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ADVFN Morning London Market Report: Friday 1 December 2023

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London open: Stocks up after encouraging Chinese manufacturing, UK house price data

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London stocks rose in early trade on Friday after the release of encouraging Chinese manufacturing and UK house price data, with miners pacing the gains.

At 0830 GMT, the FTSE 100 was up 0.8% at 7,510.87.

Investors were digesting manufacturing figures out of China. The Caixin/S&P Global manufacturing purchasing managers’ index rose to 50.7 in November from 49.5 in October.

This was above the 50.0 level that separates contraction from expansion and marked the fastest expansion in three months. However, it contrasts with the official manufacturing PMI released on Thursday, which nudged down to 49.4 from 49.5.

Capital Economics said: “At face value, the average of the two is consistent with factory activity remaining largely unchanged last month.

“But that may not be the case in practice – the hard data have held up better than survey-based measures lately.”

On home shores, the latest Nationwide survey showed that house prices unexpectedly rose again last month.

House prices were up 0.2% on the month following a 0.9% increase in October. This was the third monthly rise in a row and ahead of expectations for a 0.4% decline.

On the year, house prices were 2.2% lower in November following a 3.3% drop the month before. Analysts were expecting a 2.5% decline. Nationwide pointed out that while this was still weak, it was the strongest outturn since February.

The average price of a home now stands at £258,557.

Nationwide chief economist Robert Gardner said: “There has been a significant change in market expectations for the future path of Bank Rate in recent months which, if sustained, could provide much needed support for housing market activity.”

He noted that in mid-August, investors were expecting the Bank of England to raise rates to a peak of around 6% and lower them only modestly, to around 4% over the next five years. However, by the end of November, this had shifted to a view that rates have now peaked at 5.25% and will be lowered to around 3.5% in the years ahead.

“These shifts are important as they have led to a decline in the longer-term interest rates (swap rates) that underpin fixed rate mortgage pricing,” he said. “If sustained, this will help to ease the affordability pressures that have been stifling housing market activity in recent quarters, where the number of mortgage approvals for house purchases has been running at c.30% below pre-pandemic levels.”

Still to come, the S&P Global/CIPS UK manufacturing PMI for November is due at 0930 GMT.

In equity markets, mining stocks were boosted by the upbeat Chinese data and by broker notes. Anglo American and Antofagasta both rallied after upgrades to ‘buy’ from ‘neutral’ at UBS.

On the downside, education publisher Pearson fell after a downgrade to ‘hold’ from ‘buy’ at Deutsche Bank.

Ceres Power tumbled as it warned that full-year revenues were set to drop on the year to around £20m to £21m, from £22m in FY2022.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Anglo American Plc +6.49% +139.00 2,281.00
2 Antofagasta Plc +4.12% +58.00 1,466.50
3 Rio Tinto Plc +3.59% +194.00 5,593.00
4 Glencore Plc +3.04% +13.45 455.25
5 Bhp Group Limited +2.70% +65.00 2,469.00
6 Johnson Matthey Plc +2.23% +34.50 1,584.50
7 Carnival Plc +2.16% +22.50 1,063.50
8 Melrose Industries Plc +2.01% +10.40 529.00
9 Berkeley Group Holdings (the) Plc +1.94% +90.00 4,726.00
10 Centrica Plc +1.91% +2.85 151.90

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Pearson Plc -1.79% -16.80 920.40
2 Tesco Plc -1.71% -4.90 280.90
3 Itv Plc -1.53% -0.92 59.20
4 Ocado Group Plc -0.87% -5.20 594.80
5 Sainsbury (j) Plc -0.80% -2.30 283.60
6 Hargreaves Lansdown Plc -0.56% -4.00 714.40
7 Legal & General Group Plc -0.31% -0.70 228.60
8 Aviva Plc -0.10% -0.40 417.10
9 Shell Plc -0.00% -0.00 1,894.60
10 Just Eat Plc -0.00% -0.00 861.00

 

US close: Dow Jones wraps up best month in over a year

Wall Street stocks were mostly higher at the close on Thursday, with the Dow Jones hitting a new high for 2023, as a winning month for stocks drew to a close.

At the close, the Dow Jones Industrial Average was up 1.47% at 35,950.89 and the S&P 500 had advanced 0.38% to 4,567.80, while the Nasdaq Composite was down 0.23% at 14,226.22.

The Dow closed 520.47 points higher on Thursday, extending gains recorded in the previous session after US GDP figures came in ahead of expectations.

