The FTSE 100 underperformed European peers on Monday, with share price falls for miners doing little for the large-cap benchmark, while the mood in equity markets was largely cautious with a trio of major central bank decisions to come.
Elsewhere, an ounce of gold slipped back below the $2,000 mark, while London-listed small-cap stock DG Innovate jumped after bolstering its board with one-time Tesla executives.
The FTSE 100 index traded down 48.64 points, 0.6%, at 7,505.83. The FTSE 250 fell 73.60 points, 0.4%, at 18,628.39, and the AIM All-Share was down just 0.75 of a point, 0.1%, at 722.70.
The Cboe UK 100 was down 0.6% at 749.21, the Cboe UK 250 was down 0.4% at 16,143.94, and the Cboe Small Companies was up 0.3% at 14,049.83.
In European equities on Monday, the CAC 40 in Paris was up 0.1%, though the DAX 40 in Frankfurt was down 0.1%.
‘The FTSE 100 started the week on the back foot, dragged lower by the mining sector as figures from China over the weekend showed the economy swung deeper into deflation,’ AJ Bell analyst Russ Mould commented.
‘An indicator of depressed domestic demand and a very different story to the inflationary pressures faced in the rest of the world, the data inevitably hit the miners given the world’s second-largest economy is such a rapacious consumer of commodities.’
China’s economy slipped further into deflation in November, according to official figures released on Saturday.
Consumer prices fell by 0.5% compared to the same month last year, the sharpest fall in three years, according to China’s National Bureau of Statistics. It was steeper than the 0.2% fall seen in October.
This means that Chinese consumer prices are now in deflationary territory for the second month in a row.
Shares in Rio Tinto fell 1.9%, among the worst FTSE 100 performers. Elsewhere, BHP fell 1.5%. Bucking the trend, Anglo American rose 1.3%, though it had suffered a bruising 19% slump on Friday on an underwhelming outlook.
Stocks in New York are called to open lower on Monday. The Dow Jones Industrial Average is called down 0.1%, the S&P 500 0.2% lower and the Nasdaq Composite down 0.3%.
Focus for the week will be on major central banks. The Federal Reserve kicks off the central banking bonanza by announcing its latest interest rate decision on Wednesday.
It will follow Friday’s slightly hotter-than-expected US jobs report, and will also come in light of a consumer price index reading scheduled for Tuesday. The Bank of England and European Central Bank follow with their final interest rate decisions of the year on Thursday.
Scope Markets analyst Joshua Mahony commented: ‘Friday’s US jobs report provided the basis for a more hawkish stance at the Fed this week, with markets gradually easing back on their rate cut expectations. With questions remaining over whether headline (3.2%) and core [personal consumption expenditures] (3.5%) inflation will hit target by March, the strength of the US jobs market highlights the potential for a relatively hawkish take from the Federal Reserve on Wednesday. The Federal Reserve forecasts should provide a strong basis for markets to base their expectations upon, and it has become quite apparent that the US jobs market remains incredibly resilient despite the restrictive actions of the Fed.’
The headline US consumer price inflation rate is expected to have cooled to 3.1% in November, according to FXStreet cited consensus.
Sterling was quoted at $1.2558 early Monday, higher than $1.2535 at the London equities close on Friday. The euro traded at $1.0764 early Monday, higher than $1.0758 late Friday. Against the yen, the dollar surged to JP¥146.07 early Monday UK time, from JP¥144.51 on Friday.
The yen suffered after Bloomberg reported that Bank of Japan officials are in no rush to lift interest rates from negative territory.
The BoJ’s policy rate stands at -0.10%, where it is expected to remain after the central bank’s next decision a week on Tuesday.
Citing people familiar with the matter, Bloomberg reported that policymakers have not seen enough evidence of wage growth to justify a policy shift for now.
Back in London, shares in DG Innovate soared to 0.10 pence from 0.044p. The electric mobility and energy storage company bolstered its top-team by adding ‘seasoned executive’ Peter Bardenfleth-Hansen, once of Tesla Inc, as chief executive.
Christian Eidem and Jochen Rudat joined as executive directors, the latter being one of the ‘first hires in Europe’ by the Elon Musk-founded electric vehicle manufacturer.
In addition, the company said it has raised £2.4 million through the issue of convertible notes.
‘The new executive management team envisage a dual strategy: to complete the development and commercialisation of the company’s existing technology and to build a larger business through significant complimentary acquisitions within the wider electric mobility and energy storage spaces,’ DG Innovate said.
AJ Bell analyst Mould added: ‘This money will be used to advance existing projects; however, the new directors have already indicated they will use DG Innovate as a roll-up vehicle for acquisitions in the electric mobility and energy storage space. That implies we could see a succession of fundraises in 2024.’
Gold was quoted at $1,994.63 an ounce early Monday afternoon, down from $2,006.01 on Friday. Brent oil was trading at $75.19 a barrel midday Monday, down from $76.00 late Friday.
‘Gold prices dropped below the $2,000 mark during early Monday trading, falling below that significant level for the first time in over two weeks. The precious metal lost some of its shine as traders’ expectations shifted following the release of US labour data on Friday, which came up better than expected,’ ActivTrades analyst Ricardo Evangelista commented.
‘Bullion prices had been supported by hopes that the Federal Reserve would pivot with a rate cut, which some saw coming as early as next March. However, with inflationary pressures still lingering, the resilience of the American labour market means that an earlier rate cut is unlikely. Against this background, the prospect of higher for longer rates is back, in a development that supports treasury yields and the dollar, and is bad news for the non-yielding gold.’
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