The FTSE 100 outperformed European peers during uninspiring trade early Thursday, amid geopolitical concerns and caution ahead of a US labour market reading.
China issued a robust response to a meeting between key political figures in the US and Taiwan.
The dollar found some support as focus turns to Friday’s US nonfarms reading.
In early corporate news, recruitment company Robert Walters reported a slow start to its financial year.
The FTSE 100 index opened up 28.70 points, 0.4%, at 7,691.64. The FTSE 250 was up 38.53 points, 0.2%, at 18,639.95, and the AIM All-Share was up 1.81 points, 0.2%, at 805.50.
The Cboe UK 100 was up 0.5% at 769.72, the Cboe UK 250 was up 0.6% at 16,231.96, and the Cboe Small Companies was down 0.3% at 13,157.49.
In European equities, the CAC 40 in Paris and the DAX 40 in Frankfurt were each up 0.1%.
Financial markets in the London, Paris, Frankfurt and New York will be closed on Friday to mark Good Friday. However, the US jobs report will still be reported at 1330 BST on Friday.
UK and European markets will remain closed on Easter Monday, while New York re-opens.
Annual growth in UK house prices weakened to levels not seen since October 2019, according to data from Halifax. According to the mortgage lender, average house prices edged up 0.8% in March on a monthly basis. Growth slowed from a 1.2% climb in February. Annually, growth in house prices slowed to 1.6% in March, from the 2.1% climb seen in each of the previous three months.
In London, residential property market slowdown fears hit shares in housebuilder Barratt, down 1.8%, and estate agent Savills, shedding 3.6%.
The dollar was slightly stronger in early exchanges.
Sterling was quoted at $1.2461 early Thursday, lower than $1.2471 at the London equities close on Wednesday. The euro traded at $1.0903, down from $1.0919. Against the yen, the dollar was quoted at JP¥131.36, up versus JP¥130.94.
In the US on Wednesday, Wall Street ended mixed, with the Dow Jones Industrial Average ending up 0.2%, the S&P 500 down 0.3% and the Nasdaq Composite down 0.3%.
‘Yesterday was a typical risk-off day in the financial markets. The US treasuries rallied, the yields fell, and the stocks fell as well, as the latest set of economic data from the US showed further weakness,’ said Swissquote Bank’s Ipek Ozkardeskaya.
On Wednesday, survey data from the Institute for Supply Management indicated that the slowdown in the US services sector was faster than expected. The ISM services PMI registered 51.2 in March, its third consecutive month of growth, but down from 55.1 points in February. Markets had expected the reading to dip to 54.5 points, according to FXStreet.
Meanwhile, in Asia on Thursday, the Nikkei 225 index in Tokyo closed down 1.1%. The S&P/ASX 200 in Sydney closed down 0.3%. In China, the Shanghai Composite was marginally lower, while the Hang Seng index in Hong Kong was marginally higher.
‘As we approach the Easter weekend, risk-off sentiment has continued to grow in markets thanks to another round of weak data that’s added to fears about a potential US recession,’ analysts at Deutsche Bank commented.
Sentiment was also stifled by geopolitical tensions between the world’s two largest economies. China sent warships through waters around Taiwan on Thursday as it vowed a ‘resolute response’ to the island’s president meeting US House Speaker Kevin McCarthy.
China’s services sector continued to rebound in March, according to the latest survey data on Thursday.
The Caixin services purchasing managers’ index rose to 57.8 points in March from 55.0 in February, rising further above the 50-point mark that separates expansion from contraction. It shows a sharp acceleration in the pace of growth.
It was the strongest expansion seen since November 2020, and the third consecutive month of growth.
Meanwhile, developments in Middle Eastern relations may also unnerve the US.
Top diplomats from Middle East rivals Iran and Saudi Arabia met in Beijing on Thursday, pledging to work together to bring ‘security and stability’ to their turbulent region following a surprise China-brokered deal.
In a joint statement released after talks between Iranian Foreign Minister Hossein Amir-Abdollahian and Saudi counterpart Prince Faisal bin Farhan, the two sides vowed to continue to work together to improve ties.
‘The oil-rich kingdom has restricted oil output twice against the wishes of the United States, and it has forged goodwill with its neighbouring country, Iran?a country with whom the Saudis have long been at odds,’ said Zaye Capital Markets’ Naem Aslam.
‘This predicament has led traders to believe that they need to use extreme caution when deciding which asset class to support,’ he added.
Brent oil was trading at $84.56 a barrel early Thursday, up from $84.48 late Wednesday. It was up sharply from $79.14 at the market close on Friday, before the surprise production cut announcement from Opec+ last weekend.
In the FTSE 100, Shell rose 2.0% in early trading.
The oil major said it expects a rise in Integrated Gas production in the first quarter of 2023, though it predicted an adjusted corporate loss on a tax hit.
Shell predicted an adjusted loss in its corporate segment between $900 million and $1.2 billion, widening from $600 million in the fourth quarter of 2022. The outcome ‘includes one-off tax charges’, the company said.
It expects Integrated Gas adjusted earnings pre-tax depreciation between $1.2 and $1.6 billion, compared to $1.4 billion in the fourth quarter.
Upstream adjusted earnings are expected between $2.8 billion to US3.1 billion, compared to $2.9 billion. For Integrated Gas, it forecast production between 930,000-970,000 barrels of oil equivalent, up from 917,000 boe in the fourth quarter. Upstream production volumes are expected to be within a similar range to the previous quarter, between 1.8 million and 1.9 million boe per day, compared to 1.85 million in the fourth quarter.
Astrazeneca rose 0.9%, on news UK’s NHS has approved the use of one of its drugs, which could benefit hundreds of patients with breast cancer and prostate cancer.
Men with advanced prostate cancer and women with HER2-negative early breast cancer who are at high risk of the disease returning will be able to access olaparib through the NHS in England. The decision has been overwhelmingly welcomed, with praise from cancer charities and scientists.
Reckitt Benckinser, ConvaTec and Rentokil fell by 1.9%, 1.2% and 1.3% respectively, as the stocks went ex-dividend.
Gold was quoted at $2,013.40 an ounce, lower than $2,021.30, but also up sharply from $1,979.05 last Friday.
In the FTSE 250, Ferrexpo rose 3.5%.
The iron ore pellet maker updated on its production in the first quarter. Total iron ore pellet production doubled to 901,000 tonnes from the 420,000 tonnes in the fourth quarter. The rise was mostly down to the improvement in electricity supply to its operations in Ukraine, the firm said. This enabled Ferrexpo to restart a second pelletiser line in late February.
Among London’s small-caps, Robert Walters fell 3.5%.
The recruitment firm reported a ‘slower start’ to 2023. Net fee income in the first quarter rose 4% year-on-year to £102.4 million. It grew 16% in Europe and 18% in Other Internation, helping to offset a 9% decline in the UK and a 1% fall in Asia Pacific. However, on a constant currency basis, net fee income was flat.
‘Uncertain global macroeconomic conditions continued to impact recruitment activity levels across a number of the group’s markets and disciplines,’ the firm said.
Robert Walters pointed to the ‘relatively robust’ market fundamentals such as vacancy levels and salary inflation, as well as a global shortage of qualified professionals. It expects the rebound in the Chinese economy, easing inflation and the stabilisation of the technology sector to boost the global outlook.
Still to come on Thursday’s economic calendar, there’s a UK construction PMI print at 0930 BST. The US weekly unemployment insurance claims will be released at 1330 BST
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