Stock prices in London opened lower on Monday, with the FTSE 100 underperforming European peers as its heavyweight miners struggled following underwhelming China data.
Focus for the week will be on major central banks. The Federal Reserve kicks off the central banking bonanza by announcing its latest interest rate decision on Wednesday.
It will follow Friday’s slightly hotter-than-expected US jobs report, and will also come in light of a consumer price index reading scheduled for Tuesday. The Bank of England and European Central Bank follow with their final interest rate decisions of the year on Thursday.
The FTSE 100 index opened up 26.47 points, 0.4%, at 7,528.00. The FTSE 250 fell 39.67 points, 0.2%, at 18,662.32, and the AIM All-Share was down just 0.19 of a point at 723.26.
The Cboe UK 100 was down 0.3% at 751.52, the Cboe UK 250 was down 0.1% at 16,193.47, and the Cboe Small Companies was up 0.1% at 14,019.11.
In European equities on Monday, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was flat.
Sterling was quoted at $1.2558 early Monday, higher than $1.2535 at the London equities close on Friday. The euro traded at $1.0764 early Monday, higher than $1.0758 late Friday.
Analysts at Lloyds Bank commented: ‘With financial markets strong anticipating significant cuts in interest rates next year, the messaging from three of the major central banks - the Bank of England, European Central Bank and the US Federal Reserve - will be watched closely. While none of them are expected to make an immediate change to interest rates, their guidance on next year’s policy actions will command attention.
‘Policymakers from all three central banks have made attempts to row back against recent market moves but so far with only limited effect. Markets now see about a 60% probability of an ECB rate cut by March and see two 25 basis point cuts as likely by June and around a 125bp reductions in total for 2024. Expectations for the US [are] similar with almost two 25bp reduction priced by June and around five in all by year end.’
Ahead of the Fed decision, data on Tuesday is expected to show the US annual inflation rate cooled to 3.1% last month, from 3.2% in October.
The Bureau of Labour Statistics said Friday that nonfarm payrolls rose by 199,000, beating FXStreet-cited market consensus of 180,000. The figure was also above October’s reading of 150,000.
The unemployment rate fell to 3.7%, wrong-footing analysts who had predicted it would remain unchanged from the prior month at 3.9%.
Meanwhile, the rate of pay annual pay growth remained unchanged. Average hourly earnings rose 4.0% in November from the prior year, in line with forecasts and the prior month. October’s reading was revised downwards slightly from 4.1%, however.
Against the yen, the dollar surged JP¥146.07 early Monday UK time, from JP¥144.51 on Friday.
The yen suffered after Bloomberg reported that Bank of Japan officials are in no rush to lift interest rates from negative territory.
The BoJ’s policy rate stands at -0.10%, where it is expected to remain after the central bank’s next decision a week on Tuesday.
Citing people familiar with the matter, Bloomberg reported that policymakers have not seen enough evidence of wage growth to justify a policy shift for now.
In London, mining shares were under pressure after some tepid data out of China, a major buyer of minerals. Glencore fell 2.1%, while Rio Tinto declined 1.3%.
China’s economy slipped further into deflation in November, according to official figures released on Saturday.
Consumer prices fell by 0.5% compared to the same month last year, the sharpest fall in three years, according to China’s National Bureau of Statistics. It was steeper than the 0.2% fall seen in October.
This means that Chinese consumer prices are now in deflationary territory for the second month in a row.
SPI Asset Management analyst Stephen Innes labelled it ‘another unfavourable inflation report’.
‘This development has intensified worries about potential deflation impacting corporate earnings and profit margins, dragging down the region markets in a negative feedback loop,’ the analyst commented.
Back in London, Qinetiq was the best FTSE 250-listed performer, up 3.5%. JPMorgan lifted the defence technology to ’overweight’ from ’neutral’.
Synectics jumped 30% as the security and surveillance systems provider predicted annual results will be ‘materially ahead of market expectations’.
It hailed strong trading in the second half ended November 30, particularly in the oil and gas market.
Its order book is in loftier territory, sitting at £28.6 million at year-end, up from £24.4 million a year earlier.
Gold was quoted at $1,996.88 an ounce early Monday, down from $2,006.01 on Friday. Brent oil was trading at $75.97 a barrel early Monday, largely unmoved from $76.00 late Friday.
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