European Markets React to Disappointing Eurozone Economic Data

Tepid trade after eurozone data disappoints

(Alliance News) - Stock prices in London were mostly lower at midday on Monday despite "encouraging" UK composite purchasing managers' index data, while signs of a eurozone economic slowdown kept eyes on the European Central Bank. The FTSE 100 index was down 8.53 points, 0.1%, at 8,221.46. The FTSE 250 was up just 0.85 of a point at 20,832.69, and the AIM All-Share was down 1.50 points, 0.2%, at 744.12. AJ Bell analyst Russ Mould commented: "Investors are still weighing the Federal Reserve's blockbuster 50 basis point interest rate cut last week, which was seen in some quarters as worrying about the state of the world's largest economy, despite the Fed's best efforts to offer reassurance." The Cboe UK 100 was down 0.1% at 823.22, the Cboe UK 250 was down 0.2% at 18,326.30, and the Cboe Small Companies was up 0.2% at 16,800.54. The UK private sector economy remained in growth territory this month, though progress slowed across the board, date from S&P Global showed. The flash UK composite purchasing managers' index declined to 52.9 points in September, from 53.8 in August. The latest reading was a two-month low, but remained above the 50 point threshold. The flash manufacturing PMI fell to 51.5 points in September, from August's final reading of 52.5. The services PMI slipped to 52.8 from 53.7. The latest readings represented a three-month low for manufacturing and a two-month low for services. S&P Global said the "overall speed of recovery moderated for the first time since June". Still, S&P Global analyst Chris Williamson said the figures "bring encouraging news, with robust economic growth being accompanied by a cooling of inflationary pressures". "The data therefore hint at a 'soft landing' for the UK economy, whereby the fight against inflation is showing increasing signs of being won without higher interest rates having caused a downturn," Williamson added. On the FTSE 100, Kingfisher rose 1.1%. UBS raised the stock to 'neutral' from 'sell'. Also on Monday, the London-based DIY retailer, which owns B&Q, Castorama, and Screwfix, announced the start of a GBP75 million share buyback, to be completed by November 22. This is the fourth tranche of Kingfisher's GBP300 million buyback announced in September 2023. Rightmove was up 1.6% amid another development in an M&A saga. "If you want to own the market leader, you must pay a premium price and that's exactly the situation with Rightmove," AJ Bell's Mould commented. "Rupert Murdoch's REA Group is back for the third time with a higher bid for the UK property portal but...the latest bid of 770p is a step in the right direction but unlikely to be enough." Mould continued: "Rightmove digging in its heels and refusing to be bought on the cheap would also show that UK PLC isn't for sale at any price...[and] might show to investors that not only is there good value on offer, but that certain companies might still be around to generate returns over the long term and not simply be a 'blink and you'll miss it' opportunity." Elsewhere on the London Stock Exchange, Alphawave IP dropped 25%. The London-based designer of high-speed connectivity solutions now expects 2024 revenue of between USD310 million and USD330 million compared with guidance of USD345 million to USD365 million given in March. Earnings before interest, tax, depreciation and amortisation are seen of USD50 million, down from USD70 million previously guided. Alphawave said the changes to guidance reflect the impact on first half results of the merger of two large artificial intelligence customers in Korea. In the first six months of 2024, pretax loss ballooned to USD49.9 million from USD6.6 million a year prior. Revenue more than halved to USD91.0 million from USD187.2 million. In European equities the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was up 0.5%. French banks hurt the CAC. Credit Agricole fell 4.9%, while BNP Paribas and Societe Generale each lost 3.5%. French Prime Minister Michel Barnier promised cohesion and a willingness to compromise Sunday, a day after his new government was announced to immediate threats of a no-confidence motion in parliament. The first major test for Barnier will be to submit a 2025 budget plan addressing France's precarious financial situation, which he called "very serious". Barnier, elaborating on his plan for taxes targeting the rich, said on Sunday that they had to do their bit. He argued for "targeted levies on rich people or certain large companies". The eurozone's private sector economy fell back into decline in September, as the manufacturing leg continued to limp, numbers on Monday showed. The latest Hamburg Commercial Bank flash purchasing managers' index faded to 48.9 points in September from August's final figure of 51.0. The flash manufacturing PMI fell to a nine-month low of 44.8 points in September from 45.8 in August. The services PMI hit a seven-month low of 50.5 points, down from August's 52.9, though it remained in growth territory. Hamburg Commercial Bank analyst Cyrus de la Rubia said the eurozone economy is "heading towards stagnation", as the "recession has now dragged on for 27 months and even worsened in September". The pound was quoted at USD1.3299 at midday on Monday in London, down compared to USD1.3307 at the equities close on Friday. The euro stood at USD1.1113, falling against USD1.1164. Against the yen, the dollar was trading at JPY143.29 down compared to JPY143.85. "This morning's rather disastrous eurozone PMI figures suggest that the market continues to under-price the chances of back-to-back ECB cuts, with the EUR overnight index swap curve discounting just a one-in-three chance of another 25 basis points cut in October," Pepperstone analyst Michael Brown commented. Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index up 0.2%, and the Nasdaq Composite up 0.3%. Brent oil was quoted at USD74.66 a barrel at midday in London on Monday, up from USD74.43 late Friday. "There are still heightened worries about an escalation of conflict in the Middle East, following Israel's increased attacks on Hezbollah in Lebanon," commented Hargreaves Lansdown analyst Susannah Streeter. "The expectation of two more rate cuts this year from the US Fed, potentially making the dollar-denominated commodity cheaper for overseas buyers, is also adding to higher demand expectations, pushing up prices. But concerns about lower demand from China still persist." Gold was quoted at USD2,622.16 an ounce midday Monday, largely flat against USD2,622.00 late Friday aftermoon. Still to come on Monday's economic calendar, there is a US flash composite PMI reading at 1445 BST. Comments and questions to [email protected] Copyright 2024 Alliance News Ltd. All Rights Reserved.

FTSE 100 holds firm while euro ebbs amid weak PMI

(Alliance News) - London's FTSE 100 perked up in afternoon trading to close higher on Monday shrugging off weak global PMI data. The FTSE 100 index closed up 29.72 points, or 0.4%, at 8,259.71. The FTSE 250 ended up 13.28 points, or 0.1%, at 20,8451.82, but the AIM All-Share closed down 1.30 points, 0.2%, at 744.32. The Cboe UK 100 ended up 0.2% at 825.65, the Cboe UK 250 down slightly at 18,356.82, and the Cboe Small Companies ended up 0.3% at 16,827.67. In European equities on Monday, the CAC 40 in Paris up 0.1%, while the DAX 40 in Frankfurt ended up 0.6%. In London, data showed UK private sector remained in growth territory this month, though progress did slow across the board. The flash UK composite purchasing managers' index declined to 52.9 points in September, from 53.8 in August. The latest reading was a two-month low, but remained above the 50 point threshold which separates growth from decline. The composite PMI is calculated using manufacturing and service sector readings. The flash manufacturing PMI fell to 51.5 points in September, from August's final reading of 52.5. The services PMI slipped to 52.8 from 53.7. The latest readings represented a three-month low for manufacturing and a two-month low for services. "UK private sector firms indicated a sustained upturn in business activity during September, marking 11 months of continuous expansion. However, output growth slowdowns in both manufacturing and services meant that the overall speed of recovery moderated for the first time since June," survey publisher S&P Global said. Pantheon Macroeconomics analyst Rob Wood said businesses are currently waiting "to see the measures in the Autumn Budget". Chancellor Rachel Reeves will deliver said budget, the first from the UK's new Labour government, on October 30. It will come with a full fiscal statement from the Office of Budget Responsibility. Going forward, Wood said: "Strong new orders growth and business optimism suggest the PMI will bounce back once Budget uncertainty has passed." Chancellor Rachel Reeves said the budget will be one with "real ambition, a budget to fix the foundations, a budget to deliver the change that we promised, a budget to rebuild Britain." Speaking to the Labour party conference in Liverpool Reeves pledged there will be no "return to austerity". "Yes, we must deal with the Tory legacy and that means tough decisions but I won't let that dim our ambition for Britain," she said. Growth in the eurozone's private sector economy declined in September, PMI survey results showed, while the manufacturing sector continued to limp. The latest Hamburg Commercial Bank flash purchasing managers' index faded to 48.9 points in September from August's final figure of 51.0. The flash manufacturing PMI fell to a nine-month low of 44.8 points in September from 45.8 in August. The services PMI hit a seven-month low of 50.5 points, down from August's 52.9, though it remained in growth territory. "The reduction in overall business activity was driven by a deepening downturn in the eurozone manufacturing sector, where production decreased for the eighteenth month running and at the fastest pace in the year-to-date. Although services business activity continued to rise, the latest expansion was only marginal and the weakest since