Europe

FTSE 100 closes on five-week high as shares in easyJet rally

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The FTSE 100 has closed on a five-week high as a fall in sterling lifted AstraZeneca and Unilever. It came as shares in EasyJet rallied on speculation of a takeover by British Airways owner IAG.

The FTSE 100 index closed 46.86 points higher, or 0.66 percent, at 7,094.53. It is the FTSE 100’s strongest level since September 23 and marks its first monthly rise in three months.

Global companies such as AstraZeneca, Unilever and BP, which draw large parts of their revenue overseas, rose nearly two percent as sterling slid.

Meanwhile, sterling saw its recent daily gains against the US dollar slip away during Monday.

It was down one percent to 1.1494 against the dollar when European markets closed, falling more than a cent from the highs of the day.

Chris Beauchamp, chief market analyst at online trading platform IG, said: “While Wall Street edges lower in early trading, the FTSE 100 has managed to rise to a one-month high.

“Banks have been a major player here as expectations of tighter interest rates boost income forecasts for the sector, a point highlighted by several major players in their results.

“Meanwhile, the pound’s drop today back below 1.15 dollars has provided another tailwind for the index, but the modest losses in the US might be a harbinger of things to come if the Fed is more hawkish than expected this week.”

UK markets have recouped some of the sharp losses made in October when former Prime Minister Liz Truss’s economic plan sent borrowing costs sharply higher and triggered political turmoil.

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The FTSE 250 index, which is most exposed to the domestic economy, edged down 0.2 percent today (October 31) but marked monthly gains of 4.2 percent.

The banking sector gained 1.3 percent after a Sunday Times report said more windfall taxes in the UK were unlikely.

Easyjet jumped 6.1 percent after a Times report said International Consolidated Airlines Group (IAG) is to renew its EU consolidation plans, fuelling speculation Easyjet could be a takeover target. IAG rose 5.4 percent.

Centrica Plc rose 4.7 percent after brokerage Jefferies upgraded the stock to buy and raised its price target, citing strong fundamentals.

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Meanwhile, US stocks fell, potentially stalling a two-week rally in the S&P 500 and the Nasdaq indexes as investors turned cautious ahead of the Federal Reserve’s rate-setting meeting this week.

A policy decision from the Fed is due on Wednesday with investors expecting a fourth straight 75-basis point interest rate hike to curb high inflation.

Hopes about the central bank easing its aggressive stance on interest rate hikes had buoyed equities over the last few weeks, but communication from Fed officials after the decision, as well as non-farm payrolls data this week, would be key in setting expectations for future interest rates.

Apple Inc dropped 1.4 percent with a Reuters report saying production of its iPhones could slump by as much as 30 percent next month due to tightening COVID-19 curbs in China.

Shares of Amazon.com and Google-owner Alphabet were also down 1.4 percent and 1.5 percent respectively.

Among S&P 500 sectors, information technology and communication services were the lead decliners, falling 1.2 percent and 1.5 percent respectively.

European stocks also marked their first monthly gain in three months today, buoyed by a better-than-expected earnings season and hopes the US Federal Reserve would slow its pace of interest rate hikes.

The pan-European STOXX 600 index rose 0.4 percent to close at a more than six-week high, having recouped early losses after data showing record-high inflation in the eurozone.

Patrick Armstrong, Chief Investment Officer at Plurimi Wealth, said: “I think the market is taking some comfort and predicting a Fed that may start to pivot, but I’m not sure if that is the correct view at this point given how high inflation is.

“European markets are up a little bit today…playing catch up with a really strong afternoon session in the United States last week.”

Eurostat data showed inflation in the 19 countries sharing the single currency accelerated to 10.7 percent in October from 9.9 percent a month earlier, much higher than the European Central Bank’s (ECB) two percent inflation target.

Andrew Kenningham, chief Europe economist at Capital Economics, said: “With inflation having jumped to well over 10 percent, the ECB will prioritise price stability and press on with rate hikes regardless.”

The ECB doubled its deposit rate to 1.5 percent last week and promised more tightening in the months to come even if it pushes the bloc into recession.

Investors will also look towards a Bank of England policy meeting later this week with bets running high of it sticking to its similarly hawkish stance.

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