European markets were in confident mood on Monday ahead of a week stacked with central bank decisions, though crude prices suffered, tempering the FTSE 100 and hurting shares in its pair of oil majors.
All eyes are on whether the Federal Reserve decides to pause on Wednesday, as choreographed, or whether Tuesday’s US inflation reading prompts it to hike again.
The FTSE 100 index inched up 8.33 points, 0.1%, at 7,570.69. The FTSE 250 rose 99.15 points, or 0.5%, at 19,190.81, though the AIM All-Share lost 0.86 of a point, 0.1%, at 792.48.
The Cboe UK 100 closed up 0.1% at 754.66, the Cboe UK 250 added 0.5% at 16,728.17, and the Cboe Small Companies rose 0.1% to 13,870.47.
Analysts at Lloyds Bank commented: ‘Policy updates from the US Federal Reserve and the European Central Bank along with some key data releases in the UK and US should give markets plenty to digest. The latest policy decisions from the Fed (Wednesday) and ECB (Thursday) come hot on the heels of last week’s somewhat surprising decisions by the Bank of Canada and the Reserve Bank of Australia, both of which hiked by 25bp to 4.75% and 4.10%, respectively.
‘Recent US data have been mixed with monthly payrolls data pointing to a tight labour market, but other signs indicating a softening economy as past interest rate rises feed through. That will probably be enough for the Fed to ’pause’ rates at 5.00-5.25%. The ECB, however, is almost certain to raise them again by 25bp, which would mean rises in total of 400bp in since last summer. President Lagarde has said that there is ’more ground to cover’ to bring inflation lower.’
The dollar was mixed on Monday. The pound was quoted at $1.2511 late Monday afternoon in London, lower compared to $1.2577 at the equities close on Friday. Sterling hit an intraday high of $1.2599, falling just shy of $1.26, before succumbing to selling pressure.
The euro stood at $1.0754, up slightly against $1.0750. Against the yen, the dollar was trading at JP¥139.54, up compared to JP¥139.33.
Shares in New York were higher at the time of the European equities close. The Dow Jones Industrial Average rose 0.1%, the S&P 500 was 0.3% higher and the Nasdaq Composite added 0.6%.
Brent oil was quoted at $72.71 a barrel late Monday in London, slumping from $76.12 late Friday.
‘These are perplexing days for the oil market as benchmark crude prices did not respond to Saudi Arabia’s unilateral decision last weekend to cut production,’ SPI Asset Management analyst Stephen Innes commented.
‘And with most analysts surprised by the extent of the pullback in prices this year, expect a raft of forecast downgrades as the bullish thesis gives way to visible supply, a global manufacturing funk and deflationary pressure from China.’
Shell and BP closed 0.7% and 1.7% lower, hurting the FTSE 100.
Luxury retailers LVMH and Hermes rose 1.8% and 3.0%, lifting the CAC 40 in Paris. Helping to boost the DAX 40 in Frankfurt, sports apparel maker Adidas added 5.5%. Bernstein lifted the stock to ’outperform’.
The CAC 40 rose 0.5%, while the DAX 40 surged 0.9%.
Back in London, Carnival jumped 13%. JPMorgan lifted the cruise ship operator to ’overweight’ from ’neutral’. Segro fell 2.4% after Goldman Sachs cut it to ’neutral’ from ’buy’.
Elsewhere in London, AO World surged 7.8% after Frasers announced it had bought a stake in the online electricals retailer.
The Sports Direct-owner said it bought a 19% stake in AO World through the purchase of 109.4 million shares at a price of 68 pence each, for a total investment of £75 million.
Frasers said the investment was the ‘culmination of productive talks over the last two years about establishing a strategic partnership’.
AJ Bell analyst Russ Mould commented: ‘In recent years it has aspired to get more money from its customer base and a natural extension has been to focus on things that make people look and feel good beyond simply the clothes on their back. That explains its push into beauty, handbags and sofas through such brands as Flannels, House of Fraser and Sofa(.com). If it has dressed people and partially furnished their homes, it makes sense to think about other ways to get these customers to part with more cash.
‘It has become fashionable to have sports equipment at home, whether that be exercise bikes, weights or rowing machines. These are incredibly bulky to get to people’s homes, so there is merit in finding ways to make the delivery process more efficient for such items as well as existing homeware products it is selling – which is where AO’s expertise might come in handy.’
Frasers shares closed flat.
Gold was quoted at $1,957.18 an ounce late Monday, lower against $1,961.75 on Friday.
Tuesday’s economic diary has a UK unemployment reading at 0700 BST, before the key US consumer price index data at 1330 BST.
The local corporate calendar has annual results from equipment rental firm Ashtead and a trading statement from housebuilder Bellway.
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