The FTSE 100 outperformed as European stocks struggled on underwhelming China trade data, as eyes turn to words from more US central bankers, after one pushed back on softer interest rate expectations on Monday.
The FTSE 100 succumbed to share price declines from miners and oil. Though insurers and retail prevented the blue-chip index from suffering a deeper fall.
The FTSE 100 index was down just 2.57 points at 7,415.19. The FTSE 250 was up 32.79 points, 0.2%, at 17,780.26 while the AIM All-Share was down 0.52 of a point, 0.1%, at 697.36.
The Cboe UK 100 was down 0.1% at 739.89, the Cboe UK 250 rose 0.2% at 15,439.01, and the Cboe Small Companies fell 0.1% at 12,927.05.
In European equities, the CAC 40 in Paris was down 0.7% while the DAX 40 in Frankfurt 0.3%.
The dollar recovered from some recent weakness on Tuesday. The pound fell markedly to $1.2281 on Tuesday afternoon, from $1.2385 at the time of the London equities close on Monday. The euro slipped to $1.0670 from $1.0736. Against the yen, the dollar bought JP¥150.40, up from JP¥149.37.
‘The dollar’s sell-off last week was extreme and it recovered yesterday and through the European session today,’ Bannockburn Global Forex analyst Marc Chandler commented.
‘The greenback’s moves appear to have been driven by interest rate expectations. Recall that at the end of last week, the market was pricing in three Fed cuts next year and a strong chance of a fourth hike. Yesterday, the implied yield of the December 2024 Fed funds futures rose by 13bp, which essentially unwound the chances of a fourth cut next year.’
In New York, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite are called to open 0.3% lower.
On Monday, Minneapolis Fed chief Neel Kashkari did not declare victory in the fight against inflation.
He told Fox News that ‘we need to let the data keep coming to us to see if we really have got the inflation genie back in the bottle so to speak’.
‘Before we declare that ’we’re absolutely done, we’ve solved the problem’, let’s get more data and see how the economy evolves,’ Kashkari said.
SPI Asset Management analyst Stephen Innes commented: ‘In the coming days, several Fed officials, including Chair Jerome Powell, are scheduled to deliver speeches.
‘One problem, however, hiding in plain sight is that the Fed could fall victim to its own success. Fed officials had been using various forums and public appearances to communicate a nuanced message to the market: the sharp increase in long-term US Treasury yields that began in August could effectively replace the final rate hike indicated by the September dot plot. The idea was that the rise in long-term yields could tighten financial conditions, doing some of the work the Fed intended to accomplish with rate hikes. And openly conveying this message at the FOMC sparked a bond rally, leading to a reversal of the very dynamic that the Fed was trying to achieve.’
In London, BP fell 1.2% and Shell lost 1.3%, tracking Crude lower.
A barrel of Brent oil fell to $83.68 early Tuesday afternoon, from $86.00 late Monday afternoon. Brent spiked in the wake of a Hamas attack on Israel on October 7, but the North Sea benchmark now sits below the $84.37 a barrel that it fetched prior to the event.
The lack of an escalation to a wider regional conflict, and now the weaker China data, have meant there has been a reluctance to push oil prices higher.
According to data on Tuesday, exports in China declined, in a poor reading of the global economy. However, imports rose in a sign that domestic demand is picking up.
Nonetheless, mining stocks were lower. Anglo American fell 3.0% and Glencore lost 2.1%. Miners are heavily exposed to the ebbs and flows of the global economy.
Supporting the FTSE 100, insurer Beazley rose 6.5%. It said net insurance written premiums in the nine months to September 30 surged 26% to $3.53 billion from $2.80 billion.
The good news for the insurance sector did not end there. FTSE 250-listed Direct Line rose 3.8%.
The Bromley, London-based motor and home insurer said total gross written premiums and associated fees soared 59% to £1.28 billion in the third quarter of 2023, and by 27% to £2.97 billion in the first nine months of the year.
‘In Motor, we can see the pricing actions we have taken come through...and we believe we are writing profitably, consistent with a 10% net insurance margin,’ said acting Chief Executive Officer Jon Greenwood.
Admiral and Sabre Insurance added 1.8% and 4.1% in a positive read across.
Among London’s large-caps, diversified AB Foods surged 6.6%. It lifted its final dividend, announced a special one and outlined a £500 million buyback.
It reported an annual earnings hike, shaking off ‘unseasonal weather’ which threatened to hamper the second half for its Primark retail arm.
Group revenue in the year ended September 16 rose 16% to £19.75 billion from £17.00 billion the year prior. Pretax profit rose by a quarter to £1.34 billion from £1.08 billion. Revenue rose across the board, with climbs registered in retail and across its food divisions.
Marks & Spencer rose 2.4% in a positive read-across.
Persimmon added 4.6% after housebuilder backed its outlook.
Chief Executive Officer Dean Finch said: ‘We are on track to deliver around 9,500 quality new homes in 2023 with operating profit in line with expectations and at an operating margin similar to the first half.
Also supporting the sector’s shares, mortgage lender Halifax said the average house price increased 1.1% in October from September, halting a streak of six successive monthly declines.
Barratt Developments, up 2.8%, was among the best FTSE 100 performers, in a positive read-across.
Naked Wines plunged 34%. The wine seller now predicts annual sales will fall between 12% and 16%. It had previously predicted a decline between 8% and 12%.
Trading in the US market has been ’weaker than anticipated‘, Naked Wines warned.
It also announced Nick Devlin has stepped down as CEO with immediate effect. Founder and Chair Rowan Gormley becomes executive chair on an interim basis. Devlin remains as president for Naked Wines USA ’through the peak trading period‘ before leaving the group entirely.
Gold traded at $1,963.47 an ounce on Tuesday afternoon, down from $1,982.98 at the equities close on Monday.
Still to come on Tuesday is a US trade balance reading at 1330 GMT.
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