European equities struggled to find their groove on Tuesday, as the FTSE 100 finds gains hard to come by in a tricky January so far, while stocks in New York are set for a tepid return to trading.
The FTSE 100 index was down 36.20 points, 0.5%, at 7,558.71. It has fallen over 2% since the start of the year. Heading into Tuesday, it had 10 days of trading in the new year. It rose in just three of them.
The FTSE 250 was down 36.27 points, 0.2%, at 19,164.57, and the AIM All-Share was up 2.19 points, 0.3%, at 749.56.
The Cboe UK 100 was down 0.4% at 755.17, the Cboe UK 250 was up marginally at 16,618.28, and the Cboe Small Companies was down 0.2% at 15,028.83.
So far in 2024, equities have struggled to find their feet, as investors fret over the interest rate outlook.
‘I sense that the first quarter of this year will be marked by the realization that it’s too early for the central banks to cut the interest rates unless something really bad – like another bank crisis, or a real estate crisis, or another debt crisis hits the fan. Because March – where market prices reflect the first rate cuts from both the Federal Reserve and the European Central Bank - is about two months away, and things don’t look that bad,’ Swissquote analyst Ipek Ozkardeskaya commented.
‘The divergence between the reason and market pricing suggests that the rate cut expectations will be gently delayed and pricing will be revisited. If that’s the case, stock and bond markets should correct to the downside, and the US dollar should recover.’
The UK unemployment rate for the period from September to November was 4.2%, unchanged from the August to October period. The figure came in line with FXStreet-cited market consensus.
Also in the three months to September, annual growth in average total pay, excluding bonuses, was 6.6%. This in line with market consensus too, and slower than the growth in the previous three-month period of 7.3%.
Including bonuses, average pay growth was 6.5%, lower than market expectations of 6.8% and the 7.2% registered in the three months to October.
AJ Bell’s Russ Mould said the data will ‘stir the pot’, as it appears that inflationary pressures are easing.
However, Mould warned: ‘Data points like these don’t seem enough to put central banks on a different path and we’re facing the risk that the likes of the Bank of England and European Central Bank will act too late to avoid a sharp economic slowdown.’
Inflation data from the UK on Wednesday will provide the BoE with further data to digest ahead of its next decision.
The BoE will make its next interest rate decision on February 1. Before that, there is the European Central Bank decision on January 25, as well as the US Federal Reserve on January 31.
According to FXStreet, consumer price inflation in the UK are expected to cool to 3.8% annually in December, from 3.9% a month earlier.
The recent peak for annual inflation in the UK was 11.1% in October 2022, which the ONS estimated to be the highest since 1981. November’s reading was the tamest since September 2021.
Further, Bank of England Governor Andrew Bailey is due to speak at 1500 GMT on Tuesday, and investors will be listening for further clues about the trajectory of interest rates.
Stocks in New York were called to open lower, after financial markets were closed on Monday for Martin Luther King Jr Day. The Dow Jones Industrial Average is called down 0.5%, the S&P 500 index down 0.6%, and the Nasdaq Composite down 0.8%.
Donald Trump romped to a lightning-quick victory Monday in Iowa’s caucuses – the first vote in the US presidential race – cementing his status as the presumptive Republican standard-bearer to challenge President Joe Biden in November’s election.
The former president has led polling for more than a year, but the contest was seen as the clearest insight yet into whether he can convert his advantage into a stunning White House return.
In European equities on Tuesday, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 0.7%.
The pound was quoted at $1.2627 at midday on Tuesday in London, lower compared to $1.2734 at the equities close on Monday. The euro stood at $1.0881, down against $1.0950. Against the yen, the dollar was trading at JP¥146.67, higher compared to JP¥145.77.
In the FTSE 100, Ocado was the best performer at midday, rising 6.7%.
The Hertfordshire-based online grocer and warehouse technology firm reported an 11% annual jump in retail revenue to £609.4 million in the 13 weeks to November 26, from £549.3 million.
Looking at its winter period, Ocado said it delivered ‘another record Christmas’ and hit its highest ever level of sales over the peak Christmas trading period.
Experian shares were trading 2.8% higher, following a positive trading update.
The credit checking company said total revenue was up 9% in the three months that ended December 31, or 7% at constant exchange rates, with organic growth up 6%.
Looking ahead, Experian said it expects organic revenue growth of between 5% and 6% for the full year, alongside ‘modest margin accretion’, both at constant rates.
At the other end of the index, Rightmove lost 4.1% at midday. JPMorgan cut the property portal’s stock to ’underweight’ from ’neutral’.
AstraZeneca fell 2.8%. UBS cut the pharmaceutical company’s stock to ’sell’ from ’buy’.
The FTSE 250’s Moneysupermarket.com also took a hit from a stockbroker downgrade. Its shares were down 7.9% after Jefferies cut it to ’hold’ from ’buy’.
Spirent Communications rose 6.4% to top the FTSE 250 index.
It said its 2023 results were in line with its revised expectations ‘following a challenging year’.
The Crawley, England-based automated test and assurance solutions provider said full-year revenue closed at $474 million, down 22% from $607 million a year earlier.
Spirent expects to report an adjusted operating profit in line with the market consensus of $45 million, within a range of $37 million to $50 million. Adjusted operating profit in 2022 was $129.5 million, so another substantial annual fall.
On London’s AIM, Eqtec surged 53%.
The thermochemical conversion technology company confirmed that Banca del Fucino has approved the drawdown of its €2.9 million loan facility. The facility was announced back in September.
Eqtec said it will provide financing for Eqtec Italia MDC, which owns the Italy Market Development Centre, located in Gallina, near Castiglione d’Orcia, Tuscany, Italy.
Oil prices rose on Tuesday as traders fretted over the potential disruption in trade in the Middle East, where important producers like Qatar and Saudi Arabia are situated.
Brent oil was quoted at $79.06 a barrel at midday in London on Tuesday, up from $78.09 late Monday.
Gold was quoted at $2,040.42 an ounce, down against $2,053.53.
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