European stocks kicked off the week strongly, with hope that US rates have hit a peak creating a supportive backdrop for equities for now, but investors may need to rethink that notion if an inflation reading comes in hot on Tuesday.
The FTSE 100 index added 65.28 points, 0.9%, at 7,425.83. The FTSE 250 rose 60.56 points, 0.3%, at 17,913.65, and the AIM All-Share ended down just 0.27 of a point at 700.82.
The Cboe UK 100 ended up 0.9% at 741.17, the Cboe UK 250 rose 0.2% at 15,475.40, and the Cboe Small Companies climbed 0.8% to 12,963.55.
In European equities on Monday, the CAC 40 in Paris added 0.6%, while the DAX 40 in Frankfurt rose 0.7%.
In New York, the Dow Jones Industrial Average was up 0.1%, though the S&P 500 and the Nasdaq Composite each lost 0.1%, as equities across the Atlantic had a more uncertain start to the day. New York-listed stocks returned some of Friday’s gains in the wake of a US credit rating outlook downgrade by Moody’s. The nation’s ’Aaa’ rating was spared, however.
Tuesday’s economic calendar has a UK labour market reading at 0700 GMT, before eurozone gross domestic product at 1000 GMT and US inflation, the main event at 1330 GMT.
The US annual consumer inflation rate is expected to have cooled to 3.3% in October, from 3.7% in September, according to consensus cited by FXStreet.
Inflation data from the UK follows on Wednesday.
Ebury analyst Matthew Ryan commented: ‘Labour data and inflation out this week are key. Markets are expecting another significant fall in core inflation, to a still high 5.8%. As with the dollar, sterling can be expected to react quite strongly to a surprise in either direction, as this remains key for Bank of England monetary policy. MPC members [Governor Andrew] Bailey and [Huw] Pill largely reiterated recent communications last week, stressing that interest rate cuts remain a long way off.”
Sterling was quoted at $1.2264 late Monday afternoon, higher than $1.2200 at the London equities close on Friday. The euro traded at $1.0696, up from $1.0670 late Friday. Against the yen, the dollar was quoted at JP¥151.59, up slightly versus JP¥151.49.
CPT Markets analyst Vikas Lakhwani commented: ’The US dollar continued to record some volatility and remained below its peak at the beginning of the month on an unclear trend as monetary policy expectations continued to change rapidly. Last week’s focus on comments from Jerome Powell and other governors of the Federal Reserve has added to the uncertainty around the next steps in monetary policy. This week, the inflation and job market data as well as risks of a government shutdown could fuel volatility.‘
In the FTSE 100, Phoenix Group was the top performer, up 5.7%.
The insurer upgraded its near-term cash generation targets, after completing a funds merger of the Phoenix Life and Standard Life businesses. It now expects to deliver around £1.8 billion in cash generation in 2023, compared to its prior target range of £1.3 billion to £1.4 billion.
‘As a result, the group expects to have significant surplus cash at its holding company at the end of 2023, which creates further balance sheet optionality,’ the firm said.
BAE Systems added 0.2%.
The firm said its recent trading has been in line with its upgraded guidance from its interim results. It is delivering ‘another year of good sales and earnings growth’, as well as ‘strong cash flow generation’. The defence firm points to a strong opportunity pipeline, as well as strong order flow on new and existing programmes, and renewals on incumbent positions.
Analysts at Shore Capital Markets commented: ‘Given BAE’s global footprint, we view the group as principal beneficiary of growing global defence budgets, which should underpin long term growth.’
Aviation stocks took flight as a key industry event kicked off. In London, jet engine maker Rolls-Royce added 3.5%, while GKN Aerospace owner Melrose climbed 3.0%.
In Paris, Airbus added 1.4%. Turkish Airlines confirmed on Monday that it was in talks with Airbus to buy up to 355 jets in a huge push to expand its fleet.
It did not disclose any financial details for the deal announced as the Dubai Air Show opens on Monday, where a number of major purchases could be signed this week.
Boeing was up 4.3% in New York as it enjoyed deal wins of its own. Emirates announced a bumper order of 95 planes and flydubai snapped up 30 wide-bodied aircraft from the firm.
Back in London, British Land rose 1.9%. The London-based commercial property developer and investor set out a promising outlook for its financial year.
The company said it now expects estimated rental value growth at the top end of its previous guidance for financial year 2024 ending March 31. It added that it was comfortable with current market expectations for financial 2024 earnings.
In May, it guided for estimated rental value growth of 2% to 4% across campuses, the same growth in retail parks and 4-5% ERV growth in London urban logistics. On Monday, it increased its guidance for retail parks to 3-5%.
Land Securities added 0.9% in a positive read-across. It reports half-year results on Tuesday.
Brave Bison gained 15% as the London-based digital advertising and technology service provider reported approximately £4 million in new and renewed contracts.
Chair Oliver Green said: ‘Trading conditions have improved noticeably since the lull in Q2, and we are pleased to see Brave Bison’s differentiated proposition attracting the right kind of customer.’
Gold was quoted at $1,945.38 an ounce late Monday afternoon, rising from $1,938.67 on Friday. Brent oil was trading at $82.39 a barrel, up from $81.12.
Tuesday’s UK corporate calendar has annual results from tobacco firm Imperial Brands and half-year numbers from telecommunications firm Vodafone Group and money transfer company Wise.
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