Major averages delivered solid gains in November, putting an end to a three-month losing streak. For the month, the S&P 500 was up 8.9%, while the Nasdaq picked up nearly 10.7%. The blue-chip Dow Jones was up 8.8% in November, turning in its best monthly performance since last October.

Thursday’s primary focus was news that US inflation had eased, as expected, in the month of October, according to data released Thursday by the Bureau of Economic Analysis, which will provide some reassurance to the Federal Reserve that elevated interest rates were doing their job of cooling economic growth and taming price pressures. The personal consumption expenditures index for October flatlined during the month after 0.4% growth in September, slightly below the 0.1% increase expected by analysts.

Meanwhile, the annual change in the core PCE – which excludes more volatile items like food and energy to give a more accurate gauge of inflationary pressures and as such is the Fed’s preferred measure of inflation – slowed to 3.5% from 3.7%, in line with economists’ forecasts. Data also revealed that US personal incomes increased by 0.2% over October as expected, slowing from 0.4% growth in September, while personal spending growth also eased to 0.2%, from 0.7% previously.

Elsewhere on the macro front, Americans filed unemployment claims at an accelerated clip in the week ended 25 November, according to the Labor Department. Initial jobless claims rose by 7,000 to 218,000 last week, up from a revised figure of 211,000 for the previous week but short of market expectations for a print of 220,000.

Continuing claims, on the other hand, surged by 86,000 to 1.92m, marking the highest level since November 2021, while the four-week moving average, which aims to strip out week-to-week volatility, fell by 500 to 220,000. Non-seasonally adjusted claims dropped by 42,136 to 198,843, driven by declines in California, Texas, Oregon, Florida and Georgia.

On another note, November’s Chicago purchasing managers’ index surged to 55.8 in November, according to the Institute for Supply Management, up from 44 in the prior month, well above market forecasts for a print of 45.4 and the first month of expansion in Chicago’s economic activity since August 2022.

Finally, US pending home sales dropped to a record low in October as mortgage rates rose sharply. According to the National Association of Realtors, pending home sales dropped 1.5% month-on-month and 8.5% year-on-year, following an upwardly revised 11.2% drop in September. Pending home sales hit their lowest level since the NAR started monitoring the metric in 2001 – worse than readings during the height of the Covid-19 pandemic and the global financial crisis of more than a decade ago.

In the corporate space, Big Lots posted a narrower-than-expected third-quarter loss at the bell, while Kroger cut its full-year sales guidance on the back of uneven grocery demand and lower prices.

 

Friday newspaper round-up: Rail disruption, gambling firms, Twitter

Another nine days of disruption for rail passengers has begun as train drivers in the Aslef union start an overtime ban and a series of rolling strikes halting services across Britain, in a long-running dispute over pay. Drivers will be taking industrial action at train operating companies (Tocs) contracted to the Department for Transport, striking for 24 hours at each one on different dates between Saturday 2 December and Friday 8 December. The strikes will stop most or all trains at the affected operators in England and also hit some cross-border services to Scotland and Wales. – Guardian

Gambling firms are raking in more money than ever from UK punters, fuelled by a surge in the use of online slot machines, which the government is considering curbing due to their association with heavy losses and addiction. The betting and gaming industry’s revenues reached £15.1bn in the year to March 2023, or £10.95bn excluding the National Lottery, figures from the Gambling Commission released on Thursday show. – Guardian

With Twitter losing advertisers left and right because of Elon Musk’s tweets, contrition from the billionaire would have been expected. Yet on stage at an event in New York this week, he was anything but. Musk had a blunt three word missive for companies that had stopped advertising with his social network: “Go f— yourself.” – Telegraph

Matthew Moulding has taken a stake in the activist investor targeting his beauty business in a move that harks back to the so-called “Pac-Man defence” strategy occasionally employed to counter potential hostile takeovers. Moulding, the founder of THG, has taken a 3.2 per cent stake in Kelso Group after the activist called for a break-up of his listed beauty empire. – The Times

Microsoft will invest £2.5 billion in Britain over the next three years to double its data centre capacity and provide computing power to help to drive the expansion of artificial intelligence. Microsoft will invest £2.5 billion in Britain over the next three years to double its data centre capacity and provide computing power to help to drive the expansion of artificial intelligence. The investment has been hailed by Rishi Sunak as “a turning point for the future of AI infrastructure and development in the UK”. – The Times

 

 

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