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(Alliance News) - Stock prices in London closed lower at the start of the week, with equity market sentiment still downbeat after a dollar-boosting US jobs report that may have pushed the prospect of Federal Reserve interest rate cuts further down the horizon.
The FTSE 100 had a largely uninspiring day on Monday but spent most of it in the green, before succumbing to selling pressure in the afternoon after a US service sector reading.
"Yet more good US data has bolstered the dollar and sent US stocks into a tailspin, as markets continue to write down any last hopes of a March rate cut," IG analyst Chris Beauchamp commented.
"Today's ISM services PMI seems to have dealt the death blow to any lingering hopes that a March rate cut was still on the cards. It looks like the relentless optimism seen so far on Wall Street is finally beginning to collide with reality."
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 USD1.2527 at the time of the London equities close on Monday, down from USD1.2639 on Friday. The euro stood at USD1.0728, down against USD1.0793. Against the yen, the dollar was trading at JPY148.80 higher compared to JPY148.35.
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 GBP2.5 million in financial year 2024, which ends on March 31. This is expected to produce annualised savings of GBP21 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 GBP290 million to GBP310 million. This would be up from GBP288.4 million in financial 2023.
Over in Milan, UniCredit shot up 8.1%. The lender said it plans to distribute EUR8.6 billion to shareholders for 2023, up by about EUR3.35 billion the year earlier.
"Since 2021, we will have returned this year EUR17.6 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 EUR1.92 billion for the fourth quarter, 19% higher than EUR1.61 billion in the comparable quarter last year, primarily helped by growth in net interest income.
Brent oil was quoted at USD77.11 a barrel late Monday afternoon in London, largely unmoved from USD77.09 late Friday. Gold was quoted at USD2,019.86 an ounce, lower against USD2,034.63.
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.
By Eric Cunha, Alliance News news editor
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