Indices in London closed higher on Monday as the market reacted favourably to President-elect Trump’s choice of Scott Bessent to head the US Treasury, although oil majors suffered amid falling brent prices.
AJ Bell’s Russ Mould said Bessent is perceived as being a relatively ‘conventional and safe pair of hands candidate’.
‘Importantly, Bessent is seen as being less aggressive on tariffs than some of the rhetoric espoused by Trump on the campaign trail,’ Mould added.
The FTSE 100 index rose 29.60 points, 0.4%, at 8,291.68. The FTSE 250 climbed 167.57 points, 0.8%, at 20,749.26, and the AIM All-Share gained 1.33 points, 0.2%, at 733.53.
The Cboe UK 100 firmed 0.3% at 833.92, the Cboe UK 250 added 0.9% at 18,233.39, and the Cboe Small Companies rose 0.5% to 15,679.90.
In New York, the Dow Jones Industrial Average was up 0.8% at the time of the closing bell in London. The S&P 500 was 0.3% higher, and the Nasdaq Composite climbed 0.5%.
Reflecting on Bessent’s appointment as next US Treasury Secretary Paul Donovan at UBS said: ‘Investors prefer orthodoxy, predictability, and coherence from economic policy; there were fears that some of the candidates may not possess those attributes. Bessent does. Bessent has said he regards taxing US consumers via trade tariffs as a bargaining tool - essentially the stance in Trump‘s first term. Others in the cabinet disagree, but investors will be pleased there is one voice of trade tax moderation.’
According to the Wall Street Journal, Bessent outlined a ’3-3-3’ view for the US economic outlook. He wants to cut the budget deficit to 3% of gross domestic product by 2028 from over 6% in 2023. He is eyeing GDP growth of 3% and wants to pump an extra 3 million barrels of oil per day.
It’s a busy week stateside ahead of the Thanksgiving holiday.
Tuesday sees the release of minutes from the last Federal Open Market Committee meeting. Wednesday will be packed with data including durable orders and shipment, jobless claims, personal consumption, PCE inflation.
‘We do not expect anything in this data to shift the market narrative that resilient activity and elevated inflation will lead the Fed to slow the pace of cuts,’ said analysts at Citi.
‘But we think this narrative overstates the strength of the labour market and under-appreciates the extent to which upside risks to inflation have abated. That will only become more clear with data for November and December,’ the broker added.
Bessent’s appointment saw the dollar’s recent ascent pause for breath.
The pound was quoted at $1.2559 late on Monday afternoon in London, rallying from $1.2511 at the time of the European equities close on Friday. The euro stood at $1.0488, little changed from $1.0491. Against the yen, the dollar was trading at JP¥154.37, fading from JP¥154.87.
‘By the end of last week, the dollar’s valuation was very stretched and positioning was probably very lop-sided. In trade-weighted terms, it was almost back at the September 2022 peak by Friday. All that was lacking for a correction/consolidation was a catalyst and now we’ve got one,’ Societe Generale analyst Kit Juckes commented, noting Bessent’s appointment.
The price of oil fell on reports of a possible cease-fire pact between Israel and Lebanon’s Hezbollah.
Brent oil was quoted at $73.43 a barrel late Monday afternoon, down from $74.46 at the time of the London equities close on Friday. Gold slid to $2,634.92 an ounce from $2,703.04.
Bloomberg reported that Israel is potentially ‘days away’ from a cease-fire agreement with Hezbollah, following a new round of shuttle diplomacy by a senior envoy for the outgoing Biden administration.
‘We are close to a deal,’ the Israeli ambassador to the US, Michael Herzog, told Israel‘s Army Radio on Monday, adding that some final points still needed to be addressed. ‘It could happen within days.’
The Israeli security cabinet is expected to meet on Tuesday and may vote on whether to accept a truce with Hezbollah, according to an Israeli official, cited by Bloomberg.
Oil majors BP and Shell both dropped 0.8% and 0.4% respectively, while the fall in the price of the yellow metal weighed on Fresnillo and Endeavour Mining, down 3.0% and 1.6% respectively.
In Europe, the CAC 40 in Paris ended flat, while the DAX 40 in Frankfurt rose 0.4%.
Hot-on-the-heels of a tepid purchasing managers’ index reading, there was another poor reading of the German economy on Monday. Sentiment among German companies continued to worsen in November.
Business sentiment among German companies deteriorated in November, survey results published by the ifo institute showed on Monday. The ifo business climate index declined to 85.7 points in November from 86.5 in October.
ING analysts commented: ‘Today’s Ifo index paints a rather miserable picture for the German economy - and after meagre growth in the third quarter a (technical) winter recession now looks likely.’
On London’s FTSE 100, JD Sports rallied 9.6% as Deutsche Bank upgraded the sports retailer to ’hold’ from ’sell’. JD fell heavily last week in the wake of reduced annual profit guidance.
Broker rating changes also supported Weir, up 1.9% as Deutsche upgraded to ’buy’ from ’hold, and Barratt Redrow, up 3.6%, as Jefferies made a similar move.
But Kingfisher slumped 13% after it trimmed the top-end of its guidance due to soft trading in France in the UK during the third quarter.
Kingfisher, which owns brands such as B&Q, Screwfix and Castorama, now expects adjusted pretax profit of £510 million to £540 million in the year to January 31 2025, the top end of the range lowered from £550 million. This would be a decline of up to 10% from £568 million posted last year.
Kingfisher said sales fell 0.6% to £3.22 billion in the third quarter to October 31, with like-for-like sales 1.1% lower at constant currency.
This compared to market consensus of £3.27 billion and negative 0.2% for sales and LFL performance respectively, according to Barclays.
‘Given that we already knew that group LFL sales were down 0.3% in the first six and a half weeks of [the third quarter], the overall quarter outcome implies LFL sales decelerated in the latter part of the quarter,’ Barclays added.
Elsewhere, Anglo American rose 1.7%. It said it has struck a deal to sell its remaining steelmaking coal portfolio, netting $3.78 billion.
The miner said it will sell the business to Peabody Energy. Coupled with the $1.1 billion sale of its roughly 33% stake in the Jellinbah joint venture, it expects to net about $4.9 billion from the disposal of its steelmaking coal business.
‘We see this as a positive event that will serve to reassure the market on management’s commitment to execute on the restructuring plan,’ said analysts at RBC Capital Markets.
On the FTSE 250, ITV shot up 8.6%, on M&A chatter. ITV’s boss has been mulling with advisers a possible separation of a unit, Sky News reported on Saturday, while possible bidders are in early talks about teaming for a tilt at buying all or parts of the FTSE 250 listing.
Sky, citing television industry sources, reported that CVC Capital Partners and a ‘major European broadcaster’ are among those that are mulling over the merits of making a bid to acquire ITV.
The European broadcaster is believed to be Television Francaise SA, which operates the TF1 TV channel in France.
Tuesday’s global economic diary sees consumer confidence in and new homes sales figures in the US.
The local corporate calendar has full-year results from contract caterer Compass Group.
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