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(Alliance News) - Stock prices in London closed broadly higher on Monday as investor sentiment was buoyed by the re-opening of China and hopes that the US Federal Reserve may slow the pace of rate hikes.
The FTSE 100 index closed up 25.45 points, or 0.3%, at 7,724.94. The FTSE 250 ended down 25.33 points, or 0.1%, at 19,479.39, and the AIM All-Share closed up 2.58 points, or 0.3%, at 850.04.
The Cboe UK 100 ended up 0.3% at 772.50, the Cboe UK 250 closed up 0.2% at 17,018.23, and the Cboe Small Companies ended up 0.3% at 13,536.33.
The US added more jobs than expected in December, according to data released by the US Department of Labor on Friday.
Total non-farm payroll employment increased by 223,000 in December, the department said. This came in higher than market expectations of 200,000 jobs, as cited by FXStreet.
The data has allowed investors to start pricing in a less aggressive stance from the Federal Reserve moving forward.
"Against this background, the consensus is that when the Fed next meets in February it will decide on a 25 basis points rate hike, rather than the 50 or 75 bp delivered at each of the last six meetings," explained Ricardo Evangelista at ActivTrades.
The US central bank's first interest rate decision of 2023 is scheduled for February 1.
According to the CME FedWatch tool, which tracks interest rate probabilities, the market largely expects a hike of 25 basis points. There is a 73% chance of such a quarter-point lift, and a 27% chance of another half-point hike.
At its December meeting, the Federal Open Market Committee lifted the target range for the federal funds rate by 50 basis points to 4.25% to 4.50% - the highest since 2007 - from a previous range of 3.75% to 4.00%.
Stocks in New York were called higher at the London equities close, with the DJIA called up 0.8%, the S&P 500 index up 1.3%, and the Nasdaq Composite up 2.2%.
The US dollar, meanwhile, was struggling.
The pound was quoted at USD1.2203 at the London equities close on Monday, sharply higher compared to USD1.2051 at the close on Friday.
The euro stood at USD1.0749, higher against USD1.0612. Against the yen, the dollar was trading at JPY131.88, lower compared to JPY132.44 late Friday.
Chris Turner at ING said the dollar softened as wage growth in the US came in below expectations on Friday.
Hourly earnings rose 4.6% on-year, slowing from 4.8% in November, and below FXStreet-cited consensus of 5%.
However, it was the latest health reading for the US service sector that "really knocked the dollar hard" according to Turner.
The US services sector finally slipped into contraction territory at the end of December, after two-and-a-half years of growth, according to a survey by the Institute for Supply Chain Management.
The latest ISM services purchasing managers' index fell to 49.6 points in December, from 56.5 in November. Below the 50.0 no-change mark, the reading suggests the US services economy is in decline.
It was the first reading below 50 points in 30 months, ISM noted.
ING's Turner explained that ISM services readings under 50 are "one of the most reliable indicators of a US economy headed into recession", thus bruising the US currency.
In London, miners and oil majors were boosted by the news that China lifted quarantine requirements for inbound travellers on Sunday, ending almost three years of self-imposed isolation.
The re-opening of the world's second largest economy has resulted in expectations of higher demand for commodities, which, in turn, has provided support for stocks like Antofagsta, Glencore and Shell.
Antofagatsa closed 4.2% higher, the best blue-chip performer, while Glencore and Shell were up 1.2% and 0.8%, respectively.
Brent oil was quoted at USD80.46 a barrel at the London equities close on Monday, up from USD79.64 late Friday. Gold was quoted at USD1,874.24 an ounce, significantly higher against USD1,861.63.
Airtel Africa dropped 3.2% despite announcing that its Nigerian subsidiary, Airtel Networks, has purchased additional spectrum for network expansion in Africa.
Airtel said that the additional spectrum would support its investments in network expansion for both mobile data and fixed wireless home broadband capability.
"Nigeria is a market with enormous potential for future growth in mobile services. Investment in new technologies and local infrastructure to enable this growth is a strategic priority for the group," said Chief Executive Officer Segun Ogunsanya.
In the FTSE 250, Keller plunged 12% after it said it identified "deliberate and sophisticated financial reporting fraud" in its Austral arm in Australia.
The geotechnical engineering firm said two individuals have been dismissed and an internal probe is underway. It is also in the process of naming an external adviser to perform an independent investigation.
"Austral, contributing [around] 3% of group revenue, is a unique business within the group, and is the only business that exclusively accounts for revenue on a percentage of completion basis in the division," Keller added.
The fraud relates to Austral's performance from 2019 onwards. Keller expects a hit of GBP6 million for the first half of 2022 and GBP8 million to GBP10 million relating to prior years.
"Whilst the fraud continued in the second half of 2022, and has impacted the board's expectations for the 2022 full year results, the group's overall performance in the second half has been strong", it said.
Elsewhere in London, Nanoco was down 15%. The quantum dot maker warned that its settlement with Samsung Electronics is expected to be "towards the lower end of the range of expectations".
On Friday, a term sheet for a no-fault settlement was agreed between the two parties, with both parties jointly requesting a stay of the trial. Nanoco had initially launched a US patent infringement lawsuit against the South Korean-based electronics company in December, alongside lawsuits in Germany and China.
Nanoco claimed Samsung infringed on its unique synthesis and resin capabilities for quantum dots. Quantum dot technology is used on Samsung quantum light-emitting diode televisions.
On Monday, Nanoco said: "The settlement process requires further negotiations and continues to operate within the control of the US judicial system, and hence the outcome of the litigation, its settlement, and timing are not wholly within the control of the parties."
It also warned that the gross settlement value should be expected to be "towards the lower end of the range of expectations" for a successful jury trial outcome.
On AIM, Frontier Development plummeted 42% as it said it no longer expects to meet market consensus forecasts for full-year revenue and operating profit, which stand at GBP135 million and GBP19 million, respectively.
Chief Executive Officer Jonny Watts said: "It is very disappointing to be resetting our financial expectations. We intend to grow the number of our development teams to increase the cadence of new releases, whilst continuing to nurture our existing portfolio, to achieve sustainable growth."
In European equities on Monday, the CAC 40 in Paris ended up 0.7%, while the DAX 40 in Frankfurt ended 1.3% higher.
In UK corporate calendar on Tuesday, there is a trading statement from industrial and electronic product provider RS Group and half-year results game manufacturer Games Workshop.
The economic calendar has the Johnson Redbook US retail sales index at 1355 GMT.
By Heather Rydings, Alliance News senior economics reporter
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