European stocks struggling; bullish trading in New York

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London’s FTSE 100 ended trading slightly higher on Friday, but posted its third straight weekly loss as investors scaled back bets on a U.S. interest rate cut amid robust recent data.

Tepid UK retail sales data drew attention back to the Bank of England. The weaker numbers reinforced expectations of a rate cut in May, after stronger-than-expected inflation data on Wednesday cast doubt on that prospect.

The FTSE 100 index rose just 2.84 points to 7,461.93 points. The FTSE 250 fell 76.63 points or 0.4% to 18,871.41, sliding into the red after a positive start to the day. The AIM All-Share fell 5.18 points or 0.7% to 735.83.

This week the FTSE 100 lost 2.1%, recording its third consecutive weekly loss. The FTSE 250 lost 1.7%. The AIM All-Share also lost 1.8%.

The Cboe UK 100 gained 745.81, the Cboe UK 250 fell 0.7% to 16,295.89, while the Cboe Small Companies rose 0.1% to 14,904.25.

In New York, both the Dow Jones Industrial Average and the S&P 500 rose 0.5%. The Nasdaq Composite traded 0.7% higher.

On the European stock markets, the CAC 40 in Paris lost 0.4% on Friday, and the DAX 40 in Frankfurt fell by 0.1%.

The pound was trading at $1.2669 late Friday evening in London, down from $1.2687 at Thursday’s close.

The weaker pound helped the FTSE 100 decouple from declines in other European blue-chip benchmarks.

Sterling fell in response to poor UK data.

According to the Office for National Statistics, retail sales recorded their biggest monthly decline since January 2021 amid Covid-19 restrictions. This came as a shock to the market, which had only expected a slight decline.

Retail sales fell 3.2% in December compared to November, well below market consensus. According to FXStreet, a monthly decline of 0.5% was expected. In November, retail sales rose by 1.4% compared to October.

Signs of a weakening domestic economy revived hopes that the Bank of England could start cutting interest rates more quickly.

“For markets, the drop in retail sales represents a reversal in the repricing surrounding May’s rate cut, which came after Wednesday’s surprise rise in consumer price inflation,” commented Scope Markets analyst Joshua Mahony.

The euro was trading at $1.0884 at the European close on Friday, up from $1.0853 on Thursday. Against the yen, the dollar traded at JPY 148.18, higher than JPY 148.11.

Both the European Central Bank and the Bank of Japan will announce interest rate decisions next week.

ING analysts commented: “In short, we believe that President [Christine] Lagarde and her colleagues are not as obsessed with the market’s dovish pricing expectations as many believe, and that they prefer to stick to and avoid pure data dependence “To offer guidance rather than focusing their efforts on a rate cut. In other words, don’t expect a significant change in the ECB’s language this month.”

The BoJ’s decision comes in the wake of weaker Japanese inflation data.

Prices in the world’s third-largest economy rose 2.3% year-on-year in December, compared with 2.5% the previous month, excluding volatile fresh food. The figure was in line with market expectations and continued the general trend of cooling inflation over the past year, from 4.2% in January 2023.

The overall inflation rate fell from 2.8% to 2.6%.

Stephen Innes, analyst at SPI Asset Management, commented: “Economists in Tokyo expect the Bank of Japan to maintain its policy of yield curve control and negative short-term interest rates at its January meeting. So a wildcard scenario is a YCC correction. It will “Expects inflation to slow in January. Therefore, the BoJ will most likely adopt a cautious stance, especially after the recent earthquake.”

In London, shares of 4imprint rose 13%. The London-based company, which markets and distributes promotional products, expects revenue of $1.33 billion in 2023, up 16% from $1.14 billion last year.

Pretax profit for 2023 is expected to be at least $140 million, down from $104 million and slightly above the high end of analysts’ current forecasts.

“The group has made excellent progress throughout 2023, resulting in strong financial performance for the year,” 4imprint said.

Elsewhere, there was some M&A momentum for some stocks.

Wincanton jumped 48%.

The Wiltshire, England-based logistics provider agreed to the terms of a recommended cash takeover offer from CEVA Logistics UK, a subsidiary of CMA CGM, a shipping and logistics company based in Marseille, France. The offer is worth 450p per share and values Wincanton at £566.9m on a fully diluted basis, giving an enterprise value including debt of around £764.9m.

Custodian Property Income fell 13% while abrdn Property Income rose 11% after the duo announced a merger to create a property investment trust with total assets of £1.0bn.

abrdn Property Income shareholders will receive 0.78 new Custodian Property Income shares for each share. Based on Custodian’s closing share price on Thursday of 79.6p, abrdn Property Income’s shares are valued at 62.1p and the entire company at £237m.

Big Technologies fell 16%. The remote human monitoring technology company gave a somewhat muted outlook for 2024.

It warned that revenue from a contract with one of its larger customers in Colombia is likely to expire in the first half of the year. However, new, recently won contracts will partially offset the potential loss.

In the second half of 2023, the Company expanded its business development efforts in the U.S., with associated costs expected to reduce U.S. operating margins until the Company generates new sales.

The investment is likely to accelerate revenue growth in the medium term. As a result, the company expects sales to be “at least” at 2023 levels. It expects revenue of around £55m in 2023, up from £50.2m, in line with market consensus.

Brent oil was trading at $79.06 a barrel in London late Friday, up from $78.61 late Thursday. Gold traded at USD2,035.35 an ounce, down from USD2,015.55.

“Gold is trading slightly higher at the end of the week after bouncing off the USD2,000 mark the day before. The yellow metal was hit by slightly lower expectations for interest rate cuts this year and a lack of data to guide things back to normal “The numbers we have seen since the turn of the year have been fine, but more is needed to maintain the enthusiasm with which markets ended 2023,” commented Oanda analyst Craig Erlam.

“Oil prices are stable today after another turbulent but ultimately consolidating week,” Erlam continued. “While oil prices remain sensitive to events in the Middle East, as we have seen in recent weeks, the oil market remains well balanced, which is why we are not seeing higher prices. Supply disruptions remain an upside risk, but there are also downside risks , including the global economy and the OPEC+ entity.”

This article is originally published on ch.marketscreener.com

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