Equity prices in Europe ended the week largely on the back foot, despite a US jobs report which cemented expectations of a June interest rate cut by the Federal Reserve, and sent the dollar lower.
In one of the week’s recurring themes, gold was on the up again, this time pushed higher by the US data. The precious metal is on track to extend its winning streak to eight days.
The FTSE 100 index ended down 32.72 points, 0.4%, at 7,659.74. The FTSE 250 edged up 17.80 points, 0.1%, at 19,601.78, and the AIM All-Share added 2.66 points, 04%, at 740.56.
For the week, the FTSE 100 lost 0.3%, while the FTSE 250 surged 1.3%. The AIM All-Share fell 0.1%.
The Cboe UK 100 ended down 0.5% at 767.43, the Cboe UK 250 rose 0.1% at 16,980.18, and the Cboe Small Companies added 0.4% at 14,812.61.
In European equities on Friday, the CAC 40 in Paris ended up 0.2%, but the DAX 40 in Frankfurt closed down 0.2%.
The pound was quoted at $1.2860 late on Friday in London, higher compared to $1.2793 at the equities close on Thursday. Sterling had traded at its best level since July, spiking to $1.2891.
The euro stood at $1.0949, up against $1.0934. Against the yen, the dollar was trading at JP¥147.21, lower compared to JP¥148.09.
According to the Bureau of Labor Statistics, nonfarm payroll employment rose by 275,000 in February, picking up speed from a 229,000 increase in January. January’s figure was downwardly revised by some degree from an initially reported 353,000. December’s figure, meanwhile, was lowered to 290,000 from 333,000.
In total, nonfarm payrolls for December and January were in total 167,000 lower than previously reported.
For February, the figure topped the FXStreet-cited consensus of 200,000.
‘Today’s US payrolls report was undeniably soft, and one that should convince markets that the first Federal Reserve interest rate cut is just around the corner. While we saw a sizeable 75,000 upside surprise to the February job creation number, this was more than negated by the sharp 124,000 downward revision to the January number,’ said Ebury analyst Matthew Ryan.
The data helped cement expectations of a June interest rate cut by the Federal Reserve. According to the CME FedWatch Tool, there is a 79% chance the central bank cuts rates at the June meeting, a day earlier, that likelihood was predicted to be around 74%.
The data came after Federal Reserve Chair Jerome Powell told lawmakers in Washington that the US central bank ‘can and will’ begin cutting interest rates this year if current economic trends continue.
‘What we’re seeing is continued strong growth, strong labour market and continuing progress in bringing inflation down,’ Powell told the US Senate Banking Committee on the second day of hearings on Capitol Hill on Thursday.
He added that the Fed intends to begin cutting its key lending rate over the course of this year ‘if the economy evolves over that path.’
The federal funds rate range is currently at 5.25%-5.50%. The Fed’s next interest rate decision is on March 20.
Gold hit another record high in the wake of the data, climbing to $2,185.36 an ounce. It eased to $2,174.74 an ounce at the London equities close, though still up from $2,155.87 at the same time on Thursday.
‘It appears that the price of gold is poised to record a third consecutive weekly gain after reaching levels of $2,170 during Friday’s trading. This comes amid escalating geopolitical tensions, a decline in US Treasury yields, and increasing expectations that the Federal Reserve is approaching an interest rate cut,’ XS.com analyst Rania Gule commented.
‘From my perspective, the rise in gold prices indicates that cautious comments from Federal Reserve Chair Powell have boosted investor confidence in imminent interest rate cuts. Expectations for a Fed interest rate cut in the June policy meeting remain firm. It is anticipated that the interest rate will remain unchanged within the range of 5.25%-5.50% in the March and May policy meetings.’
Brent oil was quoted at $81.72 a barrel late in London on Friday, down from $82.80 late Thursday.
In London, Mondi lost 1.7%, while DS Smith added 5.2%.
Mondi and its packaging peer DS Smith have reached an agreement in principle that will see Mondi take over DS Smith in a proposed all-share deal.
In a statement dated Thursday, but was released on Friday, Mondi said the possible merger, which would create a company worth more than £10 billion, is subject to regulatory clearance and mutual confirmatory due diligence.
Mondi shareholders would own 54%, while their DS Smith counterparts would hold 46%.
Analysts at Jefferies commented: ‘In our view, the strategic rationale is compelling for this combination. While we await a firm synergy target, we estimate €300 million.’
Elsewhere in M&A, Mattioli Woods jumped 32% after it accepted a £432 million takeover offer from Pollen Street Capital funds.
Mattioli is a Leicester, England-based specialist wealth and asset management business, whilst Pollen Street is a London-based asset manager.
Mattioli Woods shareholders will receive 804p in cash. This represents a 34% premium to the closing price of 600p per share on March 7.
Pollen Street shares fell 1.1%.
On AIM, MC Mining jumped 10% after it received a more favourable takeover bid. It got a takeover proposal from Vulcan Resources, owner and operator of the Moatize coal mine in Mozambique.
Vulcan offered between A$0.17 and A$.20 per MC Mining share, valuing the AIM listing’s equity between A$69.34 million and A$81.58 million, around £35.9 million to £42.2 million.
MC Mining said the Vulcan proposal does not constitute a formal offer, but it noted the price is loftier than that proposed by Goldway Capital Investments last month.
MC Mining urged its stakeholders to reject the February takeover bid from Goldway, which offered A$0.16 for each MC Mining share, valuing the company at A$65.3 million.
Just Group shot up 14%.
In 2023, Just Group reported insurance revenue of £1.56 billion in 2023, up 17% from £1.33 billion in 2022.
The net investment result came to £273 million, swung from a loss of £454 million, while its insurance service result was £118 million, up from a restated £99 million.
Pretax profit was £172 million last year, swung from a loss of £494 million in 2022.
Reflecting on the year, Just Group explained that strong demand for its products had created the opportunity ‘to write a greater volume of new business at an efficient capital strain’.
Panmure Gordon suggested ‘either the share price will materially increase in the next 12 months or Just Group will be acquired’.
The broker said the recently rebuffed offer for Direct Line Insurance Group by Ageas highlights the ‘attractiveness’ of UK insurance assets, albeit in a different sector.
‘In our view investors should buy before bye bye,’ the broker concluded.
Monday’s economic calendar has a Japanese gross domestic product reading overnight. Over the weekend, there is a Chinese inflation reading.
Monday’s local corporate calendar has HgCapital Trust’s annual results.
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