Blue chips lose early shine as US treads water

(Alliance News) - London's FTSE 100 ran out of steam on Monday to close little changed, while New York markets made a muted start to an abbreviated session ahead of Independence Day.

Miners remained in favour on hope for economic stimulus in China, but AstraZeneca tumbled on concerns that a new lung cancer drug may not be as successful as had been hoped.

"It's been a bit of a snoozy start to July for European markets with an initially positive European open giving way to a more mixed session, with US markets only opening for a short time ahead of the US Independence Day holiday," CMC Markets analyst Michael Hewson commented.

The FTSE 100 index fell 4.27 points, 0.1%, at 7,527.26 well below its intraday high of 7,561.26. The FTSE 250 ended up 91.01 points, 0.5%, at 18,507.77. The AIM All-Share edged up 0.80 points, 0.1%, to 754.31.

The Cboe UK 100 was down 0.1% at 750.82, the Cboe UK 250 was up 0.6% at 16,192.78, though the Cboe Small Companies fell 0.4% to 13,661.36.

In European equities, the CAC 40 in Paris closed down 0.2% while the DAX 40 in Frankfurt fell 0.4%.

US markets made a subdued start after two manufacturing surveys showed the sector continued to weaken. The Dow Jones Industrial Average rose 0.1%, the S&P 500 was flat, while the Nasdaq Composite eased 0.1%.

Financial markets in New York close early at 1800 BST on Monday, 1pm local time, and remain closed on Tuesday for the Independence Day holiday.

S&P Global's purchasing managers' index reading fell to 46.3 points in June, from 48.4 in May, sinking further below the 50.0 neutral mark.

The Institute for Supply Management's PMI also made for a grim read, falling to 46.0 points in June, from 46.9 in May.

Shares in Tesla jumped 5.9% after investors welcomed a strong production update over the weekend, with car deliveries beating expectations.

In the second quarter, the electric-vehicle maker reported deliveries of 466,140 vehicles, an increase of 83% on a year before. The total was also ahead of analyst forecasts of 450,000.

As competition in the EV sector heats up, Tesla has made several price cuts in the US, Europe and Asia this year. The move has also allowed it to weather declining demand in China.

It is a gamble that "appears to be paying off handsomely", argued Hargreaves Lansdown's Susannah Streeter.

Limiting gains in London were comments from incoming Bank of England policymaker Megan Greene who warned of the dangers of complacency in the fight against inflation hinting she might back more interest rates rise in the UK.

"It would be a mistake for central bankers to take comfort in the notion that inflation and rates will automatically go back to the low levels we saw before the pandemic," she wrote in an article in the Financial Times. "This is their challenge for the future."

Mining stocks rallied on hopes of a stimulus in China. The Chinese manufacturing sector saw a softer rise in production last month, according to survey data.

The Caixin manufacturing purchasing managers' index eased to 50.5 points from 50.9 in May, coming in slightly higher than a flash estimate of 50.2.

"Now some of the disappointment about a slower than expected post-Covid recovery has eased, the focus is turning to potential financial stimulus and support, which could have positive implications for metals and energy demand," AJ Bell analyst Russ Mould commented.

Anglo American and Glencore took the top two places in the FTSE 100 risers list, up 4.1% and 3.3%, respectively.

Oil prices received a lift from output cuts by Russia and Saudi Arabia. Brent oil was trading at USD75.92 a barrel at the London close Monday, up from USD75.58. It had spiked as high as USD76.55 in morning trade.

Saudi Arabia announced it was extending a voluntary oil production cut of one million barrels per day, in a bid to prop up slumping prices. The cut which first took effect in July will continue in August and "can be extended", the official Saudi Press Agency reported, citing an energy ministry source.

Russia's top energy official, meanwhile, said that Moscow will voluntarily cut oil exports by 500,000 barrels per day, building on previously announced production cuts.

Alexander Novak said the move is to ensure "the oil market remains balanced".

Shares in BP rose 2.9%, Shell 1.6% and Harbour Energy 4.1%.

Sterling was quoted at USD1.2675 at the time of the London equities close on Monday, down from USD1.2706 on Friday. The euro traded at USD1.0905 down from USD1.0916. Against the yen, the dollar was quoted at JPY144.59, little changed from JPY144.58.

The downturn in the UK's manufacturing sector continued in June. The S&P Global/CIPS manufacturing PMI worsened to a six-month low of 46.5 points in June from 47.1 in May.

In the eurozone, the Hamburg Commercial Bank manufacturing PMI fell to 43.4 points in June from 44.8 in May, its lowest level since May 2020.

Back in London, AstraZeneca shares slumped 8.0% after results from a trial of its Dato-DXd lung cancer drug disappointed.

AstraZeneca is working with Tokyo-listed Daiichi Sankyo, who it has also collaborated with for the Enhertu drug.

In patients will locally advanced or metastatic non-small cell lung cancer treated with at last one prior therapy, Dato-DXd demonstrated a "statistically significant" improvement for the dual primary endpoint of progression-free survival compared to docetaxel, the current standard of care chemotherapy.

However, for the dual primary endpoint of overall survival, the data "were not mature".

"An early trend was observed in favour of [Dato-DXd] versus docetaxel that did not meet the prespecified threshold for statistical significance at this interim analysis," AstraZeneca said.

Analysts at Jefferies said the results seem "likely to fall short of best case."

"Limited detail, as expected, with results said to provide 'compelling evidence', suggesting a less pronounced benefit than hoped, in our view, plus 'some' Grade 5 ILD related deaths," the investment bank noted.

Gold was quoted at USD1,927.00 at the London close Monday, up from USD1,915.48 late Friday.

Oanda analyst Craig Erlam commented: "Gold has struggled in recent weeks against the backdrop of persistent stubborn inflation, resilient economic data, and, as a result, higher interest rate expectations. We're seeing it bounce back a little over the last couple of sessions after briefly dipping below USD1,900 but the trend is still very much against it."

By Jeremy Cutler, Alliance News reporter

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