A positive run-up to the year-end holidays for London stocks, fuelled by hopes for lower UK and US interest rates in 2024, stumbled early Thursday.
The FTSE 100 index opened down 6.54 points, 0.1%, at 7,709.14. The FTSE 250 was down 87.19 points, 0.4%, at 19,541.90, and the AIM All-Share was down 1.31 points, 0.2%, at 750.13
The Cboe UK 100 was down 0.2% at 769.62, the Cboe UK 250 was down 0.4% at 17,043.16, and the Cboe Small Companies was down 0.1% at 14,613.41.
In European equities, the CAC 40 in Paris was down 0.4%, while the DAX 40 in Frankfurt was down 0.3%.
The downturn was led by Wall Street. The Dow Jones Industrial Average ended down 1.3% in New York on Wednesday. The S&P 500 down and Nasdaq Composite both closed down 1.5%.
SPI Asset Management’s Stephen Innes posited that investors were digesting mixed messages from the downbeat results from delivery company FedEx - which is ‘often regarded as an economic barometer’ - alongside robust US consumer confidence data.
‘While the disappointing FedEx results provide ammunition to the overtightening hard landing camp, the consumer’s positive outlook on sentiment, diminishing inflation expectations, and a more optimistic perspective on the labour market strongly support the narrative of a soft landing, even though one could argue that the upturn in confidence poses a potential risk of reigniting inflationary pressures,’ Innes explained.
‘However, one could argue that the upturn in confidence poses a potential risk of reigniting inflationary pressures,’ he added.
Investors now are looking ahead to the key US personal consumption expenditures price index print on Friday, which is the Federal Reserve’s preferred metric of inflation. Before that, a reading on US gross domestic product is due out on Thursday.
In early UK economic news, government borrowing was higher than expected in November amid greater benefits costs and increased interest payments, according to official figures. However, it was lower than the same month last year after the government spent significantly less on energy support for households.
The Office for National Statistics said public sector net borrowing stood at £14.3 billion in November, reflecting the fourth-highest November total since monthly records began in 1993. Economists had forecast borrowing of £13.1 billion for the month.
On Wednesday, equity risk sentiment had got a boost from a cooler-than-expected UK inflation print, with investors moving to price in at least two 25-basis-point interest rate cuts by the Bank of England next year. This put pressure on the pound, which slipped further against the dollar in early exchanges in Europe.
Sterling was quoted at $1.2628 early Thursday, lower than $1.2673 at the London equities close on Wednesday.
The dollar was up against the euro but down against the yen. The euro traded at $1.09544, lower than $1.0968. The dollar bought JP¥143.24, down from JP¥143.75.
In the FTSE 100, Vodafone rose 1.6%, after Bloomberg reported that Swisscom is weighing an offer for the UK telecom’s Italian business early next year, potentially countering a rival proposal from France’s Iliad.
Citing people familiar with the matter, Bloomberg reported that the possible deal would combine Vodafone‘s mobile service with Swisscom’s Fastweb fiber broadband carrier in the country.
Swisscom and Vodafone are in talks to discuss the terms and a formal bid could be announced as soon as next month, the Bloomberg sources said.
Iliad on Monday said it submitted a proposal to Vodafone to create a new joint venture company that combines Vodafone Italia and Iliad Italia.
Elsewhere early Thursday, there was minimal news for London’s large-cap firms.
Shares in insurer Admiral fell 1.3% as Berenberg cut the stock to ’hold’ from ’buy’, with the German bank pointing to risks stemming from ‘the complexity of its accounting’.
British American Tobacco and United Utilities fell 2.6% and 2.0% respectively as the stocks went ex-dividend.
In the FTSE 250, Hipgnosis Songs Fund lost 1.8%, after releasing its delayed interim results for the six months ended September 30.
This comes just two days after the music intellectual property investor flagged discrepancies between an independent valuation of its intellectual property assets and its manager’s own view.
On an IFRS basis, net asset value per share at the end of September fell 7.2% to 110.12 US cents from 118.63 cents at the end of March, or 9.2% to 173.92 cents from 191.53 cents on an operative basis.
However, it warned that investors should use these figures ‘with a higher degree of caution and less certainty’, given ongoing concerns about the accuracy of the valuation of its assets.
The warning is another hit for the embattled firm. The discounted sale of assets to a partnership that includes investment adviser Hipgnosis Song Management, followed in October by a profit warning and decision to skip paying a dividend, triggered a shareholder revolt.
Meanwhile on AIM, GlobalData jumped 18%.
The data analytics and consulting firm said private equity company Inflexion has bought at 40% stake in its Healthcare division at a valuation of £1.12 billion. It expects to receive net cash of £434 million, which ‘will provide flexibility for accelerated value-creating M&A across the group’.
In Japan on Thursday, the Nikkei 225 index in Tokyo closed down 1.6%, with Toyota shares losing 4.0% amid more bad news for the country’s largest carmaker.
Japanese officials on Thursday started an on-site inspection at the headquarters of Toyota subsidiary Daihatsu, the transport ministry said, after an investigation found it had rigged safety tests and was forced to suspend all shipments of its vehicles.
The independent probe found the malpractice dated back to 1989 and led Toyota to express its ‘sincere apologies’ and pledge to carry out ‘a fundamental reform’.
The losses were also spurred by news that the world’s biggest carmaker was recalling around a million Toyota and Lexus vehicles in the US, citing concerns about their airbag systems.
In China, the Shanghai Composite index closed up 0.6%, while the Hang Seng index in Hong Kong was marginally higher. The S&P/ASX 200 in Sydney closed down 0.5%.
Gold was quoted at $2,036.74 an ounce early Thursday, up slightly from $2,034.50 on Wednesday.
Brent oil was trading at $79.85 a barrel, lower than $80.44.
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