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“Markets continue to be choppy as investors recalibrate expectations for interest rate cuts this year. After euphoria last November and December amid hopes the Fed would cut rates as soon as March 2024, the central bank has since tried to dampen expectations and the latest meeting minutes further muddied the water,” says Russ Mould, investment director at AJ Bell.
“Rate cuts now look as if they are going to be a story for the middle of the year and that’s prompted investors to temporarily pause for thought, leading to bouts of profit taking from the recent rally.
“As a result, Wall Street has had a weak start to the year with the Nasdaq Composite falling 3.3% and the S&P 500 down 1.7%.
“The market is also keeping a close eye on recent strength in oil prices, driven by concerns that issues in the Red Sea shipping lanes could disrupt supplies. Higher oil prices and any problems transporting goods to major locations are both key inflationary factors and are naturally driving market concerns that interest rate cuts may not happen until further into the future.
“The FTSE 100 slipped 0.6% on Friday amid a lack of corporate news to drive trading volumes. JD Sports tried to claw back yesterday’s losses triggered by a profit warning, and it was one of only eleven stocks in the index to be in positive territory on the last trading day of the week.
“Investors piled into defensive names in the utilities, healthcare and grocery sectors, seemingly wanting to hide in companies that should be in demand no matter the state of the economy.
“The bulk of the FTSE 100 was in the red, led by Endeavour Mining on the sacking of its CEO, followed by economically sensitive stocks IMI, Mondi and RS Group.”
Drinks companies
“Diageo continued its losing streak after news last November of sales weakness in Latin America and the Caribbean. Its shares are now trading at their lowest level since November 2020. Various fund managers have been talking up the stock, saying the premiumisation trend in the drinks sector still has legs, yet there are other investors who feel let down by what they thought was a stock that never caused any drama.
“Diageo was also caught up on Friday by a sell-off for the broader drinks sector after China launched an ‘anti-dumping’ investigation into brandy from the European Union. Anti-dumping is an import duty charged in addition to normal customs duty and can be levied when a foreign company sells an item significantly below their normal price. Remy Cointreau fell 7%, taking its shares to their lowest level since May 2020, while Pernod Ricard dropped 4%.
“This represents yet another point of tension between China and the West and suggests geopolitical developments could be a key worry point for markets in 2024.”
Endeavour Mining
“The abrupt sacking of gold producer Endeavour Mining’s chief executive Sebastien de Montessus has inevitably caused jitters among the company’s shareholders.
“The fear, rightly or wrongly, will be that what has been reported to date is just the tip of the iceberg. Also, de Montessus’ comments on his departure suggests he is unlikely to take the news lying down.
“Even if his explanation for the flagged irregular payment stands up, the allegations around personal conduct with colleagues add another layer to this scandal and are an uncomfortable echo of the departures of incumbent CEOs at BP and McDonald’s in recent years. They may also pose questions about the wider culture of the mining business.
“The company will hope deputy chair and Anglo American alumni Ian Cockerill can prove a safe pair of hands as temporary CEO and help steer the business through the current turmoil. However, the exit of the man who has led the business since 2016 seems certain to lead to some disruption.
“With the company expected to announce its full year results before the end of the month, Endeavour will need to report a solid operational and financial performance if it wants to start the process of winning back the market’s trust.”
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