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Jan. 15, 2018, 11:58 a.m. EST

FTSE 100 finishes down from record with Carillion collapse in focus

Barclays upgraded; GKN rises on more takeover chatter

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By Carla Mozee and Victor Reklaitis, MarketWatch


Getty Images
Construction firm Carillion has collapsed.

U.K. stocks closed lower Monday, as investors started the week with news of the collapse of construction and outsourcing heavyweight Carillion PLC, but the blue-chip benchmark kept near a record-high level.

How are markets moving?

The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.76%  fell 0.1% to end at 7,769.14 after Friday’s rise of 0.2% to an all-time closing high. The equity gauge last week marked a sixth straight weekly win, the longest win streak since January 2017.

The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.2615%  on Monday traded at $1.3801, up from $1.3727 late Friday in New York.

What’s driving markets:

The subdued Monday mood was ushered in with news that Carillion /zigman2/quotes/208402800/delayed UK:CLLN -28.95%  will enter liquidation after crisis talks failed over the weekend. The construction company that also runs public services at prisons, hospitals and schools, but the government and Carillion’s creditors couldn’t work out a way to save the firm. Carillion shares, which trade off the FTSE 100, have been halted.

“The knock in confidence to the U.K. economy – Carillion employs around 20,000 people, and utilizes a huge network of smaller subcontractors — likely contributed to the FTSE’s ... dip,” on Monday, said Spreadex financial analyst Connor Campbell in a note.

Read more: Carillion’s collapse delivers a boost for shares of rivals

Meanwhile, shares of Asia-focused banks HSBC PLC and Standard Chartered PLC were lower after China’s banking regulator this weekend said it will step up efforts to root out financial risks in the banking industry.

Investors were also keeping watch on the pound, which on Friday jumped to its highest against the U.S. dollar since the June 2016 Brexit referendum.

What strategists are saying:

“It is far from clear at this stage what the wider implications will be from the liquidation of Carillion, both in terms of its impact on the construction industry and on the wider economy as a whole, not least from the enormous uncertainty that now afflicts the tens of thousands of Carillion staff and those other companies directly dependent upon it,” wrote Rebecca O’Keeffe, head of investment at Interactive Investor.

“The pound pushed through and above the $1.3660 highs of last year closing at its best level since the Brexit vote in June 2016, opening up the prospect of further gains towards $1.3975. It first of all needs to push above the $1.3830 level and February 2016 pre-Brexit vote lows. Support comes in at the $1.3650 area and $1.3500,” said Michael Hewson, chief market analyst at CMC Markets, in a note.

Stock movers: Shares in Carillion rivals were mixed.

G4S PLC /zigman2/quotes/202248409/delayed UK:GFS +1.57%  rose 1.1%. Off the FTSE 100, shares of Serco Group PLC /zigman2/quotes/202143031/delayed UK:SRP +0.97% gained 7.4%, while Balfour Beatty PLC /zigman2/quotes/202863772/delayed UK:BBY +0.69% fell 3.3%, as the company said it will take a hit of 35 million to 45 million pounds ($48 million to $62 million) from Carillion’s liquidation.

GKN  rose 4.1%, after reports that U.S.-based private equity firm Carlyle is considering a bid for the U.K. engineering company. Meanwhile, Melrose Industries PLC /zigman2/quotes/210306391/delayed UK:MRO +4.05%  , whose takeover bid was recently rejected by GKN, said Monday it will start holding a series of meetings with shareholders to discuss the proposal. Melrose shares closed 1.4% higher.

Shares of HSBC Holdings PLC /zigman2/quotes/203901799/delayed UK:HSBA +1.21%   /zigman2/quotes/208272822/composite HSBC +1.53%  fell 0.9% and those of Standard Chartered PLC /zigman2/quotes/200125072/delayed UK:STAN +1.26%  dropped 2% following the China banking-regulatory news.

Barclays PLC /zigman2/quotes/208409333/delayed UK:BARC +5.18%   /zigman2/quotes/206581728/composite BCS +7.32%  rose 0.5% following a ratings upgrade of the lender to buy at Investec.

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July 10, 2020 4:59p
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14.20 p
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Carla Mozée is a reporter for MarketWatch, based in London. Follow her on Twitter @MWMozee. Victor Reklaitis is a London-based markets writer for MarketWatch. Follow him on Twitter @VicRek.

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