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London open: Possibility of slower Fed rate hikes buoys stocks
Stocks were a tad higher at the start of the week with investors shaking off the freezing temperatures in London and downbeat forecasts for the UK economy out of consultancy EY, helped by increased speculation of a downshift in the speed of rate hikes in the US.
It was also against the backdrop of the latter that analysts in the City were mulling the outlook for financial markets on either side of the Pond.
“While there may be some logic in the argument that we may have seen the peaks in US markets, given how they have performed in the last few months, there is less of an argument when you look at markets in Europe, which look set to open higher later this morning,” said Michael Hewson, chief market analyst at CMC Markets UK.
“Valuations in Europe are lower to begin with, and on an income/dividend basis much more compelling, compared to the US, with the FTSE100 and DAX both trading on forward dividend yields of 3.77% and 3.36% respectively.”
As at 0825 GMT, the FTSE 100 was trading up by 0.10% at 7,778.88 while Sterling was edging higher by 0.14% to 1.2414.
Dragging on the Greenback, at the end of the previous week, Federal Reserve Governor, Christopher Waller, joined the ranks of top officials arguing for a downshift in the pace of rate hikes to 25 basis points per meeting.
At last count, the US dollar index was drifting lower by 0.23% to 101.78, having hit an intra-session low of 101.60 overnight.
Euro/dollar hit a high of 1.0927 in Asian trading, putting it “just a couple of pips away from the major 50% retracement on 2021-2022 selloff,” noted Swissquote analyst Ipek Ozkardeskaya.
EY’s updated forecasts, published on Monday, were for a drop in UK gross domestic product of 0.7% in 2023, down from the 0.3% contraction it predicted in October, the Guardian reported.
Projections for 2024 and 2025 were revised lower as well, from 2.4% and 2.3% to 1.9% and 2.2%, respectively.
Most markets in Asia remained closed on Monday, in observance of the Lunar New Year holiday across Asia Pacific, although those that remained open generally performed well.
On Saturday, China’s Center for Disease Control and Prevention said that the present wave of Covid-19 had already infected roughly four-fifths of the country’s population, according to a Reuters report.
Richard Hunter, Head of Markets at Interactive Investor also noted early reports that travel demand in China during the new year had beaten expectations which “could augur well as a sign of recovery in both economic activity and consumption”.
At 1500 GMT, the US Conference Board would publish its index of leading economic indicators for the month of December. In parallel, Eurostat was to publish its preliminary reading for consumer confidence in the single currency bloc for the month of January.
The data would be followed at 1745 GMT by a speech from European Central Bank chief, Christine Lagarde, at Deutsche Boerse’s annual reception.
The week’s key economic releases would come on Thursday and Friday, in the form of the latest inflation data out of the US. Investors were also awaiting quarterly earnings from roughly one quarter of the S&P 500’s components.
Saga studies asset sales, National Express and Balfour Beatty clinch contracts
Saga, the specialist provider of products and services to those over 50 confirmed that it was in talks to potentially sell Acromas Insurance Company Limited with a view to reducing its debt pile. Its board has “concluded that a potential disposal of its Underwriting business is consistent with Group strategy and would crystalise value and enhance long-term returns for shareholders.”
National Express Group said Its German business had won a €1bn contract to operate the RE1 and RE11 Rhein-Ruhr-Express (RRX) train lines to 2033. The company took over the operation of the two lines in February 2022 through an emergency contract award. National Express now operates all three asset light RRX lots under long term contracts, the company said on Monday.
Infrastructure group Balfour Beatty said it had been awarded a £1.2bn contract by Britain’s National Highways to deliver a package of works for the proposed Lower Thames Crossing. The company said it would be responsible for the design and delivery of more than 10 miles of new highway as part of the project to build a new tunnel under the River Thames aimed at easing traffic congestion in the south of England.