February," survey publisher S&P Global said. "As the Olympic flame was extinguished, so was eurozone optimism," ING summarised. "The August uptick in the PMI was met by a sharp decline in September. This further fuels growth concerns in the bloc as inflation worries fade." Pepperstone analyst Michael Brown said Monday's data put the focus on ECB interest rate expectations. "This morning's rather disastrous eurozone PMI figures suggest that the market continues to under-price the chances of back-to-back ECB cuts." The figures pressured the euro while the pound made ground. The pound was quoted at USD1.3357 at the London equities close on Monday, up compared to USD1.3307 at the close on Friday. The euro stood at USD1.1135 against USD1.1164. Against the yen, the dollar was trading at JPY143.77, down a touch from JPY143.85 late Friday. Stocks in New York were higher at the London equities close, with the DJIA up 0.1%, and the S&P 500 index and the Nasdaq Composite up 0.3%. Figures painted a mixed picture of the US economy with the services sector continuing to expand while the manufacturing sector's slump continued. The S&P Global US flash composite purchasing managers' index came in at 54.4 points in September, down slightly from 54.6 in August. Remaining above the 50-point mark that separates expansion from contraction, it suggests growth remained fairly robust month to month. The composite measures encompasses manufacturing and services, but only the latter saw growth. The flash services PMI eased slightly to 55.4 from 55.7, coming in above FXStreet-cited market consensus of a 55.2 reading. Meanwhile, the flash manufacturing reading slumped to a 15-month low of 47.0 from 47.9, indicating a worsening downturn. It was lower than the market consensus of 48.5. On London's FTSE 100, Kingfisher rose 1.6%. UBS raised the stock to 'neutral' from 'sell'. Also on Monday, the London-based DIY retailer, which owns B&Q, Castorama, and Screwfix, announced the start of a GBP75 million share buyback, to be completed by November 22. This is the fourth tranche of Kingfisher's GBP300 million buyback announced in September 2023. Marks & Spencer climbed 1.8% as UBS started coverage with a 'buy' rating but B&M fell 2.6% as the same broker said 'sell'. Also on the rise was online property portal Rightmove after Australia's REA made another attempt to buy the firm. The new bid values Rightmove's equity at GBP6.1 billion. The offer comprises 341 pence in cash and 0.0422 of a new REA share. Based on REA's closing price on Friday, the bid values each Rightmove share at 770 pence. But Rightmove's shares rose by only 0.8%, sitting well below the bid price. AJ Bell's Russ Mould felt the market reaction tells "you everything you need to know". "There is a slim chance the deal will happen at the current price given the shares are trading...below REA's bid," he pointed out. Mould said if you want to own the market leader, "you must pay a premium price", adding the higher bid still doesn't look "generous" enough. "Shareholders are more likely to sit up and show interest if the bid starts with an eight, not a seven - and so the latest bid of 770p is a step in the right direction but unlikely to be enough," he remarked. Burberry fell 0.9% as Bank of America reiterated 'underperform' and cut its share price target to 475 pence from 700p. BofA said the luxury consumer is "all shopped out", and expects "muted" sector revenue growth will now likely continue into the second half of 2024 and 2025, leading to margin pressure, and no earnings before interest and tax growth. The recent deterioration has been the Chinese consumer, the broker explained, which was the only driver of revenue growth in the first half of the year. Elsewhere on the London Stock Exchange, Alphawave IP dropped 14%. The London-based designer of high-speed connectivity solutions now expects 2024 revenue of between USD310 million and USD330 million compared with guidance of USD345 million to USD365 million given in March. Earnings before interest, tax, depreciation and amortisation are seen of USD50 million, down from USD70 million previously guided. Alphawave said the changes to guidance reflect the impact on first half results of the merger of two large artificial intelligence customers in Korea. In the first six months of 2024, pretax loss ballooned to USD49.9 million from USD6.6 million a year prior. Revenue more than halved to USD91.0 million from USD187.2 million. Brent oil was quoted at USD73.80 a barrel at the London equities close on Monday, down from USD74.43 late Friday. Gold was quoted at USD2,630.09 an ounce at the London equities close on Friday, against USD2,622.00 at the close on Thursday. Tuesday's UK corporate calendar sees full-year results from engineering fir, Smiths Group and half-year numbers from car and home insurer Direct Line. The global economic calendar has an interest rate decision in Australia, the German ifo business climate report and US consumer confidence data. Comments and questions to [email protected] Copyright 2024 Alliance News Ltd. All Rights Reserved.