European equities were lower on Tuesday afternoon, with stocks struggling to find their groove early in the year new year, as investors show signs of unease ahead of major interest rate decisions in the weeks to come.
Among individual stocks, a special dividend announcement lifted B&M shares. Recruiters fell after a warning from Hays.
The FTSE 100 index was down 7.33 points, 0.1%, at 7,686.86. The FTSE 250 was down 109.00 points, 0.6%, at 19,284.80, and the AIM All-Share was down 1.12 points, 0.2%, at 749.70.
The Cboe UK 100 was flat at 767.97, the Cboe UK 250 was down 0.7% at 16,776.26, and the Cboe Small Companies was 0.1% lower at 14,937.10.
In European equities, the CAC 40 in Paris was down 0.4%, while the DAX 40 in Frankfurt was 0.3% lower.
Stocks in New York are called to open lower. The Dow Jones Industrial Average and S&P 500 are called down 0.4%, while the Nasdaq Composite is called to open 0.6% lower.
On Monday, the S&P 500 and Nasdaq Composite rose 1.4% and 2.2%. The Dow, weighed down by a share price slide for embattled plane maker Boeing, rose 0.6%.
‘Last night’s rebound from the US market brought some relief after a weak start to the year for equities,’ AJ Bell analyst Russ Mould commented.
‘European markets didn’t share the excitement.’
Mould said European stocks are in a ‘holding pattern’ ahead for the first batch of major interest rate decisions in 2024.
The Federal Reserve announces its first interest rate decision of the year on January 31. The Bank of England and European Central Bank follow suit a day later.
While all three are expected to leave rates unmoved this time, it is future meetings that investors have sized up for possible cuts, specifically March for the Fed. According to the CME FedWatch Tool, there is a 60% chance the US central bank cuts rates in March. There is a 95% chance it leaves the federal funds rate range unmoved at 5.25%-5.50% later this month.
Hopes for a cut in March were given a boost on Monday. A senior US Federal Reserve official, who recently suggested further interest rate hikes could be needed to tackle inflation, said her views had changed due to recent data.
Fed Governor Michelle Bowman, who is a member of the US central bank’s rate-setting committee, said she had been encouraged by recent inflation, employment and economic growth figures.
‘Based on this progress, my view has evolved to consider the possibility that the rate of inflation could decline further with the policy rate held at the current level for some time,’ she told a conference in South Carolina.
‘Should inflation continue to fall closer to our 2% goal over time, it will eventually become appropriate to begin the process of lowering our policy rate,’ she continued.
The dollar was on the up despite Fed rate cut hopes. The pound faded to $1.2712 on Tuesday afternoon London time, from $1.2757 late Monday. The euro slipped to $1.0930 from $1.0974. Versus the yen, the US currency climbed to JP¥144.15 from JP¥143.84.
‘FX markets remain generally quiet as we enter a period of consolidation after the dollar sell-off seen late last year. We had started the year thinking that a backup in short-term rates could give the dollar a little support – though in fact, dollar gains have been very modest. Behind that may well be the conviction view that the Federal Reserve will cut rates this year and that, unless something has broken somewhere,’ ING analyst Chris Turner commented.
In London, B&M European Value was among the best FTSE 100-listed performers, as the retailer declared a special dividend of 20.0p after a stellar Christmas period. Shares rose 0.9%.
Sales rose by 5% on a year before in its ‘golden quarter’, the 13 weeks leading up to Christmas.
The Luxembourg-headquartered variety goods retailer said it is on track to open 76 new stores in the current financial year, including 45 in the UK, 11 in France, and 20 in its Heron Foods arm. B&M currently has 717 stores in the UK, 122 in France, and 331 under the Heron Foods and B&M Express brands. It reiterated its annual guidance for adjusted Ebitda of £620 million to £630 million, up from £573 million in financial 2023.
At the other end of the FTSE 100 was another retailer. JD Sports was down 3.3% as share price pressure on the athleisure firm continues, after a poorly-received Christmas update of its own last week.
JD Sports had tumbled 23% on Thursday after cutting its profit outlook amid weaker-than-expected sales growth and gross margins.
Recruitment firm Hays lost 9.0% following a profit warning.
Hays said second-quarter group fees fell 10% annually on a like-for-like basis, with a slowdown seen in December. ‘It is too early to say if December’s weakness reflects a more sustained market slowdown, or shorter-term deferrals of client and candidate decision-making. However, we expect near-term market conditions to remain challenging,’ the company warned.
It now expects underlying operating profit for its half-year ended December to be around £60 million, which is below the £73 million pencilled in by analysts, according to company-compiled market consensus.
Robert Walters lost 5.7% in a negative read-across.
Jupiter Fund Management slumped 14% as it suffered higher net outflows than expected in the fourth quarter of 2023, and announced a manager of several of its most important funds will depart in July.
Ben Whitmore, the current manager of the Jupiter UK Special Situations Fund, Jupiter Income Trust, Jupiter Global Value Unit Trust, and Jupiter Global Value SICAV, as well as £4.8 billion of segregated mandates, will leave the company at the end of July, having been with Jupiter since 2006.
Whitmore will be replaced in part by a recruit from JO Hambro Capital Management.
‘The key assumption is what level of AUM attrition is suffered, but overall we see it as negative to lose such a key fund manager,’ Peel Hunt analyst Stuart Duncan commented.
Elsewhere in London, MJ Gleeson shed 9.3%. It said poor market conditions caused a sales slump in 2023, but it expects a turnaround in 2024.
The Sheffield, England-based low-cost housebuilder said its Gleeson Homes division completed the sale of 769 homes during the half-year ended December 31, down 14% from 894 a year before.
The downturn reflected ‘the weaker conditions experienced across the housing market during 2023’, the company said.
More positively, Gleeson Homes entered the second half with a forward order book of 586 plots, up from 310 over the same period.
A barrel of Brent rose to $77.73 a barrel midday Tuesday, from $75.73 at the European equities close on Monday. Gold traded at $2,034.95 an ounce, up from $2,032.33
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