European equities headed into Tuesday afternoon on the front foot, while equities in New York are called to open a touch lower, as events in the US over the next two days take centre-stage.
Tech earnings and Fed decision are on the docket over the next on Tuesday and Wednesday.
‘The next two days will test investor sentiment thanks to the publication of financial results from two of the biggest names on the global stock market and the Federal Reserve’s next interest rate decision,’ said Russ Mould, investment director at AJ Bell.
The FTSE 100 index was up 37.49 points, 0.5%, at 7,670.23. The FTSE 250 was up 39.17 points, 0.2%, at 19,350.33, and the AIM All-Share was up 0.97 of a point, 0.1%, at 751.25.
The Cboe UK 100 was up 0.5% at 766.22, the Cboe UK 250 was up 0.2% at 16,792.80, and the Cboe Small Companies was down 1.0% at 14,774.43.
The economic calendar for this week has the US Federal Reserve announcing its latest interest rate decision on Wednesday at 1900 GMT, followed by the Bank of England on Thursday at 1200 GMT.
Both central banks are expected to keep rates on hold, with focus instead being on whether the Fed and the BoE giving any clues about the trajectory of interest rates.
Before then, Microsoft and Google owner Alphabet will release earnings after US market close on Tuesday.
Mould commented: ‘The S&P 500 and Nasdaq have been on a roll since early January, and a successful showing from these two tech giants could easily keep the market rally going.’
In the year-to-date, the S&P 500 and the Nasdaq Composite are up 3.9% and 1.1%, respectively.
Stocks in New York were called lower on Tuesday, however. Both the S&P 500 index and the Nasdaq Composite were called down 0.1%. The Dow Jones Industrial Average is called down 0.2%.
Investors have had some mixed economic data to digest from the eurozone.
According to a flash preliminary estimate from Eurostat, the eurozone’s economy was stagnant on-quarter, but improved slightly annually.
Gross domestic product in the fourth quarter of 2023 was flat on-quarter, having fallen by 0.1% in the third quarter of the year.
Annually, eurozone GDP edged up by 0.1%. In the third quarter, GDP had been stagnant annually.
‘A technical recession has just been avoided in the eurozone. Still, the eurozone economy has now been broadly stagnating since late 2022 and has lost substantial ground to the US in terms of GDP in recent years. After the buoyant post-pandemic reopening phase, the economy has now entered a phase of prolonged weakness,’ said Bert Colijn, senior economist at ING.
Germany continues to drive economic weakness in the eurozone, with recession looming in the country.
According to Destatis on Tuesday, the German economy contracted by 0.3% on a quarterly basis in October to December, on a price, seasonally and calendar adjusted basis. In the third quarter, GDP was entirely flat, with neither growth nor decline.
What’s more, the ifo Institute said it expects Germany’s economic output to shrink in the first quarter of 2024.
The Munich-based research institution said it expects GDP to shrink by 0.2% in the first quarter of 2024.
Timo Wollmershauser, head of forecasts at ifo, said: ‘This would tip the German economy into recession. Companies in almost all sectors of the economy are complaining about falling demand.’
In European equities on Tuesday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was up 0.1%.
The pound was quoted at $1.2681 at midday on Tuesday in London, slightly higher compared to $1.2675 at the equities close on Monday. The euro stood at $1.0838, up against $1.0802. Against the yen, the dollar was trading at JP¥147.27, lower compared to JP¥147.72.
In the FTSE 100, IMI rose 1.7%.
The company named Jamie Pike as its future chair. Pike will pick up the role at the start of 2025, ‘following a comprehensive selection process and as part of its orderly succession planning activities.’
Pike will take over from Robert Smith, who plans on seeking re-election at the 2024 annual general meeting to aid the transition. He will then step down on December 31.
Pike is currently chair of Spirax-Sarco Engineering, a role he will step down from in 2024 following nine years as a director.
Spirax-Sarco shares rose 0.5% on Tuesday.
IMI Chief Executive Officer Roy Twite said: ‘We are delighted that Jamie is joining the Board and taking on the role of Chair next year. He brings a wealth of listed board experience and a deep understanding of engineering. I am very much looking forward to working with him.’
Rum-maker Diageo lost 3.1%.
Sales in the six months ended December 31 fell 2.8% to $15.18 billion from $15.61 billion a year earlier.
This was driven by a decline in organic net sales in Latin America & Caribbean, where they contracted by 23% on a year before. Diageo said this was the result of strong year-earlier comparison, as well as ‘lower consumption and consumer downtrading due to macroeconomic pressures in the region’.
Pretax profit dropped 15% to $3.08 billion from $3.61 billion the year before.
Despite the worse results, Diageo raised its interim dividend by 5.0% to 40.50 US cents from 38.57 cents.
Elsewhere in the FTSE 100, housebuilders were a mixed bag following some rating changes.
Taylor Wimpey rose 1.0%, after Bank of America raised its stock to ’buy’.
Meanwhile, Barratt Developments and Persimmon lost 1.4% and 1.0%, respectively. BofA cut Barratt to ’underperform’ and Persimmon to ’neutral’.
Among FTSE 250s, Auction Technology jumped 17%.
The London-based online auction operator said that the year had started ‘in line with expectations’, with total revenue of $43.9 million for the three months ended December 31, up 11% from a year prior.
The company said that trading is in line with its 2024 outlook, which reflects an anticipated improvement in performance through the stabilisation of industrial and commercial asset prices alongside contributions from its value added services revenue.
Organic revenue is expected to grow between 5% and 8% from the £135.2 million earned in financial 2023. The company also expects to maintain a 46% margin for adjusted earnings before interest, tax, depreciation and amortisation.
Brent oil was quoted at $81.92 a barrel at midday in London on Tuesday, down from $82.01 late Monday. Gold was quoted at $2,035.55 an ounce, higher against $2,026.77.
Still to come on Tuesday’s economic calendar, there is US house price index and consumer confidence data.
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