Stock prices in London reacted to dimming optimism of future US interest rate cuts, falling as the week’s developments countered upbeat sentiment at the end of 2023 of loosening monetary policy.
‘Global market moves in the first week of the year appear to have been driven by investors becoming more cautious about the timing of the first Fed rate cut and about the total amount of policy easing for 2024 as a whole,’ said Lloyds Bank analysts.
The FTSE 100 index opened down 47.31 points, 0.6%, at 7,675.76. The FTSE 250 was down 101.66 points, 0.5%, at 19,270.39 and the AIM All-Share was down 2.47 points, 0.3%, at 753.47.
The Cboe UK 100 was down 0.7% at 766.61, the Cboe UK 250 was down 0.6% at 16,772.97, and the Cboe Small Companies was down 0.1% at 16,772.97.
In European equities, the CAC 40 in Paris was down 0.7%. The DAX 40 in Frankfurt was down 0.6%, as official data revealed an unexpected slump in retail sales in November.
In the US on Thursday, Wall Street ended mostly lower, with the Dow Jones Industrial Average slightly higher, the S&P 500 down 0.3% and the Nasdaq Composite down 0.6%.
Investors were considering Thursday’s US jobs data, which have set the stage for the closely-watched non-farm payrolls print due at 1330 GMT on Friday.
On Thursday, data from payroll processing firm ADP showed the US labour market added more jobs than expected in December. Meanwhile, US new jobless claims fell by more than expected in the most recent week. Together, they suggest the labour market is in pretty decent shape, despite historically high interest rates.
Friday’s non-farm payrolls print has a ‘fine line’ to tread, noted Stephen Innes, managing partner at SPI Asset Management.
‘A too strong report could be a setback for stocks, aligning with expectations of rate cuts in [the second half of] 2024. Conversely, if the report aligns with or falls slightly short of expectations, it may reinforce beliefs in an imminent rate cut, potentially sparking a rally. On the other hand, a significantly weaker reading could renew concerns about a looming recession,’ Innes considered.
The dollar was stronger against major currencies in early exchanges in Europe.
Sterling was quoted at $1.2682 early Friday, lower than $1.2696 at the London equities close on Thursday. The euro traded at $1.0921, down from $1.0961. Against the yen, the dollar was quoted at JP¥144.98, up versus JP¥144.48.
In early economic news, UK house prices rose for the third consecutive month, according to data from Halifax. The Halifax house price index rose 1.1% on a monthly basis in December, after rising 0.6% in November.
The typical UK home cost £287,105 in December, around £3,066 higher than in November. This was the highest level seen since March 2023. On an annual basis, prices rose 1.7%, having fallen 0.8% in November.
‘The growth we have seen is likely being driven by a shortage of properties on the market, rather than the strength of buyer demand. That said, with mortgage rates continuing to ease, we may see an increase in confidence from buyers over the coming months,’ noted Halifax Mortgages director Kim Kinnaird.
In the FTSE 100, Endeavour Mining dropped 12%.
Late Thursday, Endeavour said it sacked its President & Chief Executive Sebastien de Montessus, for ‘serious misconduct’ with immediate effect.
The gold miner with assets in nations including Senegal and Burkina Faso said the move followed an investigation into an irregular payment instruction issued by him in relation to an asset disposal undertaken by the company. The irregular payment instruction amounted to $5.9 million and was discovered in the course of a review of acquisitions and disposals, which is ongoing.
De Montessus responded to the allegations, saying in 2021 he had instructed a creditor to ‘offset an amount owed to the company to pay for essential security equipment to protect our partners and employees in a conflict zone’. This had ‘no additional cost to the company’ and ‘did not benefit [him] personally in any way’, he maintained.
However, de Montessus conceded that omitting to inform the board of the arrangement was ‘a lapse in judgement’.
In the FTSE 250, Ithaca Energy fell 1.5%, with the North Sea oil and gas firm also reporting the sudden departure of a chief executive.
Ithaca said its CEO, Alan Bruce, has agreed will the board that he will step down to pursue new opportunities. Ithaca will begin a formal search process for his replacement, with chief financial officer Iain Lewis to also take on the role of interim CEO in the meantime, with immediate effect.
Clarkson added 7.2%.
The shipping services firm said its annual performance for 2023 is anticipated to be ahead of current market expectations. It expects underlying pretax profit of no less than £108 million. It credits strong trading throughout the final quarter, particularly in its Broking division.
Meanwhile on AIM, Revolution Bars Group plunged 23%
The pub and bar operator said it will close eight of its least profitable bars, as its younger customer base suffers disproportionately from the UK’s cost-of-living crisis. It also points to a challenge from the 10.8% increase to the national living wage to come in April.
However, Revolution said it had seen its best festive trading season in four years. Like-for-like sales rose 9.0% in the period from December 4 to 31. Still, group like-for-like sales for the first half - including New Year’s Eve - remained negative at minus 2.8%. It will update on its first-half trading later this month.
In Asia on Friday, the Nikkei 225 index in Tokyo closed up 0.3%. In China, the Shanghai Composite closed down 0.9%, while the Hang Seng index in Hong Kong was down 0.7%. The S&P/ASX 200 in Sydney closed down 0.1%.
Gold was quoted at $2,043.47 an ounce early Friday, a touch lower than $2,045.01 on Thursday.
Brent oil was trading at $78.07 a barrel, higher than $76.60, with prices continuing to bounce up and down amid developments in the Middle East.
As well as the US NFP data, the economic calendar for Friday has eurozone inflation readings at 1000 GMT.
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