The FTSE 100, European and US indexes were higher on Monday as markets awaited US GDP data later in the week. (Spencer Platt via Getty Images)
The FTSE 100 and US stocks headed higher on Monday, even as storm Isha battered some European countries and traders await key US data later in the week.
High winds and lashing rain caused power outages and disrupted travel across the UK and parts of Europe, with flights were grounded at multiple airports.
The FTSE 100 (^FTSE) closed 0.4% higher, while the DAX (^GDAXI) was up 0.7% and Paris’s CAC (^FCHI) rose 0.6%. The pan-European Stoxx 600 (^STOXX) also rose 0.7%.
Gambling group Entain (ENT.L) and grocer house builder Persimmon (PSN.L) were among the top gainers in the FTSE by the afternoon, each rising almost 4%.
US stocks also rose as markets closed in Europe, as market watchers await Thursday’s gross domestic products (GDP) data, which will give insight into the health of the economy and act as a guide of any potential changes in the Federal Reserve’s interest rate path. Indices were driven by buoyant tech stocks.
The S&P 500 (^GSPC) was up 0.3%, the Dow (^DJI) rose 0.4% and the Nasdaq (^IXIC) jumped 0.4%.
As markets ticked up, the Financial Times reported that hedge funds cashed in on punchy bets on stock markets to the tune of $67bn in 2023.
Citing research from LCH investments, the paper reported that the 20 hedge funds which have performed best since their inception manage 19% of assets but they made around a third of annual profits last year, in dollar terms.
Among top profit takers in 2023 included Sir Christopher Hohn’s TCI, Ken Griffin’s Citadel and Andreas Halvorsen’s Viking.
Read more: What UK retail sales slump reveals about recession and interest rates
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Buying action supports oil
Chris Beauchamp from IG has a note on oil:
Slowly but surely the buyers have taken control of oil prices. After a wobbly start to the week crude is back on the up, following weekend reports that suggest the US is now committed to policing the Red Sea for an indefinite period. Tensions in the region remain high, and have the potential to drive more upside for oil.
US stocks supported by tech giants
Here’s Yahoo Finance US’s take on another green day for US indices:
US stocks inched higher on Monday to put the S&P 500 on track for another record high, as investors became more upbeat about the health of the economy and looked to coming earnings for signs of an AI boom for techs.
S&P 500 (^GSPC) gained 0.4% after the index notched its first record close since January 2022 on Friday. Dow Jones Industrial Average (^DJI) added as much as 0.7% to touch a fresh intraday high, while stocks in the tech-heavy Nasdaq (^IXIC) jumped 0.4%.
An AI-fuelled surge in tech shares has helped pull stocks out of their early-2024 doldrums, bringing the major indexes into positive territory for January. Given that, quarterly results from the likes of Netflix (NFLX) and Tesla (TSLA) later this week will be closely watched, as how tech earnings perform could well indicate where the market heads in the short term.
Netflix is one of our tickers to watch today as it is set to report earnings on Tuesday. Here’s our take:
Investors are expecting another quarter of subscriber growth after Netflix rolled out ad-tier subscription plans and launched a crackdown on password sharing.
“Investors will be pleasantly surprised when they report their numbers. They should beat that 8.75 million [new subscriber] target, and I think they’ll probably beat it by a million or two,” Michael Pachter, Wedbush Securities managing director of equity research, told Yahoo Finance.
Netflix anticipates an 11% year-over-year increase in revenue to $8.7bn for the last three months of 2023. The company has also raised the profit margin guidance, expecting a 20% operating profit margin for 2023.
Mining companies need to dig deep
Mining companies such as Rio Tinto and Glencore are acting as a drag on the FTSE today. Here’s Michael Hewson of CMC Markets with the skinny:
“Glencore shares [slid] to 18-month lows,” he said.
“Endeavour Mining is also lower after reporting a disappointing Q4 performance, although it was more optimistic on gold production for 2024, albeit geared more towards the second half of the year.
“Natural gas prices have also continued to come under pressure, sliding closer to the lows we saw last summer, which is prompting some underperformance from the likes of BP and Shell.”
UK interest rates to fall to 4% this year, say experts
Here’s Yahoo Finance UK’s Pedro Goncalves on the potential interest rate path for 2024:
A drop in inflation will push the Bank of England (BoE) to cut interest rates to 4% this year, according to a study by a leading forecaster.
Despite a surprise increase in price rises to 4% in December, EY Item Club said inflation is still set to drop to the Bank’s 2% target by May.
This will allow Threadneedle street to cut interest rates from their 15-year high of 5.25% to 4% by the end of the year, the advisory business said.
Read more: UK interest rates to fall to 4% this year, say experts
PMI predictions
Here’s Matthew Ryan, head of market strategy at Ebury on the upcoming PMI on Wednesday:
A nagging concern for investors remains the rather fragile state of Britain’s economy. Friday’s retail sales report was particularly soft, with sales posting their largest monthly downturn since 2021, i.e. when the pandemic restrictions were still in place. It remains a coin toss as to whether a technical recession will be confirmed for Q4 when the official GDP data will be released in mid-February.
If last week’s data is anything to go by, a mild recession appears more likely than not. This week’s PMI data is expected to be far more upbeat, and remain well above the level of 50 that denotes expansion, which should support sterling.
Coming up this week
Tues: Japan’s interest rate decision
Weds: Eurozone PMI, UK PMI, Bank of Canada rate decision
Thurs: German IFO buisness climate index for January, ECB rate decision, US GDP
Fri: US PCE price index
A mixed bag in Asia
It appears to have been a wild day of trade across China and Japan. The Nikkei (^N225) was the day’s winner, having risen 1.6%, to a 32-year high. The Nikkei was buoyed by stocks such as Yamaha Motor, which finished up 5.6% as it made a play for the electric vehicle market with the acquisition of Torqeedo from Germany’s Deutz.
Meanwhile, the Hang Seng (^HSI) hit a 15-month low with heavy selling across real estate stocks. The People’s Bank of China said it would leave one- and five-year loan prime rates left unchanged at 3.45% and 4.2%, respectively. The index was 2.4% by the end of the day.
The SSE Composite (000001.SS) followed suit, falling 2.7% by the closing bell.
Good morning from London
Hello from London, this is Lucy Harley-McKeown, ready to start the week with more scintillating market moves. There were some dramatic swings overnight in Asia but London markets are starting the day in the green. Let’s get to it.
Watch: Storm Isha leaves thousands of people without power
Robert Johnson is a UK-based business writer specializing in finance and entrepreneurship. With an eye for market trends and a keen interest in the corporate world, he offers readers valuable insights into business developments.
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