The FTSE 100 edged into the green as stocks opened mixed in London ahead of Owell’s keynote speech at Jackson Hole, while the FTSE250 suffered as Watches of Switzerland and CMC Markets dropped.
The FTSE 100 index opened up 21.95 points, 0.3%, at 7,355.58. The FTSE 250 was down 37.80 points, 0.2%, at 18,156.77, and the AIM All-Share was down 0.44 of a point, 0.1%, at 734.08.
The Cboe UK 100 was up 0.2% at 733.00, the Cboe UK 250 was down 0.3% at 15,880.32, and the Cboe Small Companies was down 0.1% at 13,503.14.
In European equities on Friday, the CAC 40 in Paris was marginally higher, while the DAX 40 in Frankfurt was down 0.1%.
Investors’ focus will be on the main event of this week: Federal Reserve Chair Jerome Powell’s keynote speech at the Jackson Hole economic symposium in Wyoming. He is due to give a 25-minute speech at around 1005 EDT, or 1505 BST.
According to Lloyds Bank, investors will be looking for two key points in his remarks. Firstly, any sign of Powell confirming a pause to interest rate hikes at the next meeting in September. Secondly, whether he will indicate that rates are likely to have peaked and when they could be cut.
‘Powell may hint today that [a pause] is the most likely option. Markets will see that as good news but hardly a surprise as they are currently attaching only a low probability to a hike. Moreover, Powell may be reluctant to signal that this is a probable peak for rates. Instead, he is likely to say that while the Fed thinks it is winning the battle with inflation more may still need to be done,’ Lloyds said.
There will also be an address from European Central Bank President Christine Lagarde later on Friday.
‘Lagarde has to deal with a worsening economic outlook in the eurozone, but we suspect she will stick to data dependency and a hawkish tone,’ ING predicted.
During the Saturday session, there will be a panel featuring Bank of England Deputy Governor Ben Broadbent and Bank of Japan Governor Kazuo Ueda, which will discuss the topic of ’Globalization at an Inflection Point’.
The dollar made gains against major currencies in early exchanges in Europe, suggesting investors are bracing for some hawkishness from Powell.
Sterling was quoted at $1.2583 early Friday, dropping from $1.2639 at the London equities close on Thursday. The euro traded at $1.0788, lower than $1.0835. Against the yen, the dollar was quoted at JP¥146.05, up versus JP¥145.66.
In London, it was a mostly quiet day for large-cap equities. Gains for oil majors Shell and BP, up 0.8% and 1.0%, helped the index edge into the green. Tesco rose 1.7% and CRH added 1.2%, benefitting from increases to their target prices from Barclays and Jefferies respectively.
The real action was happening in the midcap FTSE 250 index, however, with Watches of Switzerland dropping 25%.
The firm said the acquisition by Rolex of Swiss watch retailer Bucherer will not change its relationship with Rolex, a key supplier.
Rolex on Thursday announced it will buy Bucherer to ‘preserve the close partnership ties that have linked both companies since 1924’. Rolex noted that Jorg Bucherer, in the absence of direct descendants, had decided to sell the company.
Jorg Bucherer, 86 years old, is the grandson of founder Carl Bucherer, who had formed a partnership with Hans Wilsdorf, founder of Rolex.
Watches of Switzerland said it the acquisition doesn’t represent a strategic move into retail by Rolex, and there will be no change in the product allocation or distribution of Rolex watches. This had been ‘confirmed by the highest level of Rolex management’ in Geneva, it said.
It was also a tough morning for CMC Markets, with its shares down 15%.
The online trading platform warned it had seen a ‘more challenging environment’ in August, after warning of subdued market conditions at the end of July. CMC said it saw ‘markedly lower’ monetisation of client trading activity, due to a higher proportion of lower-margin institutional volume. Trading and investing net revenues are trending 20% lower year-on-year, it said.
‘Whilst underlying market activity has the potential to recover, should year-to-date market conditions continue for the remainder of FY24 then it is expected that net operating income will be between £250 million and £280 million,’ the firm said. In the financial year ended March 31 2023, net operating income had been £288.4 million.
More positively, GfK’s long-running UK consumer confidence index improved by five points in August, with all measures reversing the drop seen in July. It remains firmly in negative territory at minus 25, however.
UK consumers are feeling a ‘renewed optimism’ against a backdrop of falling core inflation, GfK suggested.
Meanwhile, brent oil was trading at $83.89 a barrel early Friday, higher than $82.41 on Thursday.
‘Those who expected the US dollar to tumble because Brics are enlarging their alliance with top oil producers were disappointed yesterday. The US dollar extended gains to the strongest levels since the beginning of summer,’ said Ipez Ozkardeskaya, senior analyst at Swissquote Bank.
Brics, the five-member group made up of Brazil, Russia, India, China and South Africa, made its first step to enlarge the bloc on Thursday. South African Cyril Ramaphosa said the block had decided to invite Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates to become full members of Brics. The membership will take effect from January 1, 2024.
The addition of Saudi, the UAE and Iran would see the Brics group make up almost 42% of global crude oil output, according to ING. As it stands, Brics members make up around 20% of global oil output.
‘If we shift towards a new world order where oil and energy are no more traded in US dollars, that would be a major blow to the dollar as base and reserve currency, and that could also have major implications for the US economy’s exploding debt that the rest of the world would not want to finance anymore, and the risk-free-ness of the US treasury,’ Ozkardeskaya noted.
‘We won’t reach that point tomorrow...But something is cooking in the [emerging markets] kitchen and it’s worth watching.’
Gold was quoted at $1,913.70 an ounce, lower than $1,921.41.
Stocks on Wall Street had struggled on Thursday, with the Dow Jones Industrial Average down 1.1%, the S&P 500 down 1.4% and the Nasdaq Composite down 1.9%.
The initial shine from Nvidia’s forecast-beating results faded as fears about interest rates came back to the fore. These were stoked by a US jobless print showing that the US labour market remains ‘tight’, with new claims for unemployment coming in lower than expected.
Further, a leading Federal Reserve official held back from ruling out further hikes until inflation is more clearly on a downward path.
‘I am not yet seeing the slowing that I think is going to be part of what we need for that sustainable trajectory to get back to 2% [inflation] in a reasonable amount of time,’ Boston Fed President Susan Collins told the Financial Times, later adding that ‘that resilience really does suggest we may have more to do’.
After the recent focus on the outlook for China, sentiment in Asian markets was also dominated by the outlook for US interest rates. The Nikkei 225 index in Tokyo closed down 2.1%. In China, the Shanghai Composite shed 0.6%, while the Hang Seng index in Hong Kong was down 1.1%. The S&P/ASX 200 in Sydney closed down 0.9%.
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