European markets started the week on the front foot, with US inflation figures to be in focus this week, ahead of the Federal Reserve’s rate call next Wednesday.
The FTSE 100 index rose 89.37 points, or 1.1%, at 8,270.84. The FTSE 250 advanced 156.88 points, or 0.8%, at 20,650.88, and the AIM All-Share gained 2.73 points, or 0.4%, at 746.73.
The Cboe UK 100 rose 1.2% to 826.66, the Cboe UK 250 firmed 0.6% at 18,159.74, and the Cboe Small Companies ended up 0.1% at 16,863.46.
In European equities on Monday, the CAC 40 in Paris gained 1.0%, while the DAX 40 in Frankfurt rose 0.7%.
The more upbeat mood was reflected in the US. On Wall Street at the time of London’s close, the Dow Jones Industrial Average was up 1.2%, the S&P 500 rose 0.9% and the Nasdaq Composite advanced 0.7%.
In London, economic data picks up this week with the latest labour data on Tuesday and the July GDP number on Wednesday, which will be closely watched ahead of this month‘s Bank of England meeting.
Enrique Diaz-Alvarez, chief economist at Ebury said the July labour data ‘should support our view of a healthy labour market that is providing support to consumer demand, particularly as wages are still outpacing inflation, at least for now’.
‘This should support the argument that while BoE cuts are coming, the pace of rate reductions should be relatively gradual. We expect this to continue to buoy sterling, which looks well placed to hold onto its mantle as the best performing G10 currency in 2024.’
The pound was quoted at $1.3075 late on Monday afternoon in London, down compared to $1.3147 at the equities close on Friday. The euro stood at $1.1039, against $1.1104. Against the yen, the dollar was trading at JP¥142.93, up compared to JP¥142.12.
The dollar’s gains reflected fading hopes for a 50 basis points interest rate cut at next week’s Federal Open Market Committee meeting after last Friday’s mixed jobs report.
‘While the US labour market is weakening, it is by no means weak and so we continue to believe that market expectations for aggressive Fed easing remain overdone. The dollar’s recent resilience is encouraging but the fundamental data will have to come in firm in order for the greenback to see further gains. This week’s inflation data have taken on great importance,’ Brown Brothers Harriman analysts commented.
Data on Wednesday is expected to show the rate of annual US consumer price inflation faded to 2.6% in August, from 2.9% in July.
Bank of America expects the Fed to cut rates by 25bp per meeting for the next five meetings, through March 2025.
On Thursday, the European Central Bank is widely expected to lower interest rates by 25bp.
Morgan Stanley expects a 25bp rate cut and thinks the following press conference will focus on the future rate path and the likelihood of a cut in October.
‘With a 25bp cut fully priced in for the September meeting, markets will be more focused on any hints or guidance on the rate path thereafter, in our view,’ the investment bank said.
In London’s FTSE 100, Entain jumped 5.3% as a return to growth in its UK and Ireland online offering helped the Ladbrokes owner achieve a decent start to the second half of the year.
Entain said the improving momentum delivered during the second quarter has continued, with online net gaming revenue growth during the second half of 2024 to date ‘ahead of our expectations’.
The firm said it has performed well so far in its second half, returning to growth in its UK and Ireland online betting offering ‘earlier than expected’.
In the UK&I, Entain disclosed an accelerated recovery across gaming and sports, with sports NGR benefiting from both stronger volumes and margins.
Shore Capital Markets analyst Greg Johnson commented: ‘That the UK has turned positive suggests upside risk to full year revenue guidance’.
But it was a less than stellar day for luxury goods retailer, Burberry which fell 4.5% after being downgraded to ’underweight’ from ’equal weight’ by Barclays.
Analysts at the banks recently spent two weeks in mainland China and Hong Kong meeting with brands owners, luxury mall operators, retailers, investors and other sector experts.
The trip left it ‘incrementally more cautious’ on the sector, noting the macro environment ‘deteriorated’ further in the summer with a clear view now that the Chinese weakness is ‘structural and not just cyclical’.
‘In this very polarized environment, brands under transition are more at risk: we thus downgrade Burberry and Kering to underweight from equal weight,’ Barclays said.
In Paris, Gucci owner Kering eased 2.5%.
In the FTSE 250, Genus rose 6.0% as Chief Executive Jorgen Kokke became the latest member of the top team to pick up stock.
Kokke bought shares worth $242,036, after Chair Iain Ferguson bought a £178,762 chunk of stock last Thursday.
But Computacenter fell 6.9% after reporting a drop in first half sales and profit.
The Hertfordshire, England-based technology and services provider said pretax profit decreased 32% to £84.0 million in the first half that ended June 30 from £122.8 million the previous year.
Revenue was down 13% to £3.10 billion from £3.58 billion, as cost of sales reduced by 15% to £2.63 billion from £3.08 billion.
Jefferies said interims are in line with pre-announced headlines given in July and ‘while the headlines are clearly soft (though not entirely unexpected), beneath the surface we see encouraging signs of strategic progress’.
On AIM, Pebble Group fell 2.5%.
The Manchester, England-based firm, which provides products and services to the global promotional products industry, said revenue for the six months ended June 30 was £60.8 million, falling 4.0% from £63.3 million a year ago. Pretax profit was £2.9 million, down 6.5% from £3.1 million.
Brent oil was quoted at $71.25 barrel at the time of the London equities close on Monday, down from $71.50 late Friday. Gold fell to $2,497.50 an ounce against $2,514.36.
Tuesday’s economic calendar sees UK unemployment and wages data at 0700 BST and German consumer price inflation figures at 0900 BST.
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