Cooler inflation readings support equities

(Alliance News) - Stocks prices in Europe were on the up on Thursday afternoon, tamer inflation data took some shine off the euro and Crude prices climbed ahead of a meeting of oil producers.

The FTSE 100 snapped its streak of underperformance, with oil majors and China-exposed stocks leading the charge. A weaker pound, now sitting closer to the USD1.26 than USD1.27, also helped London's large-cap benchmark.

US stock market futures were higher, with equities in New York poised to round off a bullish month with more gains. The S&P 500 has added just under 10% so far in November.

The FTSE 100 index rose 41.63 points, 0.6%, at 7,465.09. The FTSE 250, however, was down 98.91 points, 0.5%, at 18,368.67, and the AIM All-Share was down 1.57 points, 0.2%, at 713.96.

The Cboe UK 100 rose 0.5% at 744.80, the Cboe UK 250 lost 0.7% at 15,903.41, and the Cboe Small Companies rose 0.1% to 13,424.49.

The CAC 40 in Paris rose 0.5%, while the DAX 40 in Frankfurt added 0.4%.

In New York, the Dow Jones Industrial Average is called up 0.5%, and the S&P 500 and Nasdaq Composite are each called to open 0.2% higher.

"US indices are on course to chalk up their best month of the year in November. Data points and commentary from the Federal Reserve have largely reinforced the idea that the current rate hiking cycle is at its end. It now feels like the market is waiting for the next big kicker to push it higher with forthcoming US jobs figures, inflation readings and central bank meetings as potential catalysts. Later today the Fed's preferred measure of inflation – personal consumption expenditures index data – is published and this could help determine if Wall Street sees out a November to remember with a bang or a whimper," AJ Bell analyst Russ Mould commented.

The US core PCE index is expected to have risen 3.5% in October, abating from a 3.7% hike in September. The data is released at 1330 GMT.

Inflation was also a theme of the morning. Eurozone consumer price inflation cooled tantalisingly closer to the European Central Bank's 2% target, numbers from Eurostat showed.

The single currency bloc's consumer price index rose by 2.4% in November from a year before, the rate of annual inflation slowing from 2.9% in October. Inflation had been expected to cool to just 2.7%, according to FXStreet cited consensus.

The latest reading represents the slowest rate of inflation since July 2021's 2.2%. That was the first time the rate of consumer price inflation topped the ECB's 2% target. It went on to peak at 10.6% in October 2022 but has steadily ebbed since.

"With euro area inflation easing rather sharply, and a technical recession in the bloc seemingly on the cards in the final quarter of this year, markets will be increasingly confident of a first ECB rate cut in the spring," Ebury analyst Matthew Ryan commented.

"Indeed, swaps are now assigning more than a 50% chance that the easing cycle begins as early as March 2024. We think that today's data ensures that this is now an increasingly plausible scenario that, if it were to materialise, would likely present some near-term downside to the euro."

Hope of rate cuts soon lifted stocks exposed to the health of the European consumer. Spirits seller Pernod Ricard rose 1.1% in Paris, retailer Zalando added 0.7% in Frankfurt.

The euro struggled, however. The single currency bought USD1.0913 around midday London time, from USD1.0966 late Wednesday afternoon. Sterling fell to USD1.2633, easing some pressure on the FTSE 100 which is stacked with international earners, from USD1.2674 on Wednesday. Versus the yen, the dollar traded at JPY147.71, up from JPY147.36.

Among the international earners on the up in London, packaging firm Smurfit Kappa rose 3.3%. It was the best FTSE 100-listed performer.

BP was second, rising 2.7%, tracking Brent higher.

The North Sea benchmark rose to USD83.73 a barrel early Thursday afternoon, from USD81.80 late Wednesday afternoon. Brent rose as high as USD84.57 on Thursday, its best level November 7.

"With energy price weakness having played a key role in driving down inflation, all eyes will be on today's Opec meeting as Saudi Arabia seek to bolster the price of their key export. While we have seen concerns grow over the potential struggles finding agreement over production levels for nations in Africa, there is speculation that Saudi will seek to drive additional production limits in a bid to lift energy prices," Scope Markets analyst Joshua Mahony commented.

Mahony noted that output levels are one way to control oil prices. However, weaker data could lead to downside pressure.

China's manufacturing purchasing managers' index – a key measure of factory output – dipped to 49.4 points. The reading was down slightly from 49.5 in October and also weaker than the 49.7 market forecast cited by FXstreet.

Shares in miners and Asia-focused lenders still rose, however, amid the expectation that weaker data will lead to stimulus. Glencore rose 1.0% in London, while Standard Chartered climbed 1.4%.

NatWest was another lender on the up, rising 1.3%, after JPMorgan lifted the stock to 'overweight' from 'neutral'.

It has been a difficult week on the stock market for Entain shares. The Ladbrokes Coral owner traded 2.0% lower, and looks set to extend its losing streak to six days.

It noted a fine by the Dutch gaming authority for its subsidiary BetEnt, which trades as BetCity and was acquired by Entain in January.

The Dutch gaming authority Kansspelautoriteit on Thursday fined BetEnt EUR3 million under the country's money laundering and terrorism financing prevention act.

Entain said the activities relate to the period between December 2022 and February 2023, adding that it was aware of instructions from September 2022 before its EUR300 million acquisition of BetEnt, which trades as BetCity.

Boot maker Dr Martens slumped 26%, the worst mid-cap performer. It reported a drop in its half-year earnings, said it expects lower full-year revenue and added that a recovery in the key US market will take than it first expected.

In the half-year ended September 30, pretax profit fell by 55% to GBP25.8 million from GBP57.9 million the year before. Revenue declined 5.4% to GBP395.8 million from GBP418.8 million the year before. Its top line was hurt by "an increasingly difficult consumer environment" in the US.

It said it expects full year revenue to decline by a high single-digit percentage, on a constant currency basis.

It also said it expects financial 2024 Ebitda to be "moderately below the bottom end of the range of consensus expectations" of GBP223.7 million to GBP240.0 million.

Dr Martens cautioned that a bounce in its US division will take longer to materialise than initially anticipated.

Gold was quoted at USD2,037.98 an ounce early Thursday afternoon, down from USD2,041.08 late Wednesday.

By Eric Cunha, Alliance News news editor

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