(Alliance News) - Stocks were called lower on Monday as UK Chancellor Kwasi Kwarteng reneged on tax cut plans, and as unease grows over Credit Suisse's credit default swaps.
Dominating the headlines after his poorly-received "mini-budget", UK Chancellor Kwarteng is now made an abrupt U-turn over the abolition of the top rate of income tax for the highest earners.
"We get it and we have listened," Kwarteng said in a statement.
Meanwhile, concerns mounted over the weekend for Credit Suisse.
The Telegraph reported that the Bank of England has been monitoring developments at the financial services firm, liaising with Swiss banking watchdogs.
Credit Suisse moved to reassure its staff in the face of market turmoil and a stock price slide, Bloomberg reported on Friday.
In a memo, Chief Executive Officer Ulrich Koerner told staff that the Swiss bank has a "strong capital base and liquidity position".
Koerner told staff not to confuse its recent share price slide with a sign that the bank's day-to-day performance is weakening.
"The sad reality is that if there is something wrong with Credit Suisse, then we have a major issue as this is a gigantic institute, and the domino effect will be unbearable for most central banks, especially pension funds," Avatrade analyst Naeem Aslam continued.
In local corporate news, Essentra named a new chief executive officer and announced the disposal of its Filters business. Halma announced the acquisition of a medical consumable device maker.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called down 68.3 points, 1.0%, at 6,825.51
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Hang Seng: down 0.7% at 17,097.47
Nikkei 225: closed up 1.1% at 26,209.41
S&P/ASX 200: closed down 0.3% at 6,456.90
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DJIA: closed down 500.10 points, or 1.7%, at 28,725.51
S&P 500: closed down 54.85 points, or 1.5%, at 3,585.62
Nasdaq Composite: closed down 161.89 points, or 1.5%, at 10,575.62
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EUR: higher at USD0.9819 (USD0.9796)
GBP: higher at USD1.1238 (USD1.1149)
USD: higher at JPY144.90 (JPY144.68)
GOLD: lower at USD1,665.86 per ounce (USD1,672.50)
OIL (Brent): higher at USD87.53 a barrel (USD86.35)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
0855 BST Germany manufacturing PMI
0900 BST EU manufacturing PMI
0930 BST UK manufacturing PMI
1445 BST US manufacturing PMI
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UK Prime Minister Liz Truss and Chancellor Kwarteng have abandoned a plan to abolish the top rate of income tax for the highest earners in an astonishing U-turn. The chancellor acknowledged that their desire to axe the 45% rate on earnings over GBP150,000 in a move to be paid for by borrowing had become a "distraction" amid widespread criticism. He issued a statement, hours before he had been due to defend the plans at the Conservative Party conference, saying: "We are not proceeding with the abolition of the 45p tax rate." The U-turn will be seen as a massive blow to their authority, coming a little over a week after they were announced and just a month into Truss's premiership. The pair had been under pressure, including from senior Tory MPs, to back down on the measure announced in the mini-budget on September 23.
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The surging cost of carbon dioxide could add GBP1.7 billion to the cost of British groceries, according to new analysis. Research by the Energy & Climate Intelligence Unit suggests that the UK's food and drink sector could end up footing the mammoth extra bill for liquid CO2 if gas prices remain high. UK commercial energy prices have rocketed over the past year, accelerated by the Russian invasion of Ukraine. The move has had heavy ramifications for industries reliant on carbon dioxide, with production also disrupted due to the rampant inflation. The price of a tonne of liquid CO2 is up to as much as GBP3000 per tonne, compared to just GBP100 per tonne one year ago, the ECIU said.
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BROKER RATING CHANGES
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JPMorgan raises Deliveroo to 'neutral' (underweight) - price target 81 (88) pence
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HSBC raises IAG to 'buy' ('hold') - price target 130 (125) pence
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HSBC cuts easyJet to 'hold' ('buy') price target 300 (600) pence
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COMPANIES - FTSE 100
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Safety equipment maker Halma announced the acquisition of US medical consumable device maker IZI Medical Products, for a consideration of USD153.5 million on a cash- and debt-free basis, to be funded from existing facilities. "Joining the Halma group will take IZI Medical Products to the next level, adding R&D, commercial and international growth opportunities that will help us in our journey to advance healthcare for patients worldwide," explained Chief Executive Andrew Williams.
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COMPANIES - FTSE 250
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Essentra said its Chief Executive Officer Paul Foreman has decided to step down at the end of 2022. Scott Fawcett, currently the manager of its components division, will take his place from the beginning of January. The Milton Keynes, England-based components maker also agreed on the disposal of its Filters business for GBP262.1 million to a subsidiary of Centaury Management Ltd. "This will provide Essentra Components with the flexibility to pursue value creating organic and inorganic opportunities, including future bolt-on acquisitions," the firm said. The sale of its Packaging business completed on Saturday, it noted. The sales will make Essentra a "pure-play" components business, with a "healthy balance sheet". Essentra said that once the Filters sale is completed, it will return GBP150 million to shareholders through a special dividend.
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OTHER COMPANIES
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Flooring manufacturer James Halstead reported a 9.6% rise in revenue year-on-year to GBP291.9 million from GBP266.4 million, for the year ended June 30. Pretax profit edged up to GBP52.1 million from GBP51.3 million. It maintained a final dividend of 5.5 pence. "A solid performance for a year that started in a positive way, as the large challenges of the last two years looked set to dissipate, only to be faced by a set of new obstacles with both energy and materials costs escalating," commented Chief Executive Mark Halstead. It noted the falling value of sterling will increase input costs, but when it comes to its exports, may bring some positives.
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Tortilla Mexican Grill said interim pretax profit shrunk to GBP264,052 from GBP2.6 million the year before, for the 26 weeks ended July 3. Revenue, however, rose 30% to GBP26.9 million from GBP20.8 million. "Sales over the summer period were more challenging than anticipated, due to a combination of train strikes, the heatwave, and pent-up consumer demand for overseas holidays," the Mexican restaurant owner explained. Times remain tough with cost pressure still elevated, it noted.
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By Elizabeth Winter; elizabethwinter@alliancenews.com
Copyright 2022 Alliance News Limited. All Rights Reserved.
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