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(Alliance News) - European equities pushed higher in anticipation of a US inflation ease and a Federal Reserve rate hike pause, though a slump in crude prices hurt oil majors.
"It has been a notably positive start to a busy week for financial markets. Stocks have opted to continue their move higher for the time being, expecting US inflation to cool slightly and the Fed to leave rates unchanged. Should those assumptions prove wrong, we can expect significant volatility across stocks and in the US dollar, with the latter likely to see further upside," IG analyst Chris Beauchamp commented.
Mixed fortunes for the energy and luxury retail sectors left the FTSE 100 worse off. Luxury retail helped boost the blue-chip benchmark in Paris. Share price falls for oil majors BP and Shell dented the FTSE 100.
Segro, Carnival and Adidas were big movers after broker actions.
The FTSE 100 index inched up 8.33 points, 0.1%, at 7,570.69. The FTSE 250 rose 99.15 points, or 0.5%, at 19,190.81, though the AIM All-Share lost 0.86 of a point, 0.1%, at 792.48.
The Cboe UK 100 closed up 0.1% at 754.66, the Cboe UK 250 added 0.5% at 16,728.17, and the Cboe Small Companies rose 0.1% to 13,870.47.
Analysts at Lloyds Bank commented: "Policy updates from the US Federal Reserve and the European Central Bank along with some key data releases in the UK and US should give markets plenty to digest. The latest policy decisions from the Fed (Wednesday) and ECB (Thursday) come hot on the heels of last week's somewhat surprising decisions by the Bank of Canada and the Reserve Bank of Australia, both of which hiked by 25bp to 4.75% and 4.10%, respectively.
"Recent US data have been mixed with monthly payrolls data pointing to a tight labour market, but other signs indicating a softening economy as past interest rate rises feed through. That will probably be enough for the Fed to 'pause' rates at 5.00-5.25%. The ECB, however, is almost certain to raise them again by 25bp, which would mean rises in total of 400bp in since last summer. President Lagarde has said that there is 'more ground to cover' to bring inflation lower."
The dollar was mixed on Monday. The pound was quoted at USD1.2511 late Monday afternoon in London, lower compared to USD1.2577 at the equities close on Friday. Sterling hit an intraday high of USD1.2599, falling just shy of USD1.26, before succumbing to selling pressure.
The euro stood at USD1.0754, up slightly against USD1.0750. Against the yen, the dollar was trading at JPY139.54, up compared to JPY139.33.
Shares in New York were higher at the time of the European equities close. The Dow Jones Industrial Average rose 0.1%, the S&P 500 was 0.3% higher and the Nasdaq Composite added 0.6%.
Brent oil was quoted at USD72.71 a barrel late Monday in London, slumping from USD76.12 late Friday.
"These are perplexing days for the oil market as benchmark crude prices did not respond to Saudi Arabia's unilateral decision last weekend to cut production," SPI Asset Management analyst Stephen Innes commented.
"And with most analysts surprised by the extent of the pullback in prices this year, expect a raft of forecast downgrades as the bullish thesis gives way to visible supply, a global manufacturing funk and deflationary pressure from China."
Shell and BP closed 0.7% and 1.7% lower, hurting the FTSE 100.
Luxury retailers LVMH and Hermes rose 1.8% and 3.0%, lifting the CAC 40 in Paris. Helping to boost the DAX 40 in Frankfurt, sports apparel maker Adidas added 5.5%. Bernstein lifted the stock to 'outperform'.
The CAC 40 rose 0.5%, while the DAX 40 surged 0.9%.
Back in London, Carnival jumped 13%. JPMorgan lifted the cruise ship operator to 'overweight' from 'neutral'. Segro fell 2.4% after Goldman Sachs cut it to 'neutral' from 'buy'.
Elsewhere in London, AO World surged 7.8% after Frasers announced it had bought a stake in the online electricals retailer.
The Sports Direct-owner said it bought a 19% stake in AO World through the purchase of 109.4 million shares at a price of 68 pence each, for a total investment of GBP75 million.
Frasers said the investment was the "culmination of productive talks over the last two years about establishing a strategic partnership".
AJ Bell analyst Russ Mould commented: "In recent years it has aspired to get more money from its customer base and a natural extension has been to focus on things that make people look and feel good beyond simply the clothes on their back. That explains its push into beauty, handbags and sofas through such brands as Flannels, House of Fraser and Sofa(.com). If it has dressed people and partially furnished their homes, it makes sense to think about other ways to get these customers to part with more cash.
"It has become fashionable to have sports equipment at home, whether that be exercise bikes, weights or rowing machines. These are incredibly bulky to get to people's homes, so there is merit in finding ways to make the delivery process more efficient for such items as well as existing homeware products it is selling – which is where AO's expertise might come in handy."
Frasers shares closed flat.
Gold was quoted at USD1,957.18 an ounce late Monday, lower against USD1,961.75 on Friday.
Tuesday's economic diary has a UK unemployment reading at 0700 BST, before the key US consumer price index data at 1330 BST.
The local corporate calendar has annual results from equipment rental firm Ashtead and a trading statement from housebuilder Bellway.
By Eric Cunha, Alliance News news editor
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