Melrose's successful bid for GKN helped the UK's top share index finish the month on a positive note on Thursday and gave a mildly upbeat end to the FTSE 100's worst quarter since 2011. The blue-chip FTSE 100 was up 0.17 percent on the day at 7,056.61 points as traders prepared for a market holiday. GKN surged about 9 percent in late trading after Melrose Industries announced it had narrowly clinched an 8 billion pound ($11 billion) takeover of the British engineering firm after a three-month battle for control.
The FTSE 100 ended the first three months of 2018 with a loss of 8.2 percent, its worst quarter since 2011 and making it the weakest-performing major European market so far this year. It was closely followed by Germany's exporter-heavy DAX , which lost 6.3 percent over the same period. British stocks had a bumpy first-quarter ride, marred by a spate of profit warnings and trouble in the retail and outsourcing sectors as Brexit uncertainty hangs over equities.
"There's been negative sentiment towards UK equities for a significant period now, stemming all the way back to the EU referendum," Laith Khalaf, senior analyst at Hargreaves Lansdown, said. "What we've had in 2018 is more of a global phenomenon, so we've had a bit of volatility returning to markets," said Khalaf, adding that this is a more normal state of affairs for markets.
On the domestic front, high street stalwarts such as Debenhams, Mothercare and Moss Bros have tumbled after profit warnings, examples of retailers struggling in a digital age. The collapse of outsourcer Carillion has further dented confidence in UK domestic stocks, while peer Capita has slashed profit forecasts and made plans to raise cash to avoid a similar fate.
The outlook is uncertain not just for UK domestics, however. A resurgent pound has reduced the forex-related boost enjoyed by big, international FTSE companies that benefited from an accounting boost following sterling's slump in the immediate aftermath of the June 2016 Brexit vote. A spike in volatility in February rattled global stock markets, which have also been hit by concerns over the prospect of a global trade war and a tumble in the US tech sector.