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LONDON MARKET MIDDAY: Stocks fall amid Middle East escalation worries

Stock prices in London declined as investors were cautious due to concerns that the Iran-Israel conflict could escalate, following reports by Iranian state media about explosions in the province of Isfahan.

The FTSE 100 index was 47.06 points, 0.6%, at 7,829.99. The FTSE 250 was down 166.79 points, 0.9%, at 19,283.88, and the AIM All-Share was down 4.00 points, 0.5%, at 741.29.

The Cboe UK 100 was down 0.7% at 781.76, the Cboe UK 250 was down 0.8% at 16,697.66, and the Cboe Small Companies was marginally down at 14,774.48.

Oil prices jumped before settling lower after Iran’s state media reported explosions in the central province of Isfahan on Friday. US media quoted officials saying Israel had carried out retaliatory strikes on its arch-rival.

Israel had previously warned it would hit back after Iran fired missiles and drones at Israel almost a week ago, in retaliation for a deadly strike on Iran’s embassy in Syria which Tehran blamed on its foe.

Fears of a major regional spillover from the Gaza war have since soared.

A barrel of Brent oil fell to $86.53 at midday on Friday, from $87.15 at the European equities close on Thursday. It had traded as high as $90.71, however.

‘The widely anticipated Israeli retaliation in Iran finally took place, and whilst the initial spike in oil may have highlighted the initial fear of further escalation, we have seen both equities and crude reverse some of those preliminary moves. The Israeli decision to attack an area close to a nuclear facility serves as a warning that they could strike such highly sensitive targets in the future should they wish,’ said Scope Markets analyst Joshua Mahony.

‘However, the Israeli response has been notably more reserved, thanks no doubt to the influence of Western allies who have sought to avoid a wider conflict developing. Given the fact that Iran had provided advanced warning of their attack, it is clear that the events of the past week appear to be more about showing their willingness to act rather than actually seeking to incite a war between the two nuclear nations.’

Mahony continued: ‘For markets this is a best case scenario and should hopefully remove the fears that have been playing out within equity and energy markets in particular.’

Tensions in the Middle East have also boosted the dollar’s ‘position’, ING analysts said.

Against the dollar, sterling fell to $1.2437 at midday on Friday, from $1.2464 at the time of the London equities close on Thursday. The euro fell to $1.0653 from $1.0660. Against the yen, the buck bought JP¥154.51, down from JP¥154.60.

A recent re-assessment of Federal Reserve interest rate expectations has supported the dollar. The Fed’s most recent projections suggested three rate cuts could be in the offing this year, though at least one of those has been priced out by the market.

New York Fed President John Williams on Thursday said the US central bank feels no ‘urgency to cut interest rates’.

The next Fed decision is on May 1. Another rate hold is expected.

Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 index down 0.2%, and the Nasdaq Composite down 0.3%.

UK retail sales volumes climbed year-on-year in March, but were flat on the month before, numbers showed.

According to the Office for National Statistics, retail sales rose 0.8% in March from a year prior, though were still 1.2% below the pre-pandemic level in February 2020.

Sales had declined 0.3% on-year in February.

Sales were flat in March from February, following a 0.1% rise in February from January. February’s reading was upwardly revised. Retail sales volumes for that month were initially reported to have been flat from January.

The outcome for March fell short of FXStreet-cited market consensus. Growth of 0.3% had been expected.

In European equities on Friday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was down 0.6%.

German producer prices fell year-on-year in March, but climbed on-month, numbers showed.

According to Destatis, producer prices declined 2.9% in March from a year prior, easing from a 4.1% annual fall in February.

On a monthly basis, they rose 0.2% in March, topping the FXStreet cited consensus, which had predicted producer prices to be flat from February.

In February, producer prices declined 0.4% from January. Producer prices had risen 0.2% in January from December.

In London’s FTSE 100, airline shares struggled, after surging on Thursday following a well-received trading statement from budget carrier easyJet. easyJet traded 1.1% lower early Friday, British Airways parent IAG lost 1.6%, while FTSE 250-listed Wizz Air fell 2.0%,

Lloyds fell 1.0%. Peel Hunt kicked off coverage of the lender with a ’hold’ recommendation. It started both NatWest and Barclays at ’buy’, though the stocks traded down 0.5% and 0.9% amid Friday’s risk-off mood.

In the FTSE 250, Man Group led losses, falling 4.6%.

The active investment manager focused on private markets said assets under management on March 31 were $175.7 billion, up 4.9% from $167.5 billion on December 31.

Man Group suffered $1.6 billion in net outflows in the first quarter of 2024, but recorded a positive investment performance of $9.8 billion to create the rise in AuM.

Alternative strategies saw $3.2 billion in net outflows in the recent quarter, balanced by net inflows of $1.6 billion into Long-only strategies.

Among London’s small-caps, 888 rose 3.3%.

The sports betting and gambling company, which owns brands including 888casino and William Hill, said first-quarter revenue declined but topped expectations, ahead of a possible name change.

First-quarter revenue was £431 million, down 3.2% on-year but ahead of the £420 million to £430 million it had predicted. 888 noted that revenue was up, however, by 2% from the fourth quarter of 2023.

It explained that this reflects ‘a continuation of positive sequential quarter-on-quarter trends.’ UK & Ireland online revenue alone falls 1% due to ‘reduced sports venues and increased customer investment across the Cheltenham Festival in comparison to last year’, which a 4% growth in gaming could not offset.

888 shareholders will also get a vote on its possible name change to Evoke PLC at its annual general meeting in May.

On AIM in London, Ethernity Networks rose 6.9%, after the supplier of data processing semiconductor technology for networking appliances reports a significant increase in its annual revenue, resulting in a narrowed loss for the company in 2023.

Revenue rose 31% to $3.8 million in 2023 from $2.9 million the year before, despite market headwinds. This growth mainly came from a US wireless broadband solution customer, Ethernity said. Pretax loss narrowed to $6.4 million, from $8.0 million as a result.

Looking ahead, Ethernity said it expects to secure new contracts for its Carrier Ethernet and PON technology, generating approximately $2.2 to $3 million in incremental non-recurring engineering revenue in 2024 on top of its established business.

Gold traded at $2,380.91 an ounce at midday on Friday, down from $2,384.41 late Thursday.

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