London close: Stocks finish weaker, Arcadia rejects Frasers loan offer
London stocks finished in the red on Monday, as market watchers kept an eye on the looming collapse of Arcadia Group, and digested rocketing mortgage approvals in the UK.
The FTSE 100 ended the session down 1.59%, and the FTSE 250 was 0.65% weaker at 19,366.32.
Sterling was trading stronger, last rising 0.23% on the dollar to $1.3341, and advancing 0.38% against the euro to €1.1169.
“The month is ending with modest losses across equity markets, although these moves barely put a dent in the huge rallies seen in indices since 1 November,” said IG chief market analyst Chris Beauchamp.
“After such impressive gains, and with the end of the year so close, it is hardly surprising that a significant amount of fund rebalancing and profit taking is felt across markets, putting some modest pressure on indices.
“But this should be temporary, as further inflows and positive seasonality, plus the continued attempt to look beyond the virus to a time when vaccines are brought in, help to avoid any major declines.”
Beauchamp said investors would be right to question whether November’s bounce had “taken the heat” out of December, especially since much of the good news around vaccines and the presidential transition were now likely priced in.
“Many will hope that the indecision and weakness stocks have demonstrated towards the end of November will be a sufficient reset to allow a seasonal rally in the next four weeks.”
Late in the day, Sir Philip Green’s privately-held retail empire Arcadia Group looked closer to the brink, as its chairman rejected an offer for a £50m loan from Frasers Group.
“The board of AGL has discussed and given due consideration to the above,” wrote chairman of the Topshop owner, Andrew Coppel.
“We shall not be progressing it and, therefore, shall not be discussing the matter further.”
Mike Ashley’s Frasers Group made the £50m ‘lifeline loan’ offer on Monday morning, and said during the afternoon that the offer was rejected without any engagement from Arcadia.
Investors were also digesting news that China’s manufacturing sector expanded at the fastest rate in more than three years in November, as the country’s economy continued to rebound from the impact of Covid-19.
The services sector also performed strongly, the National Bureau of Statistics reported.
Beijing’s official monthly purchasing managers' index rose from 51.4 in October to 52.1 in November, the highest reading since September 2017.
It also beat most analyst forecasts of around 51.5.
A reading above or below the neutral 50.0 point indicates either growth or contraction, respectively.
Meanwhile, the non-manufacturing PMI rose to 56.4 from 56.2 in October.
It was the ninth consecutive month that activity has expanded and the fastest rate of growth since June 2012.
The reading also narrowly missed the consensus, which was looking for an easing, to 56.0.
On home shores, figures from the Bank of England showed mortgage approvals surged to a 13-year high in October, underpinned by pent-up demand and the stamp duty holiday.
According to the BoE’s monthly money and credit report, mortgage approvals for house purchase increased to 97,500, the highest since September 2007, against 92,100 in September.
The figure was well above consensus, with most analysts looking for around 84,000.
Net mortgage borrowing was £4.3bn, compared to September’s £4.9bn.
“The continued strength in borrowing follows high levels of mortgage approvals for house purchase seen over recent months,” said the Bank of England.
“Mortgage borrowing troughed at £0.2bn in April but has since recovered and is slightly higher than the average £3.9bn in the six months to February 2020.”
Approvals for re-mortgage were broadly unchanged at 32,900.
Brexit was also in focus, after foreign secretary Dominic Raab said over the weekend that this week will be "very significant".
He told the BBC that negotiations between the UK and the EU were down to their final two basic issues, and a deal was possible if the EU showed some pragmatism.
“Brexit remains centre stage as the outcome of the negotiations is still undecided,” said Richard Hunter, head of markets at Interactive Investor.
“Investors are hoping that a last-gasp compromise will prevent the economic pain of a no-deal to both parties, and for the UK this has particular ramifications given the parlous state of the economy both now and post-pandemic - further deterioration of the nation’s finances would be a material blow.”
Hunter said that, with “very little” corporate news this week, the macro issues were likely to come under further focus.
“The FTSE 100 has had a much improved November, being lifted by the global tide of improved sentiment especially on vaccine news.
“Even so, the fact that it remains down by 16% in the year to date gives context to what has been a tumultuous year.”
In equity markets, Royal Dutch Shell lost 5.84% and BP was down 5.75% as oil prices fell. Investors were eyeing a meeting of the OPEC+ group of oil producers, who are due to decide on January production plans.
EasyJet descended 3.98% following a report from the Telegraph that the budget airline had called in AlixPartners to assist with cash flow forecasting amid crisis talks with Whitehall officials and banks.
Frasers Group slumped 5.68% after confirming its loan offer to the teetering Arcadia had been rejected.
Going the other way, JD Sports Fashion surged 5.86% following reports over the weekend that it is considering backing away from a proposed rescue of beleaguered department store chain Debenhams.
In broker note action, homeware retailer Dunelm was boosted 3.04% by an upgrade to ‘outperform’ at RBC Capital Markets, while Bodycote was knocked 1.38% lower by a downgrade to ‘underweight’ at JPMorgan.
FTSE 100 - Risers
JD Sports Fashion (JD.) 776.20p 5.86%
Spirax-Sarco Engineering (SPX) 11,135.00p 2.63%
Experian (EXPN) 2,646.00p 2.36%
London Stock Exchange Group (LSE) 8,106.00p 2.35%
Auto Trader Group (AUTO) 560.60p 2.26%
Avast (AVST) 509.00p 1.93%
Bunzl (BNZL) 2,359.00p 1.86%
Antofagasta (ANTO) 1,254.50p 1.33%
Rentokil Initial (RTO) 497.30p 1.32%
Ferguson (FERG) 8,424.00p 1.20%
FTSE 100 - Fallers
Phoenix Group Holdings (PHNX) 716.80p -8.83%
Compass Group (CPG) 1,343.00p -6.63%
BP (BP.) 247.65p -5.80%
Royal Dutch Shell 'B' (RDSB) 1,234.20p -5.35%
Fresnillo (FRES) 1,052.50p -5.35%
Royal Dutch Shell 'A' (RDSA) 1,271.20p -5.09%
Lloyds Banking Group (LLOY) 35.62p -4.49%
Whitbread (WTB) 3,031.00p -4.14%
International Consolidated Airlines Group SA (CDI) (IAG) 154.20p -4.13%
HSBC Holdings (HSBA) 388.25p -4.10%
FTSE 250 - Risers
Hipgnosis Songs Fund Limited C Shs NPV (SONC) 110.00p 4.78%
AJ Bell (AJB) 423.00p 4.44%
GCP Student Living (DIGS) 146.60p 3.97%
Henderson Smaller Companies Inv Trust (HSL) 968.00p 3.74%
XP Power Ltd. (DI) (XPP) 4,550.00p 3.64%
CMC Markets (CMCX) 387.50p 3.61%
CLS Holdings (CLI) 213.50p 3.14%
Dunelm Group (DNLM) 1,220.00p 3.04%
Diploma (DPLM) 2,120.00p 3.01%
Energean (ENOG) 717.60p 2.96%
FTSE 250 - Fallers
Ninety One (N91) 211.80p -6.21%
Carnival (CCL) 1,327.50p -6.05%
Frasers Group (FRAS) 421.80p -5.68%
Mediclinic International (MDC) 282.00p -5.43%
Mitchells & Butlers (MAB) 215.00p -5.38%
Babcock International Group (BAB) 339.00p -5.19%
TI Fluid Systems (TIFS) 219.00p -5.03%
Capita (CPI) 42.45p -4.71%
Investec (INVP) 185.60p -4.40%
Drax Group (DRX) 328.40p -4.37%