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LONDON MARKET CLOSE: FTSE 100 drifts lower as eyes turn to Fed

20th Nov 2023 16:53

(Alliance News) - European equities closed mixed in muted trade at the start of the week, with focus turning to Tuesday's Federal Reserve meeting minutes, as investors mull the outlook for US interest rates.

The FTSE 100 index closed down 7.89 points, 0.1%, at 7,496.36. The FTSE 250 rose 31.18 points, 0.2%, to 18,599.05, and the AIM All-Share climbed 2.90 points, 0.4%, at 721.95.

The Cboe UK 100 ended down 0.1% at 747.69, the Cboe UK 250 rose 0.2% to 16,101.44, and the Cboe Small Companies climbed 0.4% higher at 13,510.20.

In European equities on Monday, the CAC 40 in Paris closed up 0.2%, while the DAX 40 in Frankfurt fell 0.1%.

In New York, the Dow Jones Industrial Average was up 0.3% at the time of the European equities close. The S&P 500 was 0.4% higher, while the Nasdaq Composite surged 0.8%.

Sterling was quoted at USD1.2497 late Monday afternoon, higher than USD1.2421 at the London equities close on Friday. The euro traded at USD1.0942, up from USD1.0881 at the European equities close on Friday. Against the yen, the dollar was quoted at JPY148.32, falling from JPY149.77.

"The US dollar began the week with a relatively weak performance, extending its sell-off from last week and reaching a two-month low. Market expectations continue to lean toward no interest rate hikes in December and a potential rate cut as early as May and weigh on the currency, as inflation eased and treasury yields retreated. Tomorrow's FOMC meeting minutes could provide further insights into policymakers' thoughts. The euro and the British pound were both able to maintain their positive trends as the dollar sank. However, both currencies could see some risks in the face of the expectations around the next steps in their respective monetary policies and local economic developments," DHF Capital analyst Bas Kooijman commented.

Minutes from the Federal Reserve's latest meeting are published on Tuesday, a day earlier than they usually would be, due to the Thanksgiving holiday on Thursday shortening the trading week. Financial markets in New York reopen on Friday, though only for an abbreviated equity trading session.

At its meeting at the start of November, the Federal Reserve left interest rates unchanged. In a widely expected move, the central bank unanimously agreed to hold the key federal funds rate in a target range between 5.25%-5.50%, a 22-year-high, where it has been since July.

But since then, Chair Jerome Powell warned the central bank would hike again if need be, offering some support to the dollar. The euro slipped below the USD1.07 mark in the wake of Powell's words. But favourable US inflation data last week, which showed a slowdown in the annual rate to 3.2% in October from 3.7% in September, put the buck on the back foot.

The Fed meeting minutes are released at 1900 GMT. Elsewhere, the economic calendar has a UK public sector finances reading at 0700 GMT, on the eve of UK Chancellor Jeremy Hunt's all-important autumn statement.

Ahead of the announcement, UK Prime Minister Rishi Sunak has promised to cut tax "carefully and sustainably" after meeting his target of halving inflation.

The prime minister did not give specifics about how the tax burden would be reduced.

But Sunak said he was able to move on to the "next phase" of the government's economic plan after inflation fell to 4.6% in October.

In London, Diploma jumped 10%. The supplier of technical products and services reported a year of double-digit growth.

Revenue in the year ended September rose 19% year-on-year to GBP1.20 billion from GBP1.01 billion, or 8% on an organic basis - ahead of its own forecasts of 7%. Meanwhile, pretax profit rose 20% to GBP155.6 million from GBP129.5 million. Adjusted operating profit rose 24% to GBP237.0 million, which was ahead of company-compiled analyst consensus expectations of GBP230.9 million.

Looking ahead, it expects growth in financial 2024 to be in line with its financial model "albeit with stronger margins".

Ashtead fell 10%, the worst FTSE 100 performer, however. It said it expects to report "record results" for its half year to October 31, but said lower operational activity across sectors has affected its performance in the latest quarter.

Ashtead said revenue late in the second quarter and into the third was hit by lower emergency response activity, due to a quieter hurricane season and fewer naturally occurring events like wildfires. Also in both quarters, its Film & TV business was impacted by the recent actors' and writers' strikes.

Shares in consumer goods firms Unilever and Reckitt, which closed down 0.4% and 1.3% on Monday, both hit 52-week lows. The duo, which both generate sizeable earnings outside of the UK, struggled amid the stronger pound.

Insurer Admiral and housebuilder Berkeley Group shined, spiking to 12-month highs. The duo, operating in sectors sensitive to robust interest rates, rose 0.9% and 0.7% on Monday.

Also supporting the FTSE 100, Shell and BP rose 1.3% and 0.6%. The duo tracked Brent prices higher.

Brent Crude fetched USD82.78 a barrel late Monday, up from USD79.74 late Friday. Speculation mounts that Saudi Arabia may extend its production cuts to boost oil prices as the 13 members of Opec and 10 other oil-producing countries, including Russia, or so-called Opec+, prepare to meet on Sunday.

Gold was quoted at USD1,974.08 an ounce late Monday afternoon, falling from USD1,981.88 on Friday.

Back in London, Capita rose 4.7% as it announced a 10-year contract to manage the UK's Civil Service Pension Scheme for the cabinet office, starting in September 2025.

The London-based consulting, transformation and digital services business said the GBP239 million contract aims to modernise pension administration systems via enhanced system design and digital innovation.

Tuesday's local corporate calendar has half-year results from electronics seller AO World and flexible workspace provider Workspace Group.

By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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