European equities were on the up on Monday afternoon, getting some impetus from bullish trade in New York at the end of last week and for now overlooking interest rate worries.
Federal Reserve rate cut bets for March have steadily ebbed. The US central bank is now odds-on to hold rates in its March meeting.
The FTSE 100 index was up 13.49 points, 0.2%, at 7,475.42. The FTSE 250 was up 146.18 points, 0.8%, at 19,017.59, and the AIM All-Share was up 1.69 points, 0.2%, at 737.52.
The Cboe UK 100 was up 0.2% at 747.12, the Cboe UK 250 was up 1.0% at 16,461.76, while the Cboe Small Companies was down 0.3% at 14,854.48.
In European equities on Monday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both up 0.5%.
In the US on Friday, stocks on Wall Street rallied, with the Dow Jones Industrial Average up 1.1%, the S&P 500 ending up 1.2% - reaching an all-time high - and the Nasdaq Composite up 1.7%.
Stocks in New York were called higher at the start of the week, building on Friday’s gains. The Dow Jones Industrial Average was called up 0.2%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 0.6%.
The dollar pulled back against major currencies over the weekend. The US Federal Reserve has entered its ’blackout’ period ahead of next Wednesday’s monetary policy decision.
Sterling was quoted at $1.2708 on Monday at midday, higher than $1.2669 at the London equities close on Friday. The euro traded at $1.0886, higher than $1.0884. Against the yen, the dollar was quoted at JP¥147.91, down versus JP¥148.18.
The key US data for the week includes fourth-quarter gross domestic product figures on Thursday, as well as core personal consumption expenditures on Friday. There will also be earnings from US firms to consider, with highlights including Netflix on Tuesday and Tesla on Wednesday.
While the Fed is almost unanimously expected to leave interest rates on hold this month, investors will be focusing on any indicators of when rate cuts will begin. According to CME’s FedWatch tool, the likelihood of a once all-but-assured 25 basis point rate cut in March is now considered to stand at just 44%, with a 55% likelihood that rates are left unchanged.
Other key events this week include the Bank of Japan’s monetary policy decision on Tuesday, and the European Central Bank’s rate call on Thursday.
On the FTSE 100, Endeavour Mining lost 1.7%, after updating on its fourth-quarter and full-year production.
The gold miner, with operations in the Ivory Coast, Senegal and Burkina Faso, expects production to total 1.1 million ounces for the 2023 full year, down 8% from 2022. Its fourth-quarter output was at 280,000 ounces, flat from the third quarter but down from 294,000 ounces year-on-year.
Endeavour expects production to increase by up to 18% in 2024, thanks to several project start-ups due to commence in the second quarter.
In the FTSE 250, Bodycote rose 4.5%.
The heat treatments and specialist thermal processing services supplier set out plans for a £60 million share buyback. It said it will launch the buyback scheme in March, with more details to be revealed in its annual results on March 15.
Bodycote also said a deal to acquire Stack Metallurgical Group will not be completed. This is due ‘to a failure to satisfy all closing conditions to the agreement’.
The firm had announced the deal to acquire SMG in October, at the same time it said it was buying Indiana-based specialist technology company Lake City. Those deals would have amounted to $145 million in total.
On Friday, Bodycote completed the acquisition of Lake City for a $66.5 million consideration. Following expected tax benefits of $7.5 million, the company said the net economic price amounted to $59.0 million.
Among London’s small-caps, S4 Capital rose 0.2%, giving back steeper earlier gains.
The London-based advertising agency said its fourth-quarter trading was in line with its expectations outlined in November. Consequently, it expects a like-for-like decline in net revenue of around 4% in 2023 as a whole, and operational Ebitda margin in the range of 10-11% - the margin was improved in the second half thanks to ‘significant’ cost reductions.
‘While it is early in the year, we are not expecting 2024 to show macro-economic improvement, and client caution on marketing spend will likely persist, although not at last year’s level,’ said Executive Chair Martin Sorrell.
On AIM, United Oil & Gas lost 39%, after the Egypt and Jamaica-focused oil and gas company received a default notice from operator Kuwait Energy Egypt for $3.8 million for outstanding cash calls in relation to the Abu Sennan concession.
Under the terms of the joint operating agreement, UOG has 30 days to remedy the default, starting from January 28. If not remedied during the period, each non-defaulting party to the agreement can require the firm to withdraw from the Abu Senann concession.
UOG was in talks about a potential sale of its 22% stake to United Energy Egypt, which is a sister company of Kuwait Energy. However, this failed to come to pass due to lack of agreement with United Energy Group - the parent company of United Energy Egypt and Kuwait Energy - about a sale and purchase agreement.
In Asia, the Shanghai Composite closed down 2.7%, while the Hang Seng index in Hong Kong dropped 2.3%. The Nikkei 225 index in Tokyo closed up 1.6%, while the S&P/ASX 200 in Sydney closed up 0.8%.
China’s central bank left its key interest rates unchanged on Monday, as expected by the market.
The People’s Bank of China maintained the one-year loan prime rate, which serves as a benchmark for corporate loans, at 3.45%. It had been cut from 3.55% in August, in an attempt to counter the post-Covid growth slowdown in the world’s second-largest economy.
The five-year loan prime rate, which is used to price mortgages, was also held at 4.2%, having been cut by 10 basis points in June.
Gold was quoted at $2,023.17 an ounce on Monday at midday, lower than $2,035.35 on Friday. Brent oil was trading at $78.70 a barrel, lower than $79.06.
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