Blue-chip shares in Europe were on the up on Monday afternoon, with market sentiment boosted by a strong session in New York at the end of last week.
Gains could be short-lived, however, if a US inflation reading comes in hot on Tuesday. Equity markets are already reeling from hawkish comments from Federal Reserve Chair Jerome Powell.
The FTSE 100 index traded 39.90 points, 0.5%, higher at 7,400.45. The FTSE 250 was up just 2.16 points at 17,855.25, and the AIM All-Share was down 0.33 of a point at 700.76.
The Cboe UK 100 was up 0.6% at 738.72, the Cboe UK 250 was flat at 15,457.74, and the Cboe Small Companies was up 0.2% at 12,881.44.
In European equities on Monday, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt was up 0.2%.
‘An easing in government bond yields supported the biggest one-day gain in the Nasdaq Composite index since May as investors remained confident in the idea of interest rates having peaked, despite an attempt by Federal Reserve chair Jerome Powell to counter this narrative last week. US inflation numbers out tomorrow will tell their own story, and a higher-than-expected reading could well prompt renewed jitters among investors,’ AJ Bell analyst Russ Mould commented.
Despite last week being a tricky one for European equities, favourable consumer price index readings for the US and UK this month could spur a rally between now and the end of the year.
Scope Markets analyst Joshua Mahony commented: ‘This week looks likely to be dominated by inflation, with both the US (Tuesday) and UK (Wednesday) reporting their latest CPI figures for October. Coming off the back of multi-month periods of stagnant or rising inflation, the expectation of a notable decline across both figures should help appease those calling for additional rate hikes in the coming months. With risk assets beginning the week on a positive footing, there is a good chance that we enjoy a period of strength across equity markets if the forthcoming inflation metrics further weaken the hawkish story as expected.’
Stocks in New York are called to open, with a US credit rating outlook change by Moody’s on Friday tempering enthusiasm.
The Dow Jones Industrial Average is called to open flat, and the S&P 500 and Nasdaq Composite down 0.2%.
Moody’s on Friday downgraded its outlook on US debt to negative from stable, one week before crucial budget negotiations in Congress. For now, it has maintained its Aaa rating on US government debt.
Sterling was quoted at $1.2248 early Monday afternoon, higher than $1.2200 at the London equities close on Friday. The euro traded at $1.0688 early Monday, up from $1.0670 late Friday. Against the yen, the dollar was quoted at JP¥151.74, up versus JP¥151.49.
In the FTSE 100, Phoenix Group was the top performer, up 5.7%.
The insurer upgraded its near-term cash generation targets, after completing a funds merger of the Phoenix Life and Standard Life businesses. It now expects to deliver around £1.8 billion in cash generation in 2023, compared to its prior target range of £1.3 billion to £1.4 billion.
‘As a result, the group expects to have significant surplus cash at its holding company at the end of 2023, which creates further balance sheet optionality,’ the firm said.
Elsewhere, British Land rose 4.5%. The London-based commercial property developer and investor set out a promising outlook for its financial year.
The company said it now expects estimates rental value growth at the top end of its previous guidance for financial year 2024 ending March 31. It added that it was comfortable with current market expectations for financial 2024 earnings.
In May, it guided for estimated rental value growth of 2% to 4% across campuses, the same growth in retail parks and 4-5% ERV growth in London urban logistics. On Monday, it increased its guidance for retail parks to 3-5%.
Kainos slumped 21% after its first-half earnings growth was overshadowed by a continued ‘post-pandemic decline’ in healthcare revenue.
The Belfast-headquartered firm provides digital services to the public sector, healthcare market and commercial customers. In addition, it is a partner of enterprise software provider Workday Inc.
Kainos said revenue in the six months to September 30 rose 7.5% to £193.2 million from £179.8 million the previous year. Pretax profit rose 12% to £30.9 million from £27.5 million.
Kainos said: ‘Our key business areas, Workday Services, Workday Products and public sector within Digital Services, together 81% of revenue, continue to perform strongly, even when measured against a strong comparative period.
‘Offsetting this growth, our healthcare revenues continued their post-pandemic decline and we observed some reductions in project scope for some commercial sector customers within Digital Services.’
FDM Group plunged 15%, as the IT-focused professional services provider warned of clients delaying and deferring decisions for project commencements and Consultant placements. This was due to ‘macroeconomic and geopolitical uncertainty’, FDM said.
Nevertheless, it expects its financial performance for 2023 to be ‘broadly in line’ with its expectations, thanks to measures taken to adjust recruitment, training and staffing levels to align with market conditions.
Gold was quoted at $1,937.23 an ounce early Monday afternoon, edging down from $1,938.67 on Friday. Brent oil was trading at $81.65 a barrel, up from $81.12.
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