Investor sentiment reflected upcoming expectations of US, EU and Japanese central bank decisions this week, as London stock prices started the week downbeat start at the open on Monday.
The FTSE 100 index opened down 20.56 points, or 0.3%, at 7,643.17. The FTSE 250 was up 16.55 points, or 0.1%, at 19,217.00, and the AIM All-Share was down 1.72 points, or 0.2%, at 764.83.
The Cboe UK 100 was down 0.2% at 762.60, the Cboe UK 250 was flat at 16,858.79, and the Cboe Small Companies was down 0.2% at 13,367.18.
The US Federal Reserve will announce its rate decision on Wednesday, with the European Central Bank following with its own decision a day after.
Carsten Brzeski at ING said that a 25 basis point hike at the ECB meeting on Thursday is a ‘no-brainer’, while Nancy Vanden Houten, lead US economist at Oxford Economics, said a 25 basis point hike from the Fed will come as ‘no surprise.’
With another hike priced in for the Fed and the ECB, market attention will be fixed on whether the moves mark the end of the central banks’ respective hiking cycles.
ING’s Brzeski said with the bleak economic outlook for the eurozone and disinflation ‘gaining traction’, the end to rate hikes is ‘near’ for the ECB.
‘We still think that the disinflationary process will gain more traction only after the summer and that the current sluggishness of the economy will not yet be sufficient to stop the ECB from hiking one last time in September,’ he said.
Though Oxford Economics’ Vanden Houten predicts Wednesday’s hike will be the final in the Fed’s tightening cycle, she expects Fed Chair Jerome Powell will stress that policy is data-dependent and won’t commit to either a pause or another hike moving forward.
Whereas hikes are expected from the Fed and the ECB, the Bank of Japan is expected to leave its ultra-loose monetary policy unchanged on Friday.
Bloomberg reported that officials have hinted the central bank would stand pat on its yield curve control programme which sees it control the range in which it allows government bonds to fluctuate. The YCC is a way of controlling long-term interest rates.
Ahead of key central bank decisions, however, preliminary purchasing manager’s index data for July due on Monday will provide updates on economic momentum in the UK, EU and the US.
‘All three are likely to show a considerable gap between struggling manufacturing sectors and service sectors that are still growing. However, the composite PMIs for the UK and US are forecast to again be above 50 signalling ongoing expansion whereas the Eurozone index is predicted to be below the 50 expansion level for the second month in a row,’ said analysts at Lloyds Bank.
The flash EU PMI print will be released at 0900 BST, with the UK print released half an hour later. The US PMI print is published at 1445 BST.
In London, Ocado was the top blue-chip performer in early morning trade, jumping 11%.
The online supermarket is to be paid £200 million in a deal with Norwegian warehouse automation firm AutoStore, which accused it of breaching patents.
In a joint statement released on Saturday, Ocado and AutoStore said they have settled their long-running dispute over robot patents. A High Court judge ruled in March that AutoStore’s ‘patents were invalid’ and that, regardless, Ocado did not infringe them.
AutoStore is to pay Ocado £200 million in 24 monthly instalments starting in July 2023 under the new settlement.
In the FTSE 250, 3i Infrastructure gained 2.0% after it announced it intends to sell its 25% stake in Attero, a waste treatment and recycling company based in the Netherlands, to Ardian Infrastructure.
The expected net proceeds from the sale are seen at €215 million, representing a 31% uplift from 3i Infrastructure’s valuation of €164 million at 31 March for the firm.
‘Attero has been a most successful investment for the company, experiencing substantial growth during our investment period. Whilst 3i Infrastructure aims to hold its investments over the longer term, we will sell investments where this generates significant additional value for our shareholders,’ said Chair Richard Laing.
Elsewhere in London, S4 Capital plunged 20% after it said revenue in the first half of 2023 was below budget, reflecting ‘challenging’ macroeconomic conditions and clients remaining ‘cautious’ and ‘very focussed on the short term’.
Consequently, S4 is now targeting full-year like-for-like net revenue growth in a range of 2% to 4%, as opposed to 6% to 10% previously, and operational Ebitda margin of 14.5% to 15.5%, as opposed to 15% to 16% previously.
In European equities on Monday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was down 0.1%.
In Tokyo, the Nikkei 225 index closed 1.2% higher.
Activity in Japan’s private sector continued to expand in July, preliminary survey data showed, despite a sharp slowdown in new order growth.
The au Jibun Bank flash composite purchasing managers’ index was unchanged at 52.1 points in July. Remaining above the 50-point no-change mark, it shows activity in Japanese businesses continued to grow during the month.
The flash services PMI eased to 53.9 from 54.0, suggesting a fairly robust rate of growth continues in the services sector. Meanwhile, the flash manufacturing PMI fell to 49.4 from 49.8 - indicating the marginal contraction in Japan’s factories continues.
In China, the Shanghai Composite closed down 0.1%, while the Hang Seng index in Hong Kong was down 2.3%.
The S&P/ASX 200 in Sydney closed down 0.1%.
The dollar was largely weaker on Monday morning, though analysts at Brown Brother Harriman predicted that the currency would strengthen over the course of this week as ‘monetary policy divergences continue to widen’ globally.
The pound was quoted at $1.2852 at early on Monday in London, unchanged from $1.2852 at the London equities close on Friday.
The euro stood at $1.1090 early on Monday, lower against $1.1121. Against the yen, the dollar was trading at JP¥141.37, down from JP¥141.64 late Friday.
In the US on Friday, Wall Street ended on a muted note, with the Dow Jones Industrial Average and the S&P 500 marginally higher and the Nasdaq Composite up 0.2%.
Brent oil was quoted at $80.34 a barrel at early in London on Monday, down from $80.41 late Friday. Gold was quoted at $1,963.33 an ounce, higher against $1,960.17.
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