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“The FTSE 100 dipped on Monday as weak commodity prices hit the big resources stocks which populate the index,” says AJ Bell investment director Russ Mould.
“In general, the momentum which stocks built up in the latter part of 2023 seems to have been lost for now as some of the excitement over interest rates has dissipated and doubt has crept in about a soft landing for the economy.
“US inflation figures scheduled for Thursday could either help get markets out of their mild New Year funk or put shares under renewed pressure, so this release will be closely monitored. Disruption to shipping routes in the Red Sea are hinting at renewed inflationary pressures coming down the pipe.”
Boeing
“Boeing’s reputation has been shattered after the incident last Friday involving one of its 737 Max planes flown by Alaska Airlines. It is the latest in a string of problems for the company, which include the grounding of 737 Max plans in 2019 after two crashes and subsequent delivery delays and production issues.
“Safety is of paramount importance in the aviation sector and airlines using 737 Max planes will be thinking long and hard about their future aircraft requirements and how Boeing might play a smaller role, or none at all. That might explain why Airbus shares jumped on Monday as investors are betting it could take even more market share from Boeing.
“There is no room for error building planes and cutting corners in the production stage could have catastrophic consequences. There are naturally questions being asked about the quality checks and whether Boeing is trying to do too much too fast.
“Boeing’s management will be under considerable pressure from the regulators and customers to explain what’s going on, which means considerable headwinds ahead for the business. It’s no wonder investors have raced to sell the shares as the risks to the investment case have just shot up.”
Shell
“The usual teaser for Shell’s quarterly results did little to enthuse investors as Saudi Arabia’s decision to cut crude prices dampened sentiment towards the sector.
“If it wasn’t for the threat of disruption to supplies thanks to tensions in the Middle East, one might have expected crude prices to come under sustained pressure as inventories and production build and signs of demand weakness emerge.
“At least Shell can lean on its big integrated gas arm. Though news its performance improved in the fourth quarter – when many of the world’s big consumers of natural gas are facing seasonally cold temperatures – hardly feels like a big revelation.
“A weak performance for its chemicals division is compounded by the big writedown associated with a Singapore refining hub it is looking to sell.
“Shell has been a beneficiary of higher commodity prices over the approximate two years which have followed Russia’s invasion of Ukraine. The company needs to show it can deliver when market conditions aren’t so helpful.
“A year into the job, chief executive Wael Sawan has hinted at a more pragmatic approach to the energy transition with any investments having to stand on their own merits. This may have been encouraging news for some shareholders but pressure will mount from other quarters for the company not to backslide further on its net zero commitments.
“At the same time Sawan has a lot to do for Shell to catch up to the equity valuation enjoyed by rivals in the US who have been less committed to a green agenda full stop.”
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