Stock prices in London ended lower on Monday, despite a strong start to the day, in the absence of fresh direction from Wall Street and as the initial boost of stimulus news in China faded.
The FTSE 100 index closed down 11.78 points, 0.2%, at 7,452.76. The FTSE 250 ended down 12.76 points, 0.1%, at 18,524.14 and the AIM All-Share closed down 0.1%, or 0.84 points, at 740.59.
The Cboe UK 100 ended down 0.2% at 741.90, the Cboe UK 250 closed down 0.2% at 16,170.0, and the Cboe Small Companies ended down 0.2% at 13,435.96.
London’s lead index had earlier traded as much as 59 points higher, boosted by Friday’s US jobs report and better news on China’s beleaguered property sector.
Moves by Chinese authorities to bolster the faltering property market appeared to be bearing fruit. Borrowing requirements for homebuyers have been lowered and lenders have been encouraged to cut interest rates.
Bloomberg reported existing home transactions doubled on Saturday from the prior week in Beijing. In Shanghai, the number of new home transactions in just one day matched those seen for the whole month of August, it said.
China’s teetering property sector was given a further boost by news developer Country Garden had won approval from creditors to extend a deadline for a key bond repayment. Shares in Country Garden closed up 15%.
But with US markets closed for Labour Day, the early gains were eroded by the time of the London close amid light trading volumes.
In European equities on Monday, the CAC 40 in Paris ended down 0.2%, while the DAX 40 in Frankfurt ended down 0.1%.
UK property stocks attracted comment on Monday.
Morgan Stanley argued UK property share prices were ‘oversold.’
‘UK balance sheets screen as sufficiently capitalised in the context of modest asset appraisals, while net asset value valuation for many is close to or at all-time lows,’ the US investment bank said.
‘We are alive to the fact that broader UK exposure and offices as a sub-sector are out of favour, but at current valuation the risk reward is compelling in our view,’ it said.
Hammerson was upgraded from ’equal-weight’ to ’overweight’ with an increased price target of 36 pence, up from 27p. Shares in Hammerson rose 2.4% at 24.52p.
The broker believes the firm is making significant restructuring progress and sees value in the shares at current levels.
Meanwhile, Land Securities was moved the other way, to ’equal-weight’ from ’overweight,’ with its price target cut to 650p from 750p. Shares fell 1.0% to 585.60p.
In addition, the target price for Derwent London moved to 2,700p from 3,000p overweight, Great Portland Estates to 545p from 640p and British Land to 405p from 450p.
The price target for Unite was raised to 1,125p from 1,050p.
JP Morgan took a less positive view of British Land, downgrading its rating to ’neutral’ from ’overweight.’
It thinks City office values could fall by as much as 20%. While the valuation isn’t stretched, JPM thinks ‘catalysts for a stock-specific re-rating look hard ahead of a turnaround in City offices.’
Elsewhere in London, Watches of Switzerland’s rallied 3.2% after its senior team bought nearly £900,000 in stock on Friday last week, after the share price took a hit from the acquisition of a rival retailer by key supplier Rolex.
Chief Financial Officer Anders Romberg bought 100,000 shares at £5.85, worth £584,700, while chair Ian Carter bought 35,000 shares at prices from 582.50 pence to 589.50p, worth £205,690 in total.
Ergomed soared 28% after agreeing a £703.1 million approach from private equity specialist, Permira.
The offer for Ergomed, a pharmaceutical services company of 1,350p per share, was 28% higher than Friday’s closing price of 1,052p, and was described by the firm as ‘fair and reasonable.’
‘We view the offer as an attractive opportunity to lock in returns,’ said analysts at Shore Capital.
On AIM, Advanced Medical Solutions plunged 26% after the surgical dressings company lowered its full-year outlook due to uncertainty over royalty income from its patent licensing agreement with Organogensis.
The firm also cautioned that ongoing Liquiband US partner issues are taking longer to resolve.
Analysts at Stifel said: ‘While the Organogenesis issue is particularly impactful with the removal of 100% margin royalties, it is beyond AMS’s control.’
‘Conversely, the US Liquiband issue is AMS’s to resolve and therefore the more disappointing of the two updates.’
Brent oil was quoted at $89.01 a barrel at the London equities close Monday, up from $88.00 late Friday. Gold was quoted at $1,938.92 an ounce, higher against $1,938.09 Friday.
The pound was quoted at $1.2620 at the London equities close Monday, up from $1.2604 at the close on Friday. The euro stood at $1.0791, higher compared to $1.0792. Against the yen, the dollar was trading at JP¥146.46, higher compared to JP¥146.21 late Friday.
In Tuesday’s UK corporate calendar sees first quarter results from Ashtead, full-year results from Alumasc and a trading statement from DS Smith.
The economic calendar for Tuesday has a UK services purchasing managers’ index at 0930 BST and the BRC-KPMG retail sales monitor will be released overnight.
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Issue Date: 04 Sep 2023