LONDON MARKETS: FTSE 100 Pulled Lower By Slump For WPP
By Victor Reklaitis and Sara Sjolin, MarketWatch
Whitbread shares leap as expectations build over possible spinoff
U.K. stocks closed lower on Monday, led lower by a fall in WPP PLC shares after its longtime chief executive, Martin Sorrell, resigned in the face of a probe.
A fall in shares in Sage Group PLC was also dragging on the FTSE 100 index, but a surge for Costa Coffee parent Whitbread PLC on news of an activist investor stake helped limit the drop.
Traders also were assessing the fallout from the airstrikes on Syria that the U.S., U.K. and France conducted late Friday.
How markets are moving
The FTSE 100 dropped 0.9% to close at 7,198.20, pulling back after three weekly rises in a row . The London benchmark remains down for the year, off by 6.4%.
The pound traded at $1.4328, up from $1.4239 late Friday in New York. A stronger pound tends to weigh on the British blue-chip index as it can reduce revenue made overseas by multinational companies when it's converted back into sterling.
What's driving markets
The key geopolitical concern for investors in recent days has been a conflict between Syria and the U.S. and its allies.
Syrian armed forces on Sunday unleashed airstrikes against rebels and shelled what rescue workers said were civilian homes. With the move, President Bashar al-Assad was seeking to demonstrate his regime's continued strength following the U.S.-led missile attack earlier in the weekend.
Expectations for the West to take military action had been building since a suspected chemical-weapons attack killed civilians in Syria more than a week ago. Analysts have worried about the U.S. ending up in a conflict with Russia, which backs the Syrian regime.
The Trump administration has said it would slap more sanctions on Russia, targeting companies tied to the Syrian regime and its chemical weapons. Companies with heavy exposure to Russia, such as steelmaker Evraz and oil giant BP, were among major decliners on Monday, down 7% and 1.6%, respectively.
What strategists are saying
"The U.S.-led strikes against Syria turned out to be a nonevent as far the markets are concerned and fortunately there were no reports of casualties. Only 3 targets were hit and the wave of strike action has already been declared to be over--at least for the time being, anyway. However, investors still remain wary of the potential for tensions to escalate between Russia and the West," said Fawad Razaqzada, technical analyst at Forex.com, in a note.
WPP shares (TSCO.LN)fell 6.5% for one of the FTSE 100's biggest drops after Sorrell resigned from his job as CEO of the advertising heavyweight.
Sorrell stepped down in the face of a company investigation into an allegation of personal misconduct. The move ends his more than three decades of leadership at the world's largest advertising company, which he founded.
"One of [Sorrell's] strong points is the ability to pull together all parts of the business to work together, and with that in mind there is a strong chance we may see the company broken up," said Joshua Mahony, market analyst at IG, in a note.
"There is reason to believe that the current share price may not fully capture all components of the firm, and investors are certainly interested in the possibility that value could be captured by splitting the firm into separate pieces," he said.
Read more:Why probe drove WPP CEO Martin Sorrell to resign
Sage's stock (SGE.LN)slumped 3% for the FTSE's largest decline. Shares in the provider of accounting software are adding to Friday's dive of 8.2%, which came after the company cut its full-year forecast for revenue growth .
On the upside, Whitbreadjumped 7.2% after Elliott Management said in a statement (http://www.prnewswire.co.uk/news-releases/elliott-statement-on-whitbread-plc-679776143.html) over the weekend that it has amassed a stake of more than 6% in Britain's biggest hotel and coffee-shop operator and believes it's currently the largest investor in the company, whose businesses include the Premier Inn chain.
The development is viewed as adding to the pressure on Whitbread to spin off its Costa Coffee business, because the U.S. activist hedge fund is among the shareholders that has called for that type of move, according to multiple published reports.