European stocks made a limp start to trading on Monday as investors eye this week’s US inflation data in the wake of Friday’s blow-out payrolls report.
The FTSE 100 index was down 12.60 points, 0.2%, at 8,268.03, having briefly seen slight gains immediately after the opening bell. The FTSE 250 was down 55.56 points, 0.3%, at 20,844.52, but the AIM All-Share was up 1.72 points, 0.2%, at 740.08.
The Cboe UK 100 was down 0.1% at 827.99, the Cboe UK 250 fell 0.4% to 18,298.59, and the Cboe Small Companies was little changed at 16,692.35.
In European equities on Monday, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was fell 0.3%.
In New York on Friday, the Dow Jones Industrial Average added 0.8%, the S&P 500 rose 0.9% and the Nasdaq Composite shot up 1.2%.
In Tokyo on Monday, the Nikkei 225 surged 1.8%, while the S&P/ASX 200 added 0.7%. In Hong Kong, the Hang Seng Index was up 1.3%. Financial markets in Shanghai remain closed, reopening on Tuesday.
Against the dollar, the pound climbed to $1.3111 early Monday, from $1.3102 at the time of the London equities close on Friday. The euro rose to $1.0970 from $1.0962. Against the yen, the dollar fetched JP¥148.17, down from JP¥148.59.
‘Friday’s US labour market report saw the US exceptionalism theme come to the fore once more, and sent the doves back to their nest. A quiet docket awaits today, as the new trading week gets underway,’ Pepperstone analyst Michael Brown commented.
‘While a week may be a long time in politics – just ask Sue Gray – the same can also be said of the financial markets,’ Brown added, referring to UK Prime Minister Keir Starmer’s former chief of staff who left the position on Sunday.
The analyst continued: ‘This time seven days ago, every man and his dog, myself included, were mulling the fact that the FOMC looked set to race back to neutral at a rate of knots, removing policy restriction in much more rapid fashion than their G10 peers. One solid jobs report, and seven days, later, and all of a sudden the idea of US economic exceptionalism is back in vogue, with participants, per the OIS curve, even casting some doubt on the idea that the FOMC will deliver 2x 25bp cuts at each of the remaining meetings this year.’
US employment growth was sharply higher than expected last month, numbers on Friday showed, lessening the case for the Federal Reserve to enact another jumbo 50 basis interest rate cut.
According to the Bureau of Labor Statistics, nonfarm payroll employment increased by 254,000 in September, markedly ahead of the FXStreet cited consensus which predicted job additions of 140,000.
Nonfarm payrolls picked up from 159,000 in August. August’s reading was upwardly revised from 142,000.
The unemployment rate edged down to 4.1% from 4.2%.
This week, the focus will be on US consumer price index data on Thursday. According to consensus cited by FXStreet, numbers are expected to show the rate of annual inflation eased to 2.3% last month, from 2.5% in August.
XTB analyst Kathleen Brooks commented: ‘This week’s US CPI print is crucial for market sentiment, in our view. The report, released on Thursday, is expected to show annual headline CPI moderating to 2.3% from 2.5%, the core rate of inflation is expected to remain steady at a 3.2% annual rate. The risk is to the upside after the recent bout of stronger than expected economic data, as the economy appears to have reaccelerated in late Q3. If we do get a larger than expected reading for inflation later this week, it may trigger a wave of risk aversion as US Treasury yields surge and as further interest rate cuts get priced out. It would also be dollar positive in our view.’
Brooks also noted it will be a key week in the UK, as the Labour government’s budget announcement edges closer.
‘It is early days for the government, and they must play a part in turning around the UK’s economic fortunes. This week the government will host an investors summit in London that will feature some of the biggest names in global business. The hope is that the government will be able to attract some big-ticket investment on the back of this conference. However, for this to happen, we think that the government will have to commit to small and inconsequential changes at this month’s Budget, including to capital gains tax and to carried interest charges,’ the XTB analyst said.
‘There has been some speculation that the government will water down original plans to charge these taxes close to the highest rate of income tax at 45%. If there are any hints that this month’s budget will be more business friendly, we think that it will be positive for UK asset prices, and it may help the pound to stage a recovery after a bruising week.’
In London, Shell shares rose 0.5%. It said refining margins ebbed in the third quarter although it raised volume guidance across both upstream and liquefied natural gas businesses.
In a mixed third quarter trading update, Shell said Chemicals margins rose to $164 per tonne from $155/t in the second quarter, but noted the division is expected to revert to a loss again this quarter.
The company said the indicative refining margin for its Chemicals & Products arm amounted to $5.5 a barrel for the third-quarter of 2024, declining from $7.7 in the second-quarter.
China stimulus-driven trade was still evident. Asia-focused insurer Prudential added 0.4%, while investor Fidelity China was the best mid-cap performer, up 3.3%.
FD Technologies added 6.1%, as it announced a £230 million deal which will sharpen its focus on one unit. It has struck a deal to sell its First Derivative business in a deal that will be classed as a ‘fundamental change of business’ according to listing rules.
The AIM-listed owner of data-driven businesses said the division will be sold for £230 million to EPAM Systems.
Subject to shareholder backing, the deal is expected to be sealed this quarter. FD said the deal enables it to focus on KX, the part of the business it believes has the ‘largest value creation potential’.
The sale also ‘facilitates the return of excess cash to shareholders’, with FD adding it will provide more details on that in its interim results next month. FD said both KX and First Derivative performed in line with board expectations in the first half ended August 31.
Petra Diamonds rose 3.9% as it announced it has received South African government clerance for the sale of the Koffiefontein mine.
Petra said it will avoid incurring closure-related costs of $15 million-$18 million.
The diamond miner in South Africa and Tanzania expects the deal to close before the end of October 2024.
A barrel of Brent rose to $78.53 early Monday in London, from $78.08 late Friday afternoon. Gold bought $2,649.31 an ounce, down from $2,655.27.
Israeli Prime Minister Benjamin Netanyahu on Sunday vowed to achieve victory and said his country’s military ‘completely transformed reality’ in the year since Hamas’s October 7 attack, which has left the country fighting two wars.
Netanyahu told troops Israel ‘will win’ as it battles militants in both the Gaza Strip and Lebanon and prepares to strike Iran, almost a year since the unprecedented attack by Palestinian Hamas militants sparked the Gaza war.
US President Joe Biden on Friday advised Israel against striking Iran’s oil facilities, saying he was trying to rally the world to avoid the escalating prospect of all-out war in the Middle East.
But his predecessor Donald Trump, currently campaigning for another term in power, went so far as to suggest Israel should ‘hit’ the Islamic republic’s nuclear sites.
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