- FTSE 100 opens flat.
- American stocks close up.
- US PPI climbs less than forecast.
- Quarter point rate cut by ECB, no clues on next move.
- CMA flags pricing concerns over Vodafone tie up with Three.
- Gold at fresh highs. Is $2,600 next?
- Brent Crude set to lock in first weekly rise in five weeks.
Derren Nathan, head of equity research, Hargreaves Lansdown:
“The FTSE has opened flat this morning after what can best be described as a stable week for basket of London’s biggest shares. After an ugly start to September, historically a poor month for equity returns, global stock markets are broadly back to where they ended last month. There’s not been any major catalyst for this rebound, more so a lack of negative surprises on the inflation front. That trend continued yesterday with US producer price rises up 1.7% in the year to August against expectations of 1.8%. That helped the S&P 500 to end the day up fractionally, with the tech-dominated NASDAQ composite faring a bit better adding 0.5%, in a third consecutive day of gains. Over the week, all major US indices are in positive territory.
However, the data may not be enough to persuade the Fed to cut rates by any more than a quarter-point next Wednesday, in what’s expected to be the first reduction in the Federal Funds Rate in over four years.
Other central banks have been quicker to fire the starting gun of the loosening cycle, and the European Central Bank did little to surprise with a quarter point reduction in rates to 3.5% three months after its initial trim. Despite a small fall in the growth forecast for 2024, to 0.8% from 0.9% due to a weaker outlook for domestic demand, there were no promises on next month’s decision, with Christine Lagarde not ‘pre-committing to a particular rate path.’
In stark contrast to the recent slump in some industrial metals, gold prices have reached new record highs of over $2,500 per ounce. The glittering performance has been buoyed by sustained high levels of purchases by central banks in the face of a weakening dollar, geopolitical uncertainty and the downward looking trajectory for interest rates. These conditions could persist for a while so there’s potential for the high-water mark to rise further in the coming months.
Brent Crude is trading at over $72 per barrel, up for the third day in a row after reaching a two-year low earlier in the week. Hurricane Francine has intensified, and oil majors are now assessing the damage to their platforms in the Gulf of Mexico, but the demand outlook is likely to resume its place as the main driver of prices now that the former tropical storm has blown over.”
Matt Britzman, senior equity analyst, Hargreaves Lansdown
“Vodafone’s proposed merger with Three will require some tweaking if it wants to get the regulator’s stamp of approval. The Competition and Markets Authority (CMA) has released its initial findings and has a few concerns about pricing, vulnerable clients, and the wholesale market. This is an initial report, with the final decision due in December, so Vodafone will need all hands on deck to try and get the CMA back on its side. This is part and parcel with trying to get a big merger over the line. None of the concerns raised suggest a major overhaul of the proposal needs to take place, just some smaller tweaks round the edges should get the job done.”
