A less hawkish tone from the US Federal Reserve was giving share prices a lift early Monday in London, while the opposite message from a European Central Bank official was supporting the euro.
The FTSE 100 index opened up 15.31 points, 0.2%, at 7,785.90. The FTSE 250 was up 90.42 points, 0.5%, at 19,793.05 points, and the AIM All-Share was up 3.46 points, 0.4%, at 859.48.
The Cboe UK 100 was up 0.2% at 778.78, the Cboe UK 250 was up 0.3% at 17,279.17, and the Cboe Small Companies was up 0.2% at 14,005.84.
The week got off to a quiet start, as investors digested the latest comments from the US Federal Reserve which hinted at a slowing of interest rate hikes.
Fed Governor Christopher Waller on Friday said there is ample evidence that a steep climb in interest rates has damped demand and economic activity, and suggested the US central bank can further slow its rate hikes.
The Fed had been raising rates a pace of three quarters of a percentage point at a time before slowing this to half a percentage point at its December policy meeting.
Alongside recent data showing a slowing in US economic activity, inflation moderated to 6.5% in December from the 40-year high seen in June last year.
Waller warned that policymakers have ‘a considerable way to go’ towards their 2% inflation goal, noting that the recent cooling was largely led by the drop in energy prices. A slight uptick in month-on-month core inflation - which excludes food and energy - was cause for caution, he noted.
Wall Street rallied on Friday, with the Dow Jones Industrial Average ending up 1.0%, the S&P 500 up 1.9% and the Nasdaq Composite up 2.7%.
The dollar was mostly soft against major currencies early Monday in London.
Sterling was quoted at $1.2412, higher than $1.2379 at the London equities close on Friday. Against the yen, the dollar was quoted at JP¥129.99, up slightly versus JP¥129.88
The euro traded at $1.0904, firm from $1.0837. Crossing over the $1.09 mark represents a nine-month high for the single currency, closing the gap on $1.0936 seen last April.
The less hawkish tone from the US central bank was in stark contrast to comments from its European counterpart.
In an interview with Dutch broadcaster WNL on Sunday, ECB governing council member Klaas Knot said two further 50 basis point hikes should be expected in February and March.
‘Expect us to not be done by then and that more steps will follow in May and June,’ Knot said, in comments reported by Reuters.
‘Hawkish commentary from ECB policymakers continues today,’ Daiwa Capital Markets said of the Knot remarks. ‘President Lagarde [will] speak again later today and no doubt repeat her new mantra that the ECB will ’stay the course’ on monetary tightening.’ Daiwa noted that Dutch National Bank governor Knot is a ‘leading hawk’ at the ECB.
In European equities on Monday, the CAC 40 in Paris was marginally higher, while the DAX 40 in Frankfurt was up 0.2%.
In London, housebuilders were on the rise, after Jefferies upgraded their price targets. Persimmon rose 1.4%, Taylor Wimpey was up 0.9%, Barratt added 1.2% and Redrow was up 1.1%.
Oil major Shell slipped 0.6% as Morgan Stanley cut the stock to ’equal weight’ from ’overweight’.
Brent oil fetched $87.32 a barrel early Monday, up from $86.55 on Friday, while gold was quoted at $1,919.98 an ounce, down from $1,925.41.
In the FTSE 250, National Express was the top performer, adding 5.4%.
The transport provider said it has won a contract worth over €1 billion to operate the RE1 and RE11 Rhein-Ruhr-Express lines in Germany to 2033. It first took over the operation of the two lines in February 2022 through an emergency contract award.
Following the new contract award, National Express now operates all three asset-light Rhein-Ruhr-Express lots under long-term contracts. The company noted that the contract is worth €1 billion over the lifetime of the agreement.
National Express said that the contract establishes it as ‘the second largest rail transport company in the region, delivering an anticipated 20 million train kilometres in 2023’.
Among London’s smallcaps, Dignity rose 8.8%.
The funeral provider said its directors will unanimously recommend a 550 pene per share takeover offer to shareholders. The £281 million offer comes from a consortium including SPWOne V, Castelnau and Phoenix Asset Management Partners, who already own a 29% stake in the firm.
In a separate trading update, Dignity said it expects underlying revenue to have shrunk to no more than £275 million in 2022 from £312.0 million the year before. Underlying operating profit is expected to be no more than £20 million, less than half of £55.8 million in 2021. The poor performance was due to changes in pricing strategy and consumers opting for lower-priced products, in addition to an increase in Dignity’s cost base.
Saga rose 2.2%.
The over-50s travel operator is seeking buyers for its in-house insurance underwriting business, the company said early Monday, confirming a report by the Sunday Times.
Saga said it is in discussions for a possible disposal of Acromas Insurance, the underwriter within its larger home and motor insurance business. However, Saga said it remains committed to providing insurance to its customers.
Saga noted that Acromas underwrites 25% to 30% of its overall insurance business. Selling it would move the risk associated with those policies elsewhere.
On AIM, online clothing retailer Sosandar rose 11%.
Sosandar said it will start selling a collection of its products via Sainsbury’s. The contract will begin online only before expanding to select stores later in the year. The partnership marks Sosandar’s first in-store presence, allowing it to become a ‘truly omnichannel retailer’.
This will ‘[further diversify] its route to market and [increase] brand awareness across its target demographic, whilst driving growth sales and [profit before tax],’ Sosandar said.
Shares in J Sainsbury were up 0.7%.
It is set to be a quiet trading week in Asia, with Chinese markets shut to mark the Lunar New Year. The Hong Kong market will reopen on Thursday, while Shanghai will remain closed all week.
In Japan on Monday, the Nikkei 225 index closed up 1.3%, while the S&P/ASX 200 in Sydney closed up 0.1%.
Still to come on Monday’s economic calendar, there is flash EU consumer confidence at 1500 GMT.
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