to the fourth quarter continued into the first quarter of 2024, particularly within continental Europe.

Among London’s small-caps, Petrofac lost 12%, with the oilfield services firm sliding further after a 20% fall on Friday. It said on Friday said ‘all options’ remaining under consideration in regard to the restructuring of its debt.

Further, Petrofac said it is in talks with prospective investors and major shareholders for a potential investment in the company, including a potential sale of non-core assets.

On AIM in London, Molecular Energies plunged 34%, following a general meeting in which the oil and gas company decided its shares will no longer trade publicly, as ‘the only practical solution’ to its problems.

About 96% of shares cast voted in favour of the special resolutions, approving the cancellation of shares and the re-registration as a private limited company.

Molecular Energies said it will re-register as a private limited company. In late March, Chair Peter Levine said the company ‘can no longer justify the disproportionately high costs of remaining listed.’

In Tuesday’s UK corporate calendar, copper producer Antofagasta and bookmaker Entain both post trading statements.

The economic calendar for Tuesday has a slew of data out in China, including gross domestic product figures, alongside UK unemployment figures.

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