European equities traded lower on Friday, after data showed inflation pressure in the eurozone accelerated, and as dovish interest rate expectations for the US are tempered ahead of the afternoon’s employment data.
Ahead of the US data, equities in New York are called to open lower. The Dow Jones Industrial Average and S&P 500 are both called down 0.3%. The Nasdaq Composite is called down 0.4%.
The FTSE 100 index traded down 69.40 points, 0.9%, at 7,653.67. The FTSE 250 was down 269.87 points, 1.4%, at 19,102.18 and the AIM All-Share was down 6.19 points, 0.8%, at 749.75.
The Cboe UK 100 was down 0.9% at 764.47, the Cboe UK 250 lost 1.7% at 16,593.38, and the Cboe Small Companies fell 0.2% to 14,906.42.
In European equities, the CAC 40 in Paris traded down 1.1%. The DAX 40 in Frankfurt was down 0.9%.
‘Markets continue to be choppy as investors recalibrate expectations for interest rate cuts this year. After euphoria last November and December amid hopes the Fed would cut rates as soon as March 2024, the central bank has since tried to dampen expectations and the latest meeting minutes further muddied the water,’ AJ Bell analyst Russ Mould commented.
‘Rate cuts now look as if they are going to be a story for the middle of the year and that’s prompted investors to temporarily pause for thought, leading to bouts of profit taking from the recent rally.’
The eurozone inflation reading put the European Central Bank interest rate outlook front and centre.
According to Eurostat on Friday, the single currency bloc’s consumer price index rose by 2.9% annually in December, accelerating from a 2.4% increase in November. The figure was below FX-Street-cited consensus of a 3.0% increase.
‘Coming off the back of yesterday’s German and French CPI gains, the 2.9% eurozone inflation gauge may add some hesitation for those expecting a rapid return below target after last month’s 2.4% reading. Nonetheless, today’s gain had more to do with base effects, and the ECB will likely be aware of the impending slump that will likely begin once the big February (0.8%) and March (0.9%) monthly CPI figures are stripped out. With that in mind, there is a good chance that in three-months’ time, there will likely be pressure on the ECB to act after a slump below 2% for headline CPI,’ Scope Markets analyst Joshua Mahony commented.
Sterling was quoted at $1.2659 early Friday afternoon, lower than $1.2696 at the London equities close on Thursday. The euro traded at $1.0915, down from $1.0961. Against the yen, the dollar was quoted at JP¥145.23, up versus JP¥144.48.
‘The US dollar continues to strengthen versus other major currencies, hitting a three-week high as the European trading session got underway. After the euphoria that marked the last days of 2023, with the markets all but pricing in the quick unwinding of the Fed’s tightening, traders haven’t been able to shake off the new year’s hangover,’ ActivTrades analyst Ricardo Evangelista commented.
‘The dollar index gained almost 2% since hitting a multi-month low at the end of December, as investors’ belief in a dovish Fed metamorphosed into uncertainty. On that note, today’s nonfarm payroll data may help undo some of that uncertainty. The markets know that the US labour market is crucially important for the Federal Reserve’s decision-making, and today’s data could, depending on the reading, either reinforce the greenback’s strong start to the year or restore the faith of investors that 2024 will be marked by several rate cuts.’
The nonfarm reading, at 1330 GMT, is expected to show the US economy added 170,000 jobs last month, fewer than November’s 199,000.
Elsewhere in the economic calendar, there is the latest ISM services purchasing managers’ index data at 1500 GMT.
Brent oil was trading at $78.04 a barrel midday Friday, higher than $76.60 late Thursday, with prices continuing to bounce up and down amid developments in the Middle East.
Shipping firm Maersk said it will avoid the Red Sea and divert ships around Africa for the ‘forseeable future’.
AJ Bell’s Mould added: ‘Higher oil prices and any problems transporting goods to major locations are both key inflationary factors and are naturally driving market concerns that interest rate cuts may not happen until further into the future.’
Endeavour Mining was the worst London-listed large-cap performer, slumping 11%.
The firm, with assets in nations including Senegal and Burkina Faso, on Thursday said it ousted Chief Executive Sebastien de Montessus for ‘serious misconduct’ and with immediate effect.
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’.
Separately, in October 2023 allegations were made against de Montessus through the company’s confidential whistleblowing channel relating to his personal conduct with colleagues.
De Montessus added: ‘This week I was given 48 hours’ notice of the concerns and no proper opportunity to answer them. As to the other investigation: no misconduct of any kind was discovered because none occurred. I am proud of what we have built together at Endeavour over the past 8 years. I will take my time to consider my position with my advisers.’
Elsewhere, Clarkson shot up 7.0%. 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.
On AIM, Supreme added 4.4%. Manchester-based consumer products manufacturer and supplier Supreme acquired the trade and assets of protein manufacturer FoodIQ out of administration for £175,000.
Supreme said the acquisition provides it with access to a ‘purpose-built, state-of-the-art, accredited, automated contract manufacturing facility that opened only 18 months ago and cost almost £1.2 million to build’.
Shore Capital, which acts as a broker to Supreme, said it saw the deal as a ‘very attractive’ bolt-on acquisition that will ‘add strategic and earnings value to shareholders in due course’.
‘FoodIQ has undertaken contract manufacturing work on behalf of Supreme, and so it is a firm with which management is very familiar...We see Supreme identifying and purchasing from its internal cash resources a high-quality asset that represents very good potential value to shareholders from which it will expand its presence in the UK wellness market,’ said Shore analysts Clive Black and Darren Shirley.
Gold was quoted at $2,039.07 an ounce early Friday afternoon, lower than $2,045.01 on Thursday.
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