LONDON MARKET MIDDAY: FTSE 100 surrenders initial rally

(Alliance News) - London's FTSE 100 faced late morning selling pressure and was trading only slightly higher midday Monday, giving back an earlier gain, after European equities kicked off the new week on stronger footing than they ended the old one.

The FTSE 100 index was up 6.80 points, or 0.1%, at 7,472.87 midday Monday. The blue-chip index had gained as much as 0.8% in early dealings.

The mid-cap FTSE 250 index was up 105.50 points, or 0.5%, at 21,748.80. The AIM All-Share index was up 4.54 points, 0.4%, at 1,087.05.

The Cboe UK 100 index was marginally lower at 742.25 at midday. The Cboe 250 was down 0.1% at 19,450.19, and the Cboe Small Companies was 0.5% lower at 15,372.83.

Much like the FTSE, the CAC 40 stock index in Paris had a strong start but fell as the morning progressed. It was down 0.2% on Monday afternoon. However, the DAX 40 in Frankfurt was 0.4% higher.

Although the FTSE 100 struggled late morning, not helped by share price declines for miners and telecom firm BT, sentiment has improved following a tough session for European equities on Friday. The mood on Monday was lifted by a strong end to the week for Wall Street, though New York futures point to a mixed start to the new trading week.

ActivTrades analyst Pierre Veyret commented: "Market sentiment has clearly improved over the weekend as traders seem to have digested the upcoming monetary tightening from the Federal Reserve to combat inflation.

"EU stock investors are likely to keep their focus on macro data, as the highly anticipated meetings from the ECB and the BoE loom. Moreover, investors are also bracing for a new batch of corporate results from major companies from the tech sector like Google, Amazon, Meta Platforms and Sony due later this week."

The pound fetched USD1.3423 midday Monday, unchanged from USD1.3422 late Friday, but down from an intraday high of USD1.3448. Against the yen, the dollar was trading at JPY115.49, up from JPY115.18.

The dollar had initially struggled on Monday, Societe Generale analyst Kit Juckes commented.

Juckes added: "But economic releases do nothing to support hopes of a smooth return to calm markets and rallying asset prices."

Data from China showed the latest coronavirus wave weighed on manufacturing activity at the start of 2022.

The Caixin purchasing managers' index fell to 49.1 points in January from 50.9 in December. Any figure above the no-change mark of 50.0 indicates expansion and one below signals contraction, indicating growth slipped into reverse in January after a modest rise in December.

Economic data out of Europe was slightly more promising. The eurozone economy managed to grow in the final three months of 2021 despite the Omicron wave, numbers from Eurostat showed on Monday.

Year-on-year, the bloc's economy grew 4.6% in the final three months of 2021, just short of consensus of 4.7%, according FXStreet, but still faster than the 3.9% notched in the third quarter.

The euro stood at USD1.1158 on Monday afternoon, soft on USD1.1163 late Friday.

On the London Stock Exchange, miners struggled following the poor data from China. China is a key buyer of minerals.

Rio Tinto fell 2.5%, while Anglo American was down 1.1%. In addition, Jefferies cut Anglo American to Hold from Buy.

Vodafone shares rose 3.5%. Bloomberg late Friday reported activist investor Cevian Capital has built up a stake in the telecommunications company.

Bloomberg, citing people familiar with the matter, said the Swedish investment firm has been in talks with officials at Vodafone for several months, in a bid to improve the FTSE 100 company's fortunes.

Measures could include selling some operations, making stock buybacks, and boosting its presence in key markets, Bloomberg added.

Fellow telecommunications firm BT fell 1.3%, though Deutsche Telekom, also a Vodafone rival, was marginally higher in Frankfurt.

SThree shares surged 12%. The recruitment company, focused on the science, technology, engineering and mathematics sectors, said it delivered a record annual performance. For the financial year ended November 30, pretax profit was up by almost double to GBP60.2 million from GBP30.6 million.

In addition, it said it has named Nick Folkes as its permanent chief technology & information officer, a role he has held on an interim basis since October.

Elsewhere in London, Scottish Mortgage Investment Trust and Allianz Technology Trust, holders of shares in big US tech stocks, were up 3.5% and 3.9%. New York tech shares surged on Friday, with the Nasdaq Composite advancing 3.1%. By points gained, it was the benchmark's best session since December.

Equities in New York are poised for a mixed open on Monday, following Friday's rally. The Dow Jones Industrial Average is seen opening 0.5% lower and the S&P 500 down 0.2%, but the tech-heavy Nasdaq Composite up 0.3%.

"Some stronger corporate earnings allied with some broad bargain hunting sparked a relief rally although the US markets remain firmly in negative territory for the year," Interactive Investor analyst Richard Hunter commented.

"While there are no ground-breaking announcements expected from the Federal Reserve this week on tightening, the spectre of interest rate rises is likely to loom. Investors are currently grappling with valuation metrics following a strong run over recent years for the main indices, with higher rates not only increasing borrowing costs for companies but also discounting the value of future profits."

The US economic calendar this week has manufacturing PMI data on Tuesday, a services reading on Thursday, before the latest jobs report on Friday. In the corporate calendar, chip-maker Advanced Micro Devices and Google-owner Alphabet report annual results on Tuesday. Facebook-owner Meta Platforms reports on Wednesday.

Still to come on Monday's economic calendar is a German inflation reading at 1330 GMT. Both the Bank of England and European Central Bank make policy announcements on Thursday.

Brent oil was quoted at USD88.82 a barrel midday Monday, down markedly from USD90.59 at the London equities close on Friday. Gold was trading at USD1,792.47 an ounce, up from USD1,784.78.

By Eric Cunha; ericcunha@alliancenews.com

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