- European markets open higher
- IAG soars past estimates
- US markets tick higher as Powell stands firm
- Chinese stocks dip on tariff concerns
- LSEG considers allowing US-denominated shares on UK indices
- Brent oil battles with mixed signals
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“European markets have opened with a slight spring in their step this morning and look set to end a wild week on a positive note. The FTSE 100 opened 0.1% higher after the index fell yesterday in the wake of the Bank of England’s 0.25% interest rate cut decision. Perhaps more important than the cut itself, given it was broadly expected, was its projection that the new budget would pair higher economic growth with higher inflation. That combination could give the Bank of England reason to slow the pace of future rate cuts.
British Airways owner IAG soared past estimates in this morning’s third-quarter results, with a revenue line beat and an even bigger one on operating profit. In what’s been a miraculous turnaround from the troubles during the pandemic, IAG’s got its balance sheet into a strong enough position to start a €350mn buyback. There was a slight trim to capacity growth expectations for the year suggesting an easing into the fourth quarter, but broadly speaking this was a great set of results and analysts will likely be revising profit projections higher as a result.
US stocks added further to their post-election record-highs, shrugging off uncertainty around the path for US rates and inflation following the Fed’s widely anticipated quarter-point cut. Despite core inflation closing in, Fed Chair Powell still views the level of price rises as somewhat elevated and suggested some uncertainty around what future fiscal policy decisions could come. When asked whether he’d resign if Trump asked him to, he simply responded “no”. Trump has suggested that he may wish to be more directly involved in rate-setting than the current independent setup allows. However, for now, the prospect of stronger economic growth seems to be driving US markets higher.
China’s Shanghai Composite dropped 0.53% to 3,452, and the Shenzhen Component lost 0.66% to 11,162 overnight, erasing early session gains as investors awaited news of further stimulus from Beijing. Concerns over potential tariffs under the Trump administration and profit-taking near October’s highs also weighed on the market. Investors are looking for guidance from the National People’s Congress Standing Committee, which is expected to release plans today that may include increased debt issuance and spending to bolster the economy.
The London Stock Exchange Group (LSEG) is reportedly considering a policy change to permit shares traded in foreign currencies to be included in major UK indices, such as the FTSE 100. Currently, only sterling-denominated stocks are eligible for these indices. The competitiveness of the UK market has been a conversation topic for a while now, and although the government itself has expressed an interest in making changes, it’s still far from the attractive listing location it wants to be. This development has sparked discussions about whether LSEG should transition to reporting its financials in U.S. dollars. Adopting USD reporting could provide a clearer financial picture, aligning reporting currency with the majority of revenue streams.
Brent crude oil futures edged down to around $75 per barrel this morning, though they still looked set to post a weekly gain. Market dynamics are mixed, with speculation around the incoming U.S. administration potentially boosting U.S. oil production, while global demand could be affected by trade impacts with major importers like China. Additional support for prices came after the Federal Reserve lowered interest rates, and expectations of possible sanctions on oil-exporting nations like Iran and Venezuela could further tighten supply.”
