European equities were largely lower on Monday afternoon, with the FTSE 100 the worst of the bunch, as focus turns to key inflation readings from the US and China this week.
Investors are looking for US inflation to cool, which would solidify Federal Reserve interest rate cut expectations. For China, however, inflation heating up would suggest that the Asian nation’s economy is beginning to fire. That would be beneficial for mining and luxury retail shares.
Over in New York, all eyes will be on Boeing shares as the aircraft manufacturer grapples with more safety issues.
The FTSE 100 index traded down 22.94 points, 0.3%, at 7,666.67. The FTSE 250 was down 50.75 points, 0.3%, at 19,159.64, and the AIM All-Share was down 1.96 points, also 0.3% lower, at 749.28.
The Cboe UK 100 was down 0.3% at 765.90, the Cboe UK 250 was also 0.3% lower at 16,662.89, and the Cboe Small Companies was flat at 14,958.71.
In European equities on Monday, the CAC 40 in Paris was down 0.1%, though the DAX 40 in Frankfurt was up 0.1%.
Sterling was quoted at $1.2697 early Monday afternoon, lower than $1.2738 at the London equities close on Friday. The euro traded at $1.0938, lower than $1.0966. Against the yen, the dollar was quoted at JP¥144.56, up versus JP¥144.29.
Scope Markets analyst Joshua Mahony noted US interest rate expectations swung to and fro towards the back end of last week.
‘Equity markets have continued to struggle as we kick off another week afresh, with European and Asian stocks heading lower once again. Friday’s US jobs report brought fresh concerns over the likeliness of the Fed to cut rate in March as markets have been widely anticipating, with a hot payrolls figure coming alongside a higher wage growth reading,’ Mahony said.
‘However, the breakdown highlighted that much of that job growth came from those taking on part-time work, with full time jobs moving sharply lower. With a sharp decline in the ISM services PMI, job growth propped up by part-time roles, and a higher unemployment rate, we have seen markets return to the view that March will see the Fed commence their easing cycle.’
‘This week brings a major focus on inflation, with tonight’s Tokyo CPI figure kicking off a period that also sees Australian, US, and Chinese consumer prices reported. Coming at a time where markets remain under pressure over fears that we may see the Federal Reserve push back over the current trajectory expected by markets, the ability to maintain the downward trajectory for inflation is key to the health of the market.’
There is a US inflation reading on Thursday, before data from China on Friday.
Also in focus this week is the start of the US earnings season, with the banking sector kicking off proceedings.
Mahony added: ‘This week will be dominated by the big banks, with many hitting long-term highs as concerns of a hard landing ease. This could allow them to save money as funds set aside for bad loans are freed up. With a soft landing allowing the Fed to cut rates at a slower pace, it could be the banks that benefit from a more hesitant approach from Powell & co. Nonetheless, with many banks sitting on massive unrealized losses thanks to the unexpected surge in bond yields, the typical view that banks want higher rates has been challenged over recent years.’
Stocks in New York are called to open lower. The Dow Jones Industrial Average is called down 0.4%, and the S&P 500 and Nasdaq Composite each down 0.1%.
Boeing shares slumped 8.4% in pre-market trading in New York, after a challenging weekend of headlines for the aerospace company.
Airlines and safety bodies around the world grounded some versions of the Boeing 737 Max 9 jets pending inspections Sunday, with dozens of flights cancelled after a panel blew out of an aircraft over the US state of Oregon.
The Federal Aviation Administration ‘is requiring immediate inspections of certain Boeing 737 Max 9 planes before they can return to flight,’ the agency said on X.
It added that around 171 aircraft worldwide would be affected, with each inspection taking four to eight hours.
AJ Bell analyst Russ Mould commented: ‘It is the latest in a string of problems for the company, which include the grounding of 737 Max plans in 2019 after two crashes and subsequent delivery delays and production issues.
‘Boeing’s management will be under considerable pressure from the regulators and customers to explain what’s going on, which means considerable headwinds ahead for the business. It’s no wonder investors have raced to sell the shares as the risks to the investment case have just shot up.’
Boeing’s woes hurt shares in London-listed Senior, which gave back 4.9%. Boeing is one of the aircraft components and systems manufacturer.
Shaking off the aviation sector malaise, Melrose shares rose 3.3%, among the best FTSE 100 performers.
JPMorgan said the company ‘Melrose remains a key pick for us in 2024’.
‘[It is] an aerospace pure-play with a credible margin story, further upside to forecasts and a sizeable buy-back supporting the shares,’ JPMorgan analysts explained, adding the company to its positive catalyst watch grouping.
Oil majors were on the decline, hurt by weaker commodity prices and a less-than-stellar update from Shell. Brent oil was trading at $76.72 a barrel on Monday afternoon, lower than $78.82 late Friday.
Shell expects to pay impairment charges between $2.5 billion and $4.5 billion in the fourth quarter of 2023, compared to the $700 million a year prior.
Shell said the impairments for the most recent quarter are driven by portfolio choices, such as its Singapore Chemicals & Productions assets, which Reuters had reported Shell plans to sell by the end of 2024.
Shell shares declined 1.7%. BP fell 1.4% in a negative read-across.
Elsewhere, CMC Markets surged 23%. The trading services provider lifted guidance for full-year net operating income to between £290 million and £310 million from £250 million to £280 million. This will be up from £288.4 million in financial 2023. The financial year for CMC ends on March 31.
The company reported a ‘strong performance’ in its financial third quarter, amid improved market conditions and led by an increased contribution from its institutional business.
CMO Group tumbled 11%, as the building materials seller annual results are to be hurt by ‘ongoing economic challenges’ to the construction sector.
Sales for the year ended December 31 are expected to be broadly in line with expectations at around £71.5 million. This represents a 14% drop from CMO’s 2022 revenue of £83.1 million in 2022.
Adjusted earnings before interest, tax, depreciation and amortisation is expected to be around £1.0 million for the full year, halved from £2.1 million a year ago.
Gold was quoted at $2,020.03 an ounce early Monday afternoon, lower than $2,051.00 late Friday.
Copyright 2024 Alliance News Ltd. All Rights Reserved.
