- The FTSE 100 expected start the week down.
- Metal prices continue to freefall.
- Rate decisions ahead in UK, EU and down under.
- US stock futures weak as inflation fear returns.
- Big Tech and Pharma earnings in focus.
- Iran de-escalation releases pressure on oil prices.
Derren Nathan, head of equity research, Hargreaves Lansdown:
“The FTSE 100 is set to start Monday in the red. Mining stocks are likely to feel the heat as metal prices scramble to find a floor. Oil prices are also trending the wrong way for investors in commodity focussed companies. The silver bubble well and truly popped on Friday after lenders upped their margin calls to speculators. That followed Donald Trump’s nomination of Kevin Warsh, one of the more hawkish contenders in the race, for the top job at the Federal Reserve bank.
There’s no sign of a silver lining this morning either, with another double-digit decline showing on traders’ screens. Gold is following a similar but far less pronounced pattern. In industrial metals, Copper has also seen a flight of speculative funds, although here, the long-term demand runway combined with limited new production set to come on stream should provide some support. It’s a timely moment for Rio Tinto to put up or shut up in its merger discussions with Glencore as the 5 February deadline approaches, but rumours are circulating that negotiators will seek an extension.
It’s a big week for central bank meetings, with the Reserve Bank of Australia first up and expected to buck the prevailing trend with a rate rise to 3.85% following higher than expected inflation and strong employment data. Closer to home markets aren’t expecting any change to lending costs at the European Central Bank (now at 2.0%) or the Bank of England (3.75%). But with UK unemployment at a four-year high of 5.1%, jobseekers will be hoping that Andrew Bailey’s comments will set the scene for further reductions in the base rate.
Futures for all the major US indices are pointing downwards this morning. Friday’s non-farm payroll print is the key economic data point to focus on after the tail end of last week revealed a month-on-month increase in producer prices of 0.5%, higher than forecast and the biggest increase in five months. Forecasters are expecting the addition of 70,000 hires, an acceleration from 50,000. A significantly higher number has the potential to dampen expectations of further rate cuts by the Fed and take the steam out of equity markets.
Back to the truest test of corporate health which is company earnings, and there are some key reports to focus on. Cloud growth and returns on the massive investment programs being implemented by Alphabet and Amazon are both areas investors will be drilling down on. For the front runners in the boom in GLP1 anti-obesity treatments, Eli Lilly and Novo Nordisk, progress on new and imminent oral formulations will take centre stage, as well as the potential impact of weight-loss medications becoming eligible for Medicare funding.
Brent Crude prices are down over 5% to around $65.6 per barrel after the White House and Tehran made positive noises about diplomacy. But the US Navy continues to maintain a high presence in the Middle-East, so the potential for tensions, and oil prices to ratchet up again remains a possibility.”
