Shares trade lower at start of key week for markets / Image Source: Adobe

Blue-chips in Europe opened lower on Monday morning, in nervy trade before eyes turn to central bank meetings and earnings from Meta, Microsoft, Apple and Tesla this week.

The FTSE 100 index opened down 35.39 points, 0.4%, at 8,467.81. The FTSE 250 was down 115.54 points, 0.6%, at 20,402.51, and the AIM All-Share was down 3.52 points, 0.5%, at 711.53.

The Cboe UK 100 was 0.4% lower at 848.73, the Cboe UK 250 shed 0.6% at 17,808.99, and the Cboe Small Companies was a touch lower at 15,985.58.

In Frankfurt, the DAX 40 shed 1.2% in early trade, while the CAC 40 fell 0.8%.

Sterling faded to $1.2446 early Monday, from $1.2490 at the time of the London equities close on Friday. The euro fell to $1.0472 from $1.0510. Against the yen, the dollar slipped to JP¥155.44 from JP¥155.70.

A barrel of Brent fetched $77.36, flat from $77.35. Gold faded to $2,756.62 an ounce from $2,774.82.

In Asia, on Monday, the Shanghai Composite ended 0.1% lower. Markets in Shanghai are now closed for over a week for the Chinese New Year holiday period. The Hang Seng Index in Hong Kong was up 0.7% in late trade. Financial markets in Hong Kong have an abbreviated trading day on Tuesday, before being closed for the rest of the week.

In Tokyo, the Nikkei 225 ended down 0.9% on Monday. Financial markets in Sydney are closed for Australia Day.

In New York on Friday, the Dow Jones Industrial Average and S&P 500 lost 0.3%, while the Nasdaq Composite shed 0.5%.

XTB analyst Kathleen Brooks commented: ‘This is the start of a new week, and new challenges face financial markets, and stock index futures have opened lower. Earnings reports and central bank meetings are centre stage. Added to this, Trump may have gone easy on tariffs so far; however, he threatened to slap a 25% tariff on goods imported from Colombia on Sunday after it declined entry to deported US migrants. This was ultimately resolved, with Trump getting his way and Colombia caving in, but it highlights how focused Trump is on using tariffs as a geopolitical threat in his second term as president. For now, Trump is tying tariff threats to US social issues like immigration. However, if he acts on his threat to impose tariffs on Europe due to its trade surplus with the US, then this would have a more chilling impact on financial markets.’

Decisions from the Federal Reserve and European Central Bank are on Wednesday and Thursday. The ECB is expected to enact a 25 basis point cut. The Fed is expected to stand pat.

Brooks added: ‘All eyes will be on how Fed chair Jerome Powell will react to Donald Trump’s call for the Fed to cut interest rates. With the Fed expected to remain on hold, they could find themselves in the middle of a political storm. The main event for financial markets is not just what the Fed does, it is also how Donald Trump reacts to it.

‘The markets are convinced that the ECB will cut, after the bank said in December that the risks to growth in the eurozone are to the downside, and we do not think that the small pick up in the January PMI data will derail prospects for a rate cut. As ever, the longer-term market reaction will depend on what the ECB says about future policy. Lagarde’s press conference will be important to tell us about the pace of future rate cuts from the ECB. Currently there are a further 2.5 rate cuts priced in for 2025 after Thursday’s cut.’

In London, BAT shares rose 4.1%. UBS raised the tobacco firm to ’buy’ from ’neutral’.

At the other end of the FTSE 100, Anglo American fell 6.2%, as one-time suitor BHP cooled its pursuit for now, the Financial Times reported.

Citing people close to BHP, a takeover of London-based Anglo American would be too expensive for the Melbourne-headquartered miner, following a rise in the share price of Anglo.

Three people close to the situation are said to have noted that following the share price increase, a fresh takeover bid would be too expensive in the near term.

BHP shares were down 1.0% in London.

Mining stocks were also hurt by poor China data, which showed manufacturing activity declined. Glencore fell 3.0%.

WH Smith added 6.1%. It is in talks to sell its high street arm.

The Swindon, England-based retailer’s high street operation is made up of about 500 stores, the first of which was opened 230 years ago.

‘WH Smith confirms that it is exploring potential strategic options for this profitable and cash generative part of the group, including a possible sale,’ a statement said.

Over the past decade, the firm has focused on its more fruitful, travel retail business which operates from airports, train stations and hospitals.

The high street business now accounts for only about 15% of annual group trading profit.

Elsewhere on the M&A front, Good Energy jumped 20%. It said it has accepted a £99.4 million takeover from suitor Esyasoft, which sweetened its bid after an approach in October.

The Chippenham, England-based renewable electricity supplier and energy services provider will be acquired by energy transition Esyasoft at 490 pence per share. It gives values Good Energy’s issued and to be issued share capital at £99.4 million, and implies an enterprise value of £67.8 million.

Over in New York, eyes this week will be on tech sector earnings, with Meta Platforms, Microsoft, Apple and Tesla all among those reporting. They represent four of ’Magnificent Seven’ stocks, which also include Amazon, Alphabet and Nvidia.

Swissquote analyst Ipek Ozkardeskaya commented: ‘In numbers, the Mag7 stocks eked out a 76% return in 2023 – the first year of the AI craze - but are expected to print an earnings increase of 34% in 2024, that is expected to slow down to 18% this year according to Bloomberg. And if you pull Nvidia out of this, the remaining magnificent companies are expected to print just 3% increase in their profits this year. That’s not very exciting at the current valuations. There are two options for the valuations to normalize: either the earnings will go up or prices will come down. Many investors, this year, bet for the second option and expect that the tech rally will show cracks and give way to a rotation from Big Tech toward the more cyclical sectors of the US, and beyond the US.’

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Issue Date: 27 Jan 2025