China growth worries meant the FTSE 100 started the week on the back foot, while the pound achieved further gains, as dollar weakness persisted.
Inflation readings from the US and eurozone, in the form of personal consumption expenditures and consumer price index readings respectively, are among the major risk events for equity markets this week.
If both come in hotter-than-expected on Thursday, investors may need to rethink their dovish interest rate expectations for the US Federal Reserve and the European Central Bank.
The FTSE 100 index traded down 17.74 points, 0.2%, at 7,470.46. The FTSE 250 inched up 9.29 points, 0.1%, at 18,467.39, and the AIM All-Share added just 0.33 of a point at 717.23.
The Cboe UK 100 was down 0.3% at 745.67, the Cboe UK 250 edged up 0.1% at 16,014.51, and the Cboe Small Companies was 0.2% lower at 13,421.54.
In European equities, the CAC 40 in Paris was 0.1% lower, while the DAX 40 in Frankfurt gave back 0.2%.
Underwhelming China data, as well as more negative headlines for its embattled property sector, meant the FTSE 100 lacked zeal on Monday.
Industrial profit growth for Chinese companies eased last month, numbers from the National Bureau of Statistics showed.
According to the NBS, industrial profit in October rose 2.7% year-on-year, ‘achieving positive growth for three consecutive months, and the efficiency of industrial enterprises continued to improve’. However, growth eased markedly from a roughly 12% surge in September.
Industrial profit declined 7.8% year-on-year over the wider 10-month period. The pace of decline narrowed from the 9.0% seen in the first nine months of 2023.
In the mining industry alone, profit declined by 20% year-on-year over the 10 months.
Chinese police have opened an investigation into Zhongzhi Enterprise Group after the debt-ridden financial giant declared itself insolvent, meanwhile.
Police in Beijing, where the group is headquartered, said late Saturday they had opened an investigation into unspecified ‘alleged offences’, adding that they had taken measures against several suspects.
Zhongzhi declared itself insolvent on Wednesday with its arrears estimated at nearly $66 billion, according to a letter to investors cited by local media.
During China’s real estate boom, many developers used Zhongzhi to finance their projects.
‘Renewed worries about the outlook for the Chinese economy caused tremors across global markets at the start of the new trading week. There was a slowdown in China’s industrial profit growth during October, causing markets to speculate its government will have to come up with yet another stimulus measure to avoid the economy spluttering,’ AJ Bell analyst Russ Mould commented.
Miner Rio Tinto lost 0.5%, as China is a major buyer of minerals. Asia-focused lender HSBC gave back 0.4%, while insurer Prudential was down 0.9%.
Ahead of a big week for oil markets, Brent was on the decline, sending shares in oil majors lower too. BP fell 0.6% and Shell was down 1.0%. Over in Paris, TotalEnergies was 0.4% lower.
A barrel of Brent oil fetched $79.53 early Monday afternoon, down from $81.47 at the time of the London equities close on Friday.
‘Crude is on course for a back-to-back monthly loss, with prices down about 20% from a high in late September. The drop has been driven by signs of increased supplies from non-Opec+ countries, rising US stockpiles and the fading of the premium generated by the Israel-Hamas war. Meanwhile, the International Energy Agency sees the market tipping back into surplus next year,’ Cavendish analyst James McCormack commented.
The Opec+ cartel will hold its meeting on Thursday. The gathering was originally planned for Sunday, before being postponed.
An ounce of gold traded at $2,012.04 early Monday afternoon in London, up from $1,999.98 late Friday. Gold miner Fresnillo was the best FTSE 100 performer, up 5.9%.
Supported by a weaker dollar, gold rose as high as $2,018.15 on Monday, its loftiest level since mid-May.
The pound rose to $1.2617 around midday on Monday, from $1.2605 late Friday, as the greenback endured a tepid start to the week. The euro climbed to $1.0947 from $1.0935. Versus the yen, the dollar faded to JP¥149.07 from JP¥149.59.
Analysts at ING commented: ‘At the start of a quiet week for data, the dollar is hovering near recent lows. However, we do not think this is yet the start of the big, cyclical turn lower in the dollar we expect for next year. Instead, falling volatility and firm short-dated US yields can probably see the dollar hold onto current levels.’
Rightmove surged 5.4%. The property portal said revenue growth has ‘continued to track marginally ahead of consensus expectations’ since it reported first-half results back in July. This is despite ‘uncertainty in the housing market’.
It has seen better-than-forecast average revenue per advertiser. Its ARPA is set to grow between £112 and £116 in 2023, better than its previous forecast of £103 to £105. In 2022, its ARPA amounted to £1,314. Its overall revenue growth outlook is at the 8% to 10% range.
It predicts underlying operating profit growth of 7% to 8%. In 2022, it achieved underlying operating profit of £245.4 million, on revenue of £332.6 million.
In addition, it set a 2028 revenue target of over £600 million, with underlying operating profit targeted at over £420 million.
Entain was the worst FTSE 100 performer, down 2.3%, after Goldman Sachs double downgraded the bookmaker to ’sell’ from ’buy’.
Johnson Matthey got a double-upgrade from Bank of America, however. The investment bank now rates the speciality chemicals firm at ’buy’, lifted from ’underperform’. Johnson Matthey shares rose 3.8%, the best FTSE 250 performer.
Elsewhere, Frontier Developments shed 19%. The Cambridge-based video games developer and publisher believes it will no longer meet market expectations for revenue, due to a ‘lower than expected sales performance’ of the Realms of Ruin title.
Frontier had been expected to generate £108 million worth of revenue for the year to May 31, which would have represented a roughly 3.3% rise from £104.6 million in financial 2023. It now expects annual revenue in the range of £80 million to £95 million, at worst, a decline of around 24% year-on-year.
Still to come on Monday there is a US new home sales reading at 1500 GMT.
Stocks in New York were called lower ahead of the data. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite are called down 0.1%.
Monday’s economic calendar is light, but inflation data takes centre-stage on Thursday. There is a eurozone consumer price index reading on Thursday, before the latest US core personal consumption expenditures gauge, the Federal Reserve’s preferred inflationary measure.
SPI Asset Management analyst Stephen Innes labelled Thursday’s PCE data as a ‘key litmus test for early rate cut bets’.
‘The upcoming inflation updates from the US and Europe are set to be prominent features on the macroeconomic agenda for the week ahead. These figures could reinforce market speculation regarding a potential shift in monetary policy in 2024 aimed at preventing inadvertent tightening through the real policy rate channel,’ Innes added.
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