Equities in London made an underwhelming start to the week, in a sign of investor unease ahead of a key few days on the fiscal and monetary policy fronts.
A pre-election budget will be the key event in the UK this week. Eyes will be on whether UK Chancellor Jeremy Hunt will size up some tax relief. In the eurozone, focus will be on the European Central Bank’s interest rate decision on Thursday. In the US, the latest jobs report on Friday will be the main event.
The FTSE 100 index fell 42.17 points, 0.5%, at 7,640.33. The FTSE 250 closed down 105.30 points, 0.5%, at 19,249.08, and the AIM All-Share lost 3.62 points, 0.5%, at 737.69.
The Cboe UK 100 ended down 0.7% at 765.20, the Cboe UK 250 fell 0.6% at 16,590.32, and the Cboe Small Companies closed down 0.2% at 14,492.71.
In European equities on Monday, the CAC 40 in Paris rose 0.3% but the DAX 40 in Frankfurt fell 0.1%.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.2%, the S&P 500 index and the Nasdaq Composite were both called down 0.1%.
The pound was quoted at $1.2696 late on Monday in London, higher compared to $1.2641 at the equities close on Friday. The euro stood at $1.0858, against $1.0827. Against the yen, the dollar was trading at JP¥150.51, higher compared to JP¥150.25.
This week’s economic calendar sees a number of data releases on the US labour market culminating in the US jobs report on Friday. Employment growth is expected to have slowed to 200,000 in February, from 353,000 in January.
The nonfarm payrolls reading will be closely scrutinised by the Federal Reserve. The Fed is expected to leave the federal funds rate range unmoved at 5.25%-5.50% in its meetings this month and in May. There is a 66% chance it cuts in June, according to the CME FedWatch Tool.
Analysts at ING commented: ‘On Wednesday and Thursday, Fed Chair Jerome Powell will testify before Congress. A dovish change in narrative does not look very likely given the latest inflation data, and a cautious wait-and-see approach should be reiterated – but may fail to impact markets too much given the proximity with jobs data.’
On Thursday, the eurozone announces its latest interest rate decision.
ACY Securities analyst Luca Santos commented: ‘Despite the repeated assertions from central bank figures that it is premature for rate cuts, the messaging is nuanced. On one hand, there is an expressed reliance on first-quarter job market data; on the other, hints at potential cuts starting in June create a delicate dance between a wait- and-see approach and signalling possible action.
‘Maintaining their stance, market observers anticipate that the ECB will initiate rate cuts in June, amounting to a total reduction of 75 basis points by year-end.’
On Wednesday, UK Chancellor Jeremy Hunt announces the latest budget, likely the last before the next general election.
Ebury analyst Matthew Ryan said: ‘This week’s spring budget announcement could include additional fiscal stimulus as the Tory Party attempts to woo voters ahead of the impending general election. Chancellor Jeremy Hunt may deliver either a cut to income taxes or national insurance. There has also been speculation of an abolishment to inheritance tax, which we would view as a Hail Mary attempt to close the vast deficit in the polls. If confirmed, these measures would likely be marginally positive for sterling.’
In London, gold miners ended among the best performers in the Main Market.
Large-caps Fresnillo and Endeavour rose 2.7% and 2.4%. Among the FTSE 250, Hochschild Mining rose 4.5%.
Morgan Stanley lifted Fresnillo to ’equal-weight’ from ’underweight’.
In addition, gold prices pushed higher. Gold was quoted at $2,116.16 an ounce at the time of the London equities close, higher against $2,075.33 on Friday.
Also on the up, Clarkson rose 3.1%. The London-based provider of integrated shipping services said that for 2023, pretax profit rose 8.2% to an all-time high of £109.2 million from £100.9 million in 2022.
Revenue, meanwhile, rose 5.9% to £639.4 million from £603.8 million. Clarkson attributed this to ‘responsible treasury management’ and ‘strong growth in our Broking, Support and Research divisions’.
China-exposed stocks ended lower, however. Miner Anglo American fell 3.3%, while luxury retailer Burberry lost 2.4%.
Investors showed some signs of nerves ahead of a key political meeting in Beijing.
Front and centre at the meetings will be China’s economy, which last year posted some of its lowest growth in decades and is battling a prolonged property sector crisis and soaring youth unemployment.
Tuesday’s opening of the National People’s Congress is expected to see Premier Li Qiang announce that growth in 2024 will stay largely flat, at around 5%.
But at a Monday press conference, NPC spokesperson Lou Qinjian struck a bullish tone.
China’s leaders, he said, had ‘ample confidence’ that the economy would rebound, adding the country has ‘more favourable conditions than challenges in its economic development’.
SPI Asset Management analyst Stephen Innes commented: ‘While there is a pressing need for a substantial stimulus to reinvigorate China’s economic growth, the likelihood of a ’big bang’ stimulus package seems low, primarily due to the government’s emphasis on pursuing high-quality development. Instead of opting for large-scale fiscal measures that could lead to short-term gains but long-term imbalances, Chinese policymakers prioritize sustainable and balanced growth.’
Elsewhere in London, PensionBee rose 6.7%.
The London-based online pension provider said it has entered into an exclusive, non-binding term sheet with a large, US-based global financial institution in order to expand into the US.
PensionBee explained that the US has the ‘world’s largest defined contribution pension market’, representing approximately 80% of the global total and $22.5 trillion in assets.
Brent oil was quoted at $83.37 a barrel at midday in London on Monday, lower from $84.08 late Friday.
Tuesday’s economic calendar has a slew of purchasing managers’ index, including China and Japan overnight, and the eurozone at 0900 GMT, before the UK at 0930 and US at 1445.
The local corporate calendar has annual results from baker Greggs and office space provider IWG.
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