Primary Health Properties has bought Irish property management business Axis Technical Services and signed a long-term agreement providing access to a strong pipeline of future primary care projects in Ireland, the company said on Monday. Axis manages a portfolio of more than 30 properties, including the majority of PHP’s Irish portfolio, it added. No financial details were disclosed.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | +4.01% | +28.40 | 736.20 |
| 2 |  |
Itv Plc | +1.85% | +1.46 | 80.52 |
| 3 |  |
Halma Plc | +1.62% | +34.00 | 2,139.00 |
| 4 |  |
Antofagasta Plc | +1.50% | +26.00 | 1,756.00 |
| 5 |  |
Ferguson Plc | +1.46% | +160.00 | 11,110.00 |
| 6 |  |
Rio Tinto Plc | +1.24% | +77.00 | 6,290.00 |
| 7 |  |
Anglo American Plc | +1.19% | +42.50 | 3,608.50 |
| 8 |  |
Barratt Developments Plc | +1.19% | +5.30 | 450.40 |
| 9 |  |
Associated British Foods Plc | +1.18% | +21.50 | 1,848.00 |
| 10 |  |
Smurfit Kappa Group Plc | +1.17% | +40.00 | 3,467.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Croda International Plc | -2.30% | -162.00 | 6,882.00 |
| 2 |  |
St. James’s Place Plc | -1.74% | -21.50 | 1,213.50 |
| 3 |  |
Fresnillo Plc | -1.42% | -13.00 | 903.40 |
| 4 |  |
Informa Plc | -1.11% | -7.40 | 657.40 |
| 5 |  |
Astrazeneca Plc | -1.07% | -120.00 | 11,080.00 |
| 6 |  |
Hiscox Ltd | -0.98% | -11.00 | 1,112.50 |
| 7 |  |
Segro Plc | -0.84% | -6.80 | 804.20 |
| 8 |  |
Severn Trent Plc | -0.64% | -18.00 | 2,799.00 |
| 9 |  |
Sse Plc | -0.60% | -10.50 | 1,740.00 |
| 10 |  |
Marks And Spencer Group Plc | -0.50% | -0.75 | 150.25 |
Monday newspaper round-up: Recession, Saga, National Grid
The UK’s impending recession could be twice as bad as previously thought, according to leading economic forecasters at the business consultancy EY. Reduced government support, higher taxes and an overall worsening outlook have all led the firm’s analysts to conclude that the next three years could be worse than they anticipated three months ago. In October, EY’s Item Club had predicted a 0.3% contraction in gross domestic product (GDP) this year, followed by 2.4% growth next year and a 2.3% rise in 2025. But in an updated forecast released on Monday, it said GDP would drop 0.7% this year, followed by growth of 1.9% and 2.2% over the next two years. – Guardian
Saga is expected to confirm the sale of its underwriting business today as it seeks to raise between £80 million and £90 million to bring down its debt. The cruise and insurance company is exploring a sale of Acromas Insurance Company Limited, its in-house underwriter, to reduce its £721 million debt. Euan Sutherland, 53, Saga’s chief executive, is trying to offload the business as he pushes ahead with turnaround efforts that were launched in 2019. – The Times
Households will be paid to cut their electricity use for the first time on Monday between 5pm and 6pm, under plans being drawn up by the National Grid. As temperatures plummet to -2C today ramping up pressure on Britain’s supplies, the power network operator is planning to call on consumers to use less electricity to help it manage the system. Around a million people have signed up to the scheme which will see them paid as much as £10 a day to cut the amount of electricity they use at certain times as part of efforts to tackle the energy crisis. – Daily Telegraph
Royal Mail boss Simon Thompson faces being hauled back in front of MPs on allegations of misleading Parliament. The business select committee is due to meet tomorrow to set its agenda, which could include calling the chief executive back for further questioning following a bruising appearance last week that saw him quizzed about strikes, his £140,000 bonus and plans to stop delivering letters on Saturdays. – Daily Mail
The number of people available for work in the City of London hit a five-year high in 2022. There was a 36 per cent rise in jobseekers for the City’s financial services sector year-on-year – the highest level since 2017. Vacancies were 16 per cent up on 2021, according to recruitment consultants Morgan McKinley. – Daily Mail
A mass market in affordable electric cars will not happen soon because of the difficulty of producing them on a commercially viable basis, one of the largest makers of zero-emission vehicles for British drivers has warned. Paul Philpott, UK chief executive of Kia, the fast-growing South Korean car company, said it had no immediate plans for a mass-market electric product. Some fear there is a prospect of a society of haves and have-nots in the electric car revolution because of the sheer cost of buying or financing a zero-emission vehicle. – The Times
