Equities made a quiet start to the week, but gold provided some excitement, hitting a record high before returning some gains.
Focus this week is on US jobs data, with the latest nonfarm payrolls report due on Friday.
The FTSE 100 index opened down 26.35 points, 0.4%, at 7,503.00. The FTSE 250 was up 38.33 points, however, 0.2%, at 18,446.98, and the AIM All-Share nudged up just 0.16 of a point at 716.45.
The Cboe UK 100 was down 0.4% at 748.49, the Cboe UK 250 was up 0.2% at 15,970.38, and the Cboe Small Companies was up 0.1% at 13,373.58.
In European equities on Monday, the CAC 40 in Paris fell 0.2% and the DAX 40 in Frankfurt gave back 0.1%.
In Asia on Monday, Tokyo’s Nikkei 225 fell 0.6%. The Shanghai Composite in China was 0.3% lower, while the Hang Seng in Hong Kong slumped 1.1%. The S&P/ASX 200 in Sydney, however, surged 0.7%.
In the US on Friday, Wall Street ended higher, with the Dow Jones Industrial Average adding 0.8%, while the S&P 500 and the Nasdaq Composite each rose 0.6%.
The outlook for US interest rates will be in focus this week. The latest nonfarm payrolls report is on Friday and the precursor ADP reading on Wednesday.
SPI Asset Management analyst Stephen Innes commented: ‘A slow Monday start as traders prepare for a slew of actionable US economic data scheduled for release this week, poised to be crucial in refining traders’ expectations regarding Federal Reserve policy. The insights garnered from this data may prove pivotal for the upcoming refresh of the dot plot later in the month. An exceptionally robust jobs report, and an unexpected surge in CPI figures on December 12 would be necessary to entertain the possibility of a rate hike during the last FOMC meeting of 2023. The Committee has firmly decided against further hikes unless compelling data prompts such action.’
Friday’s US jobs report could spark a ’Santa rally’ for equity markets before the end of the year. Hotter-than-expected data could prompt the Federal Reserve to leave interest rates higher for longer, however.
Fed Chair Jerome Powell on Friday said it is still ‘premature’ to speculate on when the US central bank will start cutting interest rates.
Some pressure on the dollar eased before the end of last week, Dutch bank ING noted.
‘Supporting the dollar later in the day, however, were comments from Fed Chair, Jay Powell. He was much more equivocal than his colleague, Christopher Waller, who earlier in the week had signalled that the inflation battle was nearly won. Indeed, Powell’s comments left in the prospects of further rate hikes - which very few in the market believe will materialise,’ ING analysts added.
‘Against this backdrop will the dollar trade on US data this week. Given the blackout period ahead of the FOMC meeting on December 13th, there will be no Fed speakers this week. Instead, the focus will be on some quite important data. Beyond today’s Durable Goods Orders, tomorrow sees the release of US services ISM and the JOLTS job opening data. Do job openings correct back lower and suggest a better balance in the US labour market - a mild dollar negative?’
The pound was quoted at $1.2662 early Monday, largely flat from $1.2659 late Friday afternoon. The euro stood at $1.0866, rising from $1.0859. Against the yen, the dollar was trading at JP¥147.04, down from JP¥147.37.
Brent Crude traded at $78.12 a barrel early Monday, down from $78.99 late Friday. Gold slipped, after breaching the $2,120 an ounce mark earlier Monday.
Gold fetched $2,062.61 an ounce early Monday in London, down from $2,070.40 at the time of the European equities close on Friday. It traded as high as $2,120.83 an ounce earlier on Monday.
Rabobank noted that bitcoin, which also sometimes moves inversely to the dollar, was also on the up.
‘If asset classes variously disparaged as an ’inert pet rock’ and ’digital magic beans’ are surging, are we heading back to the ‘good times‘ of the Covid bubble economy? Or are higher prices for zero-yield monetary alternatives a signifier of the market’s (lack of) confidence in the US dollar? There is some argument for the latter. The DXY index has been under substantial pressure as rate cuts get pulled forward along the yield curve and signs of deflation emerge in major economies,’ Rabobank analysts added.
In London, jet engine maker Rolls-Royce and packaging firm DS Smith led the way in the FTSE 100, rising 1.9% and 1.5%.
JPMorgan raised Rolls-Royce to ’overweight’ from ’neutral’. Barclays lifted DS Smith to ’overweight’ from ’equal weight’.
Miners, which surged turbocharged the index on Friday, surrendered gains on Monday. Rio Tinto fell 2.3%, while Glencore lost 1.9%.
Shares in Petrofac, a provider of services to the energy industry, slumped 8.3%. The company said it is mulling a ‘range of strategic and financial options’ to bolster its coffers.
‘Management has been making progress in organic actions to unwind working capital, collect receipts on ongoing and new contracts and to unlock long-outstanding commercial settlements. In addition, Management is considering the sale of non-core assets, and is actively engaged in discussions with financial investors to take a non-controlling position in certain other components of the business portfolio,’ it added.
Cloud-based payment services provider Cornerstone FS was among the best AIM performers, surging 25%. It predicts 2023 adjusted earnings before interest, tax, depreciation and amortisation ‘materially above current market expectations’.
‘I am pleased to be able to report that we are continuing to experience excellent trading momentum. This reflects the actions that we have taken during the year to enhance our sales team and expand our offer, such as by broadening the range of currencies and countries where we can transact,’ CEO James Hickman said.
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