Stock prices in London closed higher on Monday amid investor optimism that the US Federal may slow its rate hikes, though markets expect the opposite from the European Central Bank.
The FTSE 100 index closed up 14.08 points, or 0.2% at 7,784.67 on Monday. The FTSE 250 ended up 99.06 points, or 0.5%, at 19,801.69. The AIM All-Share closed up 3.36 points, or 0.4%, at 859.38.
The Cboe UK 100 ended up 0.3% at 779.16, the Cboe UK 250 closed up 0.3% at 17,283.05, and the Cboe Small Companies ended up 0.3% at 13,664.17.
In an interview with Dutch broadcaster WNL on Sunday, ECB governing council member Klaas Knot said two further 50 basis point hikes should be expected in February and March.
‘Expect us to not be done by then and that more steps will follow in May and June,’ Knot added, in comments reported by Reuters.
At its last meeting in December, the ECB lifted its benchmark interest rate by 50 basis points. At the central bank’s next meeting on February 2, analysts at Brown Brothers Harriman see another 50 basis point hike ‘almost fully priced in’.
The euro stood at $1.0870 at the European equities close on Monday, higher against $1.0837 at the same time on Friday.
The single currency hit an intraday high of $1.0924 on Monday, its highest level since April 21 last year, amid the hawkish rhetoric.
In contrast to the ECB, the market expects the Fed to dial back on the pace of rate hikes. According to the CME FedWatch tool, there is a 99% chance of a 25 basis point hike from the US central bank on February 1.
Federal Reserve Governor Christopher Waller said Friday that there is ample evidence that a steep climb in interest rates has damped demand and economic activity, suggesting the US central bank can further slow its rate hikes.
‘Based on the data in hand at this moment, there appears to be little turbulence ahead, so I currently favour a 25-basis point increase at the (Fed’s) next meeting,’ Waller said in prepared remarks for an event in New York.
The pound was quoted at $1.2368 at the London equities close on Monday, down from $1.2379 at the close on Friday. Against the yen, the dollar was trading at JP¥130.62 late Monday, higher compared to JP¥129.88 late Friday.
In the FTSE 100, BP finished 1.2% higher.
The firm said the floating production, storage and offloading vessel for its Greater Tortue Ahmeyim liquefied natural gas project set sail from Qidong in China on Friday.
BP said the FPSO will produce around 500 million standard cubic feet of gas per day and expects the project’s first phase to produce around 2.3 million tonnes of liquefied natural gas annually.
Brent oil was quoted at $88.82 a barrel at the London equities close on Monday, up from $86.55 late Friday.
Endeavour Mining closed 3.4% lower despite saying its production in 2022 was at the top end of its outlook and shareholder returns were almost double its minimum target.
The gold miner, with assets in nations including Senegal and Burkina Faso, said annual gold production amounted to 1.40 million ounces, down 2.5% on-year from 1.44 million.
The outcome was ‘slightly’ ahead of consensus and at the top end of Endeavour’s own 1.32 million to 1.40 million ounces target. It was also the 10th year on-the-trot that Endeavour has met or beaten production guidance.
The company said it has paid $200 million in dividends for 2022, alongside $99 million in buybacks. Returns totalled $299 million, ‘nearly doubling’ its minimum dividend commitment for the year of $150 million.
Gold was quoted at $1,922.40 an ounce, lower against $1,925.41 at the close on Friday.
In the FTSE 250, Balfour Beatty closed up 1.1% after it announced it has won a £1.2 billion contract from the UK’s highways agency to dig a tunnel under the River Thames, providing more road connections in the South of England.
The infrastructure construction firm said the contract is for the ’Roads North of the Thames’ package and was awarded by National Highways.
National Express added 1.0%. The transport provider said it has won a contract worth over €1 billion to operate the RE1 and RE11 Rhein-Ruhr-Express lines in Germany to 2033.
National Express first took over the operation of the two lines in February 2022 through an emergency contract award. Following this new contract award, National Express now operates all three asset light Rhein-Ruhr-Express lots under long term contracts.
The company noted that the contract is worth €1 billion over the lifetime of the agreement.
Elsewhere in London, Fuller, Smith & Turner closed down 3.9%. The UK pub and hotel chain warned that annual earnings will be below market expectations as rail strikes kept customers away.
Fuller’s said that while sales in the four-week Christmas and New Year period were up 38% from a year before, they remained down 5% from the same period in 2019, before the Covid-19 pandemic. Train strikes throughout the holiday period reduced sales by £4 million, the company estimates.
In European equities on Monday, the CAC 40 in Paris and the DAX 40 in Frankfurt both ended up 0.5%.
Stocks in New York were firmly in the green at the London equities close, with the Dow Jones Industrial Average up 1.0%, the S&P 500 index up 1.3%, and the Nasdaq Composite 1.9% higher.
In Tuesday’s UK corporate calendar, there’s a trading statement from Primark-owner Associated British Foods and construction firm Henry Boot.
In the economic calendar, there are a slew of flash PMI releases from EU, UK, Germany and US from 0815 GMT.
Russ Mould at AJ Bell said the PMI data is ‘always a useful leading indicator given how on top of the economic backdrop the purchasing managers surveyed must be to get their decisions right.’
Chinese markets will be shut to mark the Lunar New Year on Tuesday. The Hang Seng in Hong Kong will reopen on Thursday, while the Shanghai Composite will remain closed all week.
By Heather Rydings, Alliance News senior economics reporter
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