Stock prices in London opened in the green on Monday, ahead of a US government funding deadline and key inflation data, as insurer Phoenix rose after upgrading its cash generation targets.
The FTSE 100 index opened up 48.40 points, 0.7%, at 7,408.95. The FTSE 250 was up 27.17 points, 0.2%, at 17,880.26, and the AIM All-Share was down 0.1 of a point at 701.02.
The Cboe UK 100 was up 0.7% at 739.62, the Cboe UK 250 was up 0.2% at 15,486.31, and the Cboe Small Companies was slightly lower at 12,851.75.
In European equities on Monday, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt was up 0.2%.
After some hawkish rhetoric from US Federal Reserve officials last week, the market will be paying especially close attention to Tuesday’s consumer price index report.
‘The forthcoming CPI report holds the potential to reintroduce the possibility of a rate hike, as indicated by the last dot plot. Presently, the market has largely discounted the likelihood of another increase,’ said SPI Asset Management’s Stephen Innes.
There will also be US retail sales data on Wednesday, which are expected to show a slight 0.1% contraction on a monthly basis in October, after 0.7% growth in September.
‘If there’s an overshoot on core CPI, coupled with evidence that Americans are still spending freely, it would likely be a bearish development for equities. Such a scenario could prompt a return of rate hike expectations for the upcoming December and January [Federal Open Market Committee] meetings. On the other hand, a ’split decision‘ scenario, where inflation remains stubborn but spending decelerates, might balance out, especially if the CPI update doesn’t signal overtly foreboding inflation,’ SPI’s Innes continued.
Sterling was quoted at $1.2241 early Monday, higher than $1.2200 at the London equities close on Friday. The euro traded at $1.0694 early Monday, higher than $1.0670 late Friday.
Against the yen, the dollar was quoted at JP¥151.82, up versus JP¥151.49.
In local news, UK house prices suffered the chunkiest November loss in five years, numbers showed, though findings suggest 2023 has not been as tough a year for the sector as predicted.
According to Rightmove, UK house prices declined 1.7% on a monthly basis this month, the worst November fall since 2018.
In the FTSE 100, Phoenix Group was the top performer, up 7.5%.
The insurer upgraded its near-term cash generation targets, after completing a funds merger of the Phoenix Life and Standard Life businesses. It now expects to deliver around £1.8 billion in cash generation in 2023, compared to its prior target range of £1.3 to £1.4 billion.
‘As a result, the group expects to have significant surplus cash at its holding company at the end of 2023, which creates further balance sheet optionality,’ the firm said.
BAE Systems added 0.3%.
The firm said its recent trading has been in line with its upgraded guidance from its interim results. It is delivering ‘another year of good sales and earnings growth’, as well as ‘strong cash flow generation’. The defence firm points to a strong opportunity pipeline, as well as strong order flow on new and existing programmes, and renewals on incumbent positions.
In the FTSE 250, International Distributions Services fell 0.9%, after its Royal Mail arm was fined £5.6 million by the UK communications regulator.
Ofcom said the British mail delivery service failed to meet its first and second class delivery targets in the 2022/23 financial year. The regulator said the firm still underperformed against its targets, even after adjusting for industrial action, extreme weather and the Stansted runway closure.
‘Clearly, the pandemic had a significant impact on Royal Mail’s operations in previous years. But we warned the company it could no longer use that as an excuse, and it just hasn’t got things back on track since. The company’s let consumers down, and today’s fine should act as a wake-up call,’ said Ofcom Director of Enforcement Ian Strawhorne.
FDM Group plunged 15%, as the IT-focused professional services provider warned of clients delaying and deferring decisions for project commencements and Consultant placements. This was due to ‘macro-economic and geopolitical uncertainty’, FDM said.
Nevertheless, it expects its financial performance for 2023 to be ‘broadly in line’ with its expectations, thanks to measures taken to adjust recruitment, training and staffing levels to align with market conditions.
In Asia on Monday, the Nikkei 225 index in Tokyo closed marginally higher. In China, the Shanghai Composite closed up 0.3% while the Hang Seng index in Hong Kong climbed 1.3%. The S&P/ASX 200 in Sydney closed down 0.4%.
In the US on Friday, stocks on Wall Street rallied, with the Dow Jones Industrial Average up 1.2%, the S&P 500 up 1.6% and the Nasdaq Composite 2.1%
Over the weekend, the prospect of a US government shutdown returned to the fore, ahead of a key deadline to agree on funding.
The Republican party revealed an unconventional temporary plan to fund the government, with little room to manoeuvre it through a deeply divided Congress just days ahead of a potential shutdown.
US media reported that unusual play would see some bills needed to keep the government open passed via a short-term bill until January 19, while the rest would be rolled over until February 2. It is aimed at buying Congress time to pass individual spending bills – and does not provide funding for Israel, Ukraine and border security, according to the reports.
The White House slammed the proposal as ‘a recipe for more Republican chaos and more shutdowns’.
Meanwhile, credit ratings agency Moody’s on Friday downgraded its outlook on US debt to negative from stable, one week before crucial budget negotiations in Congress. For now, it has maintained its Aaa rating on US government debt.
Gold was quoted at $1,937.94 an ounce early Monday, edging down from $1,938.67 on Friday.
Brent oil was trading at $80.62 a barrel, lower than $81.12.
Still to come in Monday’s economic calendar, there’s a trio of speeches in the UK, including words from Bank of England policymakers Sarah Breeden and Catherine Mann, and UK Prime Minister Rishi Sunak’s annual foreign policy speech at Lord Mayor’s Banquet.
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