Royal Mail was a faller on Monday as the London market drifted lower in its quietest session of the year.
Growing fears of a national postal strike sent Royal Mail sliding 1.6 per cent to 386p. The Communication Workers Union will ballot members shortly on industrial action unless Royal Mail management “significantly shift their position” on pensions, pay and strategy, CMU general secretary Dave Ward said in the Huffington Post.
Industrial action is unlikely to harm Royal Mail much in the short term as letter and parcel volumes will shift to other days, said Liberum.
However, the broker also expected a strike to “amplify” the problems already facing Royal Mail as customers redouble efforts to reduce mailouts and use rival package delivery services.
“A key selling point of Royal Mail’s service has been its reputation for operational robustness and reliability, which can only be tarnished by industrial action,” said Liberum, which repeated “sell” advice and a 385p target.
A holiday in the US meant the wider market struggled for direction with the FTSE 100 slipping 0.4 per cent, or 27.03 points, to 7,411.47 by the close.
Volume was less than half the recent daily average with more than 600m blue-chip shares changing hands across the big exchanges, the lowest total since the final half-day session of 2016.
DCC, the petrol distributor and support services conglomerate, added 1.8 per cent to £72.70 after Exane BNP Paribas turned positive.
Investors have underestimated how much DCC improves returns on acquired businesses, Exane argued.
Acacia Mining drifted 2.4 per cent to 202.2p on news that it had suspended operations at its Bulyanhulu gold mine in Tanzania, which has blocked exports and is demanding $190bn in tax and penalties from the group.
The rest of the bullion miners followed the gold price higher with Randgold ahead 2 per cent to £80.70 and Centamin up 2.4 per cent to 158.3p.
Polymetal took on 3.7 per cent to 898p after JPMorgan upgraded to “neutral”, largely on valuation grounds.
Melrose Industries, the engineering turnround specialist, drifted a further 4.9 per cent to 208.6p in the wake of interim earnings last week that missed consensus forecasts.
Goldman Sachs cut forecasts for Melrose and speculated that the group’s high-margin ergonomics division, which makes standing desks and monitor mounts, could be first in line for disposal.
Mondi was weakest among the packaging stocks, down 1.6 per cent to 20.90p, after it postponed an investment at its Czech Republic kraft paper factory due to “market conditions”.
Mondi’s decision follows signs that paper demand has been weakening with global pulp shipments and recycled packaging prices turning sharply lower.