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London’s FTSE 100 struggled on Monday, as robust US services data strengthened the case for the Federal Reserve to hold off on cutting interest rates for now.
The FTSE 100 index slipped just 2.68 points to 7,612.86. The FTSE 250 fell 154.09 points, 0.8%, at 19,018.55, and the AIM All-Share gave back 3.80 points, 0.5%, at 750.37.
The Cboe UK 100 closed down 0.1% at 761.09, the Cboe UK 250 slumped 1.0% to 16,448.70, though the Cboe Small Companies climbed 0.3% to 14,687.07.
In European equities on Monday, the CAC 40 in Paris closed marginally lower, while the DAX 40 in Frankfurt lost 0.1%.
In New York, the Dow Jones Industrial Average was down 1.0%, the S&P 500 lost 0.6%, and the Nasdaq Composite fell 0.7%.
The pound was quoted at $1.2527 at the time of the London equities close on Monday, down from $1.2639 on Friday. The euro stood at $1.0728, down against $1.0793. Against the yen, the dollar was trading at JP¥148.80 higher compared to JP¥148.35.
The US services economy made a strong start to 2024, two business surveys showed Monday.
The seasonally adjusted final S&P Global US services PMI business activity index posted 52.5 in January, up from 51.4 in December, but slightly lower than the earlier released ’flash’ estimate of 52.9.
In a separate report, The Institute of Supply Management said economic activity in the services sector expanded in January for the 13th consecutive month, beating market expectations.
The services PMI registered 53.4 in the month, accelerating from 50.5 in December. December’s figure was revised downwards from 50.6.
Capital Economics analyst Paul Ashworth commented: ‘Following on the heels of the strong labour market data, the rebound in the ISM services index to a four-month high of 53.4 in January, from 50.5, is another signal that the US economy remains impervious to the significant tightening in monetary policy over the last couple of year.’
It is not just in the US where investors are fretting over the prospect of rate cuts being later than hoped.
Shares in London-listed housebuilders struggled to make traction in the aftermath of last Thursday’s Bank of England decision.
Persimmon fell 2.5%, while Barratt Developments shed 1.6%.
Analysts at UBS commented: ‘We expect the first BoE rate cut in May 2024 (25 basis points), with total cuts of 100bps in 2024 and 175bps in 2025, bringing the bank rate to 2.5% by end-2025. However, given upside risks to our inflation forecast, we see the risk to the timing of the first cut as skewed towards a later date (August).’
CMC Markets added 18%. It plans to cut around 200 jobs, some 17% of its total workforce, as part of a cost review that was announced in November last year.
CMC said it expects to incur a one-off cost of about £2.5 million in financial year 2024, which ends on March 31. This is expected to produce annualised savings of £21 million starting from financial 2025, an 18% reduction in staff costs.
Looking ahead, CMC said trading remains in line with expectations. It is on track for full-year net operating income of £290 million to £310 million. This would be up from £288.4 million in financial 2023.
Over in Milan, UniCredit shot up 8.1%. The lender said it plans to distribute €8.6 billion to shareholders for 2023, up by about €3.35 billion the year earlier.
‘Since 2021, we will have returned this year €17.6 billion to our shareholders, underpinned by extremely strong organic capital generation and with sustainability of returns secured by our strategic momentum and significant excess capital,’ said Chief Executive Andrea Orcel.
UniCredit reported net profit of €1.92 billion for the fourth quarter, 19% higher than €1.61 billion in the comparable quarter last year, primarily helped by growth in net interest income.
Brent oil was quoted at $77.11 a barrel late Monday afternoon in London, largely unmoved from $77.09 late Friday. Gold was quoted at $2,019.86 an ounce, lower against $2,034.63.
Tuesday’s economic calendar has an Australian interest rate decision overnight. There is a UK construction PMI reading at 0930 GMT.
The local corporate calendar has annual results from oil major BP and a trading statement from lender Virgin Money UK.
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