(Alliance News) - Stock prices in London were lower at midday on Monday, but eased from steeper losses, while the pound was supported by a tax policy U-turn from UK Chancellor Kwasi Kwarteng.
The FTSE 100 index was down 35.51 points, 0.5%, at 6,858.30. The FTSE 250 was down 61.47 points, 0.4%, at 17,106.87, and the AIM All-Share was down 3.13 points, 0.4%, at 803.25.
The Cboe UK 100 was down 0.7% at 684.72, the Cboe UK 250 was down 0.3% at 14,611.08, and the Cboe Small Companies was down 0.2% at 12,704.15.
In European equities on Monday, the CAC 40 in Paris was down 1.1%, while the DAX 40 in Frankfurt was down 0.7%.
"The FTSE bounced off its lows this morning and the pound rallied – although it then drifted lower from the highs – after the UK government's embarrassing U-turn on the abolition of the tax for the highest earners," said City Index and FOREX.com analyst Fawad Razaqzada.
"With the Bank of England's temporary bond buying while raising interest rates, and the government's questionable policy choices amid the soaring cost of living crisis in the UK, investor confidence toward UK assets will likely remain negative for the foreseeable future. I expect the pound recovery to falter and don't see how the FTSE will escape getting caught in the global stock market turmoil."
UK Prime Minister Liz Truss and Chancellor Kwasi Kwarteng have abandoned a plan to abolish the top rate of income tax for the highest earners in an astonishing last-minute U-turn.
The chancellor acknowledged that their desire to borrow billions to axe the 45% rate on earnings over GBP150,000 had become a "terrible distraction" amid widespread criticism and threats of a rebellion.
Hours before he had been due to tell the Conservative Party conference they must "stay the course" on the plans, he issued a statement saying: "We are not proceeding with the abolition of the 45p tax rate."
"We get it, and we have listened," he added, in language echoed in a tweet from the prime minister a day after she said she remained absolutely committed to the cut.
Sterling was seen as high as USD1.12 as news of the U-turn broke. The pound was quoted at USD1.1198 at midday Monday, up from USD1.1149 at the close on Friday.
Meanwhile, the downturn in the UK's manufacturing sector persisted in September, according to new figures from S&P Global.
The purchasing managers' index for September was 48.4 points, rising from 47.3 in August. The reading moved closer to the 50.0 point no-change marker, indicating the rate of contraction slowed during the month.
It came in slightly below a previous flash estimate of 48.5 points, however.
Contractions were seen across the consumer, intermediate and investment goods industries, with the steepest decline seen in intermediate goods producers.
The euro stood at USD0.9783 at midday Monday, down from USD0.9796 on Friday.
Credit Suisse shares were down 7.9% in Zurich, as concerns over its financial health mounted over the weekend. Investor concern surrounds its level of credit default swaps.
The Bank of England said it is keeping an eye on developments at the Swiss financial services firm.
"The 5-year CDS for Credit Suisse spiked to 250 [basis points] from around 60 at the start of the year. It means that the market is aggressively pricing a default for one of the biggest Swiss banks. Is it possible? Yes, it is possible, but it is highly unlikely. Because Credit Suisse is certainly 'too big to fail'," said Swissquote Bank analyst Ipek Ozkardeskaya.
Credit Suisse moved to reassure its staff in the face of market turmoil and a stock price slide, Bloomberg reported late Friday.
In a memo, Chief Executive Officer Ulrich Koerner told staff that the Swiss bank has a "strong capital base and liquidity position".
"What will likely happen is, either there is a miracle this Christmas and the bank's new CEO strengthens the back of the bank in 100 days as he promised, and the bank survives and thrives until the next scandal. Or the bank will become a nice takeover target, and be eaten by another bank. Or it will be saved by the Swiss government," Ozkardeskaya continued.
In the FTSE 100, Vodafone jumped 2.8% as it confirmed it is in discussions with Hong-Kong based CK Hutchison Holdings over a possible combination of Vodafone UK and Three UK.
"The envisaged transaction would involve both companies combining their UK businesses, with Vodafone owning 51% and our partner CK Hutchison owning 49% of the combined business," it explained.
The relative ownership would be achieved through differential leverage, with no cash consideration to be paid.
Vodafone said a combination would provide the enlarged group with the "necessary scale" to speed up the rollout of full 5G in the UK, as well as to extend broadband connectivity to rural communities and small businesses.
Scottish Mortgage Investment Trust was 4.3% lower, with its tech stock-heavy investment portfolio suffering after steep losses on the Nasdaq Composite in recent days.
Halma was down 3.1%, after announcing a USD168.0 million acquisition of US medical consumable device maker IZI Medical Products LLC.
IZI will be a stand-alone company within Halma's Healthcare sector, headed up by its current management team.
"IZI further extends our Healthcare sector into products supporting minimally invasive diagnosis and treatment of acute conditions, principally cancer. IZI's growth is supported by the higher incidence of health conditions in ageing populations, improved screening and diagnostics enabling earlier treatment of disease, and expansion into adjacent applications through innovation," said Chief Executive Andrew Williams.
Telecom Plus topped the FTSE 250, jumping 22%. The multi-utility provider raised its full-year profit expectations, after a "record" number of UK households signed up to try and save on their energy bills.
The company said it has seen a reduction in the previously expected cost of multi-service discounts during the second half and an improved outlook for energy affordability. It noted the recently announced price guarantee, which will cap average energy bills at GBP2,500 per household for the next two years.
Based on this, Telecom now expects full-year profit to be "materially ahead" of current market expectations.
On AIM, foreign exchange provider Argentex was up 14%. It expects revenue to rise 75% to GBP27.4 million year-on-year in the six months to September 30. It said the recent historic lows in sterling have provided "exceptional short-term trading conditions".
Brent oil was quoted at USD88.48 a barrel at midday in London, rising from USD86.35 late Friday. FTSE 100-listed oil majors Shell and BP were up 2.3% and 1.7% respectively, tracking the crude price higher.
Oil prices rallied on Monday as expectations that the world's largest producers planned to slash production grew.
The Organisation of Petroleum Exporting Countries and its key allies, collectively called OPEC+, is expected to deliver a substantial cut in production when it meets on Wednesday against the backdrop on gloomy energy demand outlook.
Gold was quoted at USD1,664.64 an ounce Monday, lower against USD1,672.50 at the close on Friday.
Against the yen, the dollar was trading at JPY145.09, higher compared to JPY144.68 late Friday.
US futures pointed to a mixed open in New York, with the Dow Jones Industrial Average called up 0.4%, the S&P 500 index called up 0.2%, and the Nasdaq Composite expected to open 0.2% lower.
Still to come on Monday's economic calendar is a US manufacturing PMI at 1445 BST.
By Elizabeth Winter; elizabethwinter@alliancenews.com
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