Investor sentiment was battered this week as simmering tensions in the Middle East erupted into military conflict. Global markets were roiled after reports that Iran had launched an attack on Israel earlier in the week. The situation intensified when Israel was said to have retaliated with a strike on Iranian soil on Friday, though Iran swiftly dismissed these claims.
Back in the UK, the economic data showed retail sales volumes climbed 0.8% year-on-year in March, according to the Office for National Statistics (ONS). However, sales were flat month-on-month, missing forecasts of a 0.3% rise and remaining 1.2% below pre-pandemic levels from February 2020.
Major deals also contributed to the week’s volatility. In the FTSE 100, packaging firm Mondi topped gainers, surging 9.3% after the company said it does not plan on making an offer for DS Smith, whose shares lost 10.2%.
In early March, DS Smith and Mondi had agreed in principle to a takeover deal valuing DS Smith shares at 373 pence each, with Mondi saying the possible £10 billion merger would create a combined entity. However, on Friday, Mondi revealed it had decided against pursuing the transaction after considering the value implications for its own shareholders.
On Tuesday DS Smith accepted a £5.8 billion takeover bid from US pulp and paper supplier International Paper. The offer will see DS Smith shareholders receive 0.1285 International Paper shares for each DS Smith share held, valuing the UK firm at around £5.8 billion on a fully diluted basis with an enterprise value of £7.8 billion.
In the FTSE 250, hedge fund manager Man Group led losers with a 6.6% decline. While assets under management grew 4.9% to $175.7 billion, the firm suffered net outflows of $1.6 billion in Q1 amid significant redemptions from its alternative strategies.
Sports betting group 888, owner of William Hill, bucked the trend in the small-cap arena by adding 4.8%. The firm’s Q1 revenue fell 3.2% year-on-year but topped guidance at £431 million. 888 is also seeking shareholder approval to rebrand as Evoke plc at its upcoming AGM.
Several companies issued profit warnings and restructuring plans earlier in the week. Bootmaker Dr Martens plunged 29% after slashing its earnings forecast, while CEO Kenny Wilson announced his departure. Retailer Superdry shed over 22% as it mulled delisting from the LSE and launched a £10 million equity raise.
Shares in International Distribution Services soared 29% on Wednesday after the Royal Mail owner rejected a takeover approach from Czech billionaire Daniel Kretinsky’s EP Group, which holds a 27.5% stake. EP Group, however, signalled it may return with a firm bid before a mid-May deadline.
The travel sector was boosted by easyJet after the airline reported it had trimmed first-half losses and projected a 22% revenue jump to £3.27 billion, despite absorbing a £40 million hit from Mideast tensions. The budget airline cited strong Easter and summer bookings, with 70% of holiday packages sold.
Elsewhere, precious metal prices soared to near-record highs on Friday as geopolitical risks flared in the Middle East. Gold, a traditional safe-haven asset, breached the $2,400 per ounce mark in early trading following reports of an Israeli attack on Iran.
Meanwhile, currency markets remained highly volatile. The Japanese yen plummeted to 34-year lows against the US dollar after hotter-than-expected US inflation data and hawkish rhetoric from Federal Reserve officials bolstered expectations of higher interest rates for longer. The yield-sensitive yen came under intense selling pressure as soaring US Treasury yields widened the policy divergence with Japan.
Initial reports of Israeli strikes on Iran sparked a brief risk-off move, with the yen and Swiss franc gaining ground as the euro, pound and Australian dollar retreated. However, the flight to safety was short-lived after Iran dismissed claims of an attack, prompting a reversal in currency movements later in the session.
The cryptocurrency market was not spared from the turmoil, with Bitcoin and other major coins experiencing a sell-off during the risk-off episode. Bitcoin briefly dipped below $60,000 before paring losses to trade around $64,422 on Saturday morning. Ethereum and Ripple’s XRP also felt the heat as investors sought shelter from the geopolitical storm.
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