The FTSE 100 reached its loftiest level in almost four-and-a-half years early Monday, as a combination of a further re-opening of the Chinese economy from lockdowns and hopes for a dovish pivot by the US Federal Reserve boosted stock prices.
The large-cap index was up 22.09 points, or 0.3%, at 7,721.58. London’s equities benchmark spiked to 7,723.08, its best level since August 2018.
The FTSE 250 was up 89.29 points, or 0.5%, at 19,594.01, and the AIM All-Share was up 1.91 points, or 0.2%, at 849.37.
The Cboe UK 100 was up 0.3% at 772.48, and the Cboe UK 250 was up 0.6% at 17,081.10. The Cboe Small Companies was down 0.2% at 13,688.64 - with its worst performer being Nanoco. The quantum dots developer gave back some of Friday’s hefty gain.
In European equities on Monday, the CAC 40 in Paris was 0.1% higher, while the DAX 40 in Frankfurt was up 0.2%.
Asian equity markets led the way upward on Monday. The Shanghai Composite index ended 0.6% higher, while the Hang Seng in Hong Kong was up 1.9% in late trade. The S&P/ASX 200 in Sydney closed up 0.6%. Financial markets in Tokyo were closed for Coming of Age Day.
China lifted quarantine requirements for inbound travellers on Sunday, ending almost three years of self-imposed isolation, even as the country battles a surge in Covid cases.
Beijing last month began a dramatic dismantling of a hardline zero-Covid strategy that had enforced mandatory quarantines and punishing lockdowns.
The strong day in Asia on Monday followed a positive end to the week for stocks in New York on Friday. The Dow Jones Industrial Average surged 2.1%, the S&P 500 rallied 2.3% and the Nasdaq Composite jumped 2.6%. That put the Dow and S&P up 1.5% for the week as a whole and the Nasdaq up 1.0%.
The mood in New York was supported by a favourable US nonfarm payrolls report.
The US added more jobs than expected in December, according to the latest data from the US Department of Labor. Total non-farm payroll employment increased by 223,000 in December, the department said. This came in higher than market expectations of 200,000 jobs, as cited by FXStreet.
However, wage growth came in below expectations. Hourly earnings rose 4.6% on-year, slowing from 4.8% in November, and below FXStreet cited consensus of 5%.
Eyes now turn to the Fed, with US central bank’s first interest rate decision of 2023 scheduled for February 1.
According to the CME FedWatch tool, which tracks interest rate probabilities, the market largely expects a hike of 25 basis points. There is a 73% chance of such a quarter-point lift, and a 27% chance of another half-point hike.
At its December meeting, the Federal Open Market Committee lifted the target range for the federal funds rate by 50 basis points to 4.25% to 4.50% - the highest since 2007 - from a previous range of 3.75% to 4.00%.
The pound rose to $1.2147 early Monday, up markedly from $1.2051 at the London equities close on Friday. The euro climbed to $1.0689 from $1.0612, while against the yen, the dollar faded to JP¥132.11 from JP¥132.44.
In London, the positivity out of China lifted the mining sector. Antofagasta was the best FTSE 100 performer, adding 2.4%.
China is a major buyer of minerals.
BT rose 1.9% after Citigroup lifted its view of the telecommunications company to ’buy’ from ’neutral’.
Keller fell 4.9%. The geotechnical specialist contractor said it has identified ‘deliberate and sophisticated financial reporting fraud’ in its Austral arm in Australia.
Keller said two individuals have been dismissed and an internal probe is underway. It is also in the process of naming an external adviser to perform an independent investigation.
‘Austral, contributing [around] 3% of group revenue, is a unique business within the group, and is the only business that exclusively accounts for revenue on a percentage of completion basis in the division,’ Keller added.
The fraud relates to Austral’s performance from 2019 onwards. Keller expects a hit of £6 million for the first half of 2022 and £8 million to £10 million relating to prior years. The fraud continued into the second half of 2022, it noted.
Keller expects full-year operating profit ‘slightly below’ the bottom end of a £109 million to £114 million market forecast range. For 2021, Keller posted statutory operating profit of £80.5 million, or £92.8 million on an underlying basis.
After leaping 31% on Friday, Nanoco shares returned 14% early Monday. Ajudge has agreed to a 30-day stay to allow quantum dot developer and Samsung to agree terms to a legal settlement.
Nanoco on Friday said it had agreed a term sheet for a no-fault settlement with the electronics firm.
The duo have been locked in a dispute with Nanoco claiming Samsung infringed on its unique synthesis and resin capabilities for quantum dots. Quantum dot technology is used on Samsung QLED televisions. QLED stands for quantum light-emitting diode.
Frontier Developments shed 39%. It expects a rise in first-half revenue but warned on its full-year outcome.
The video games publisher and developer expects revenue of £57 million for the six months to November 30, up 16% year-on-year from £49.1 million. Interim revenue was helped by the release of the F1 Manager 2022 racing title and survival game Stranded: Alien Dawn.
For the full-year, however, Frontier no longer expects to meet market consensus forecasts for revenue and operating profit, which stand at £135 million and £19 million, respectively. Sales across its portfolio were subdued during the key festive period.
Frontier also noted an ‘uncertain contribution’ from its Frontier Foundry arm, which publishes games developed by partner studios.
Its new top-line guidance is for revenue of ‘not less’ than £100 million, though it said it is still possible to surpass the previous year’s £114 million.
Gold traded at $1,875.33 an ounce early Monday, rising from $1,861.63 at the time of the London stock market close on Friday. A barrel of Brent fetched at $80.76, up from $79.64.
Still to come on Monday is a eurozone unemployment reading at 1000 GMT.
For the week ahead, the key release is a US inflation reading on Thursday.
‘A drop in gasoline prices suggests that the energy component in December will decline for the second consecutive month, while increases in food prices have shown hints of slowing recently too. As such, our colleagues in Daiwa America expect total consumer prices to have declined for the first time since May 2020,’ commented Daiwa Europe. It expects a 0.1% month-on-month decline in prices.
By Eric Cunha, Alliance News news editor
Comments and questions to newsroom@alliancenews.com
Copyright 2023 Alliance News Ltd. All Rights Reserved.
