Financial institutions' concerns over a potential windfall tax dampen progress for FTSE 100 companies
In the financial world, European markets experienced a downturn on Friday, with the CAC 40 in Paris and the DAX 40 in Frankfurt ending the day down 0.7% and 0.6% respectively. The FTSE 100 index in London closed down 0.3%, with the index closing at 9,187.34.
The UK government's consideration of a windfall tax on the banking sector has put pressure on Barclays and Deutsche Bank in London. The Financial Times reported fears that the autumn budget will target banks to help fill a £20 billion fiscal hole.
Meanwhile, the BoE's official rate stands at 4.0%. In the currency market, the pound eased to 1.3510 US dollars, the euro rose to 1.1699 US dollars, and the dollar traded lower at 146.92 yen against the yen.
In the commodities market, a barrel of Brent traded at 67.41 US dollars, down from Thursday's close, while gold climbed to 3,445.38 US dollars an ounce.
Elsewhere in London, takeover activity involved John Wood and JTC. John Wood finally agreed a bid of about £210 million from Sidara, worth 30 pence for each Wood share. However, the agreement is subject to several conditions, including the publication of 2024 audited accounts and the audit opinion not being modified. Shares in Wood are currently suspended pending the publication of 2024 accounts.
The AIM All-Share finished the day up 0.4%, with the index closing at 764.10. Rentokil Initial, Prudential, Fresnillo, Endeavour Mining, and ConvaTec were the biggest risers on the FTSE 100, while NatWest, JD Sports Fashion, Lloyds Banking Group, Barclays, and Kingfisher were the biggest fallers.
Looking ahead, the global economic calendar on Monday includes manufacturing PMI releases, eurozone unemployment figures, and UK mortgage approvals data. US financial markets are closed for Labour Day. The FOMC's next meeting is scheduled for September, and the Core PCE reading will play a significant role in its decision-making.
The Institute for Public Policy Research proposed a new levy on commercial banks to recoup "windfalls" made by lenders, aiming to save £7 billion to £8 billion a year over this parliament. The scheme entailed the BoE purchasing hundreds of billions of pounds of government bonds, buoying commercial bank reserves at the central bank. However, the UK taxpayer is already spending £22 billion a year compensating the Bank of England for losses on its quantitative easing programme.
In other news, JTC saw a 18% increase in market value following the rejection of a takeover proposal from Permira Advisers. The IPPR recommended that the Treasury introduce a QE reserves income levy on commercial banks to offset these costs.
Monday's local corporate calendar includes a trading statement from Kainos Group and half-year results from XP Factory. The agreement between Sidara and John Wood is a significant development in the UK's corporate landscape, providing a 450 million US dollar capital injection into John Wood. The deal is expected to solve the company's near-term liquidity challenges and strengthen it in the longer term, according to John Wood's chief executive Ken Gilmartin.
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