Traders in small U.K. companies faced frustration on Tuesday as the London Stock Exchange (LSE) experienced yet another outage, marking the third incident in as many months.
Around an hour after the market’s opening at 8 a.m. in London (3 a.m. Eastern), trading of approximately 2,000 smaller stocks came to a halt, thereby affecting the FTSE Smallcap Index. The LSE promptly announced that it was “investigating an incident.”
Despite this setback, investors were still able to trade in the constituents of the large-cap FTSE 100, the mid-cap FTSE 250, and the International Order Book, which grants access to global depositary receipts, as emphasized by the LSE.
Although live orders remained unaffected and regular trading for “Impacted securities” was restored by 10:17 a.m., another issue regarding the accessibility of smaller stocks arose approximately an hour later.
This outage adds to the list of recent trading halts faced by the LSE. In October, dealing in hundreds of smaller stocks encountered a shutdown during the final 80 minutes of a session. Additionally, in November, the LSE’s FTSE Russell indexes were halted for 40 minutes.
This recurring problem threatens London’s efforts to attract more companies and traders, as the bourse continues to grapple with challenges in securing initial public offerings. Furthermore, investors are applying a discount to the U.K. market as a whole. For instance, the FTSE 100 currently trades at a forward price/earnings ratio of 10.6, while Germany stands at 11.5, and the S&P 500 SPX in the U.S. is at 18.9, according to Factset.
London Stock Exchange and LSE Group
The London Stock Exchange (LSE) is a key part of the LSE Group, although it now represents only a small proportion of the group’s overall activities. In fact, cash equities trading and listings make up just 4% of the group’s revenues. The majority of income comes from the data and analytics business, which saw significant growth following the acquisition of Refinitiv in 2019, a deal worth $27 billion.
LSEG Shares Performance
LSEG shares have seen a positive trend in 2023, with a 25% gain so far. However, recent events have had a slight impact, as they dipped by approximately 1% during an outage period.
Market Update: FTSE 100, Interest Rates, and Chinese Economy
In U.K. blue chip trading, the mood was downbeat, resulting in a 0.6% decline for the FTSE 100 (UKX). Real estate sectors welcomed falling bond yields due to their sensitivity to interest rates. On the other hand, concerns about waning demand from a struggling Chinese economy negatively affected mining sectors.
Banking News: Qatar’s Fund and Barclays
Barclays (BCS, BARC) faced pressure after reports revealed that Qatar’s wealth fund sold a significant portion of its stake, amounting to 361.7 million shares, representing half of its total holding. Consequently, shares in the bank experienced a 2.5% decline.
European Market Performance: CAC 40 and DAX Index
France’s CAC 40 (PX1) witnessed a modest increase of 0.3%, while Germany’s DAX index (DX:DAX) climbed 0.2%. Both indices were just short of their earlier record highs achieved earlier this year.
German Market Focus: DAX Rally and Relative Strength Index
The DAX has experienced an impressive 8.5% jump in the past month, mostly due to a sharp decline in German benchmark bond yields. There is growing optimism that the European Central Bank may respond to eurozone inflation dropping back to 2.4% by cutting interest rates next year. It is worth noting that the DAX’s 14-day relative strength index, a momentum gauge, currently stands at 80.6. This value is well above the overbought threshold of 70.
