LONDON MARKET EARLY CALL: Stocks called flat ahead of PMIs

(Alliance News) - Stocks in London are set to open flat on Monday, on a busy day for PMI prints.

IG says futures indicate the FTSE 100 index of large-caps to open down 3.0 points at 7,553.23 on Monday. The FTSE 100 index closed down 2.26 points at 7,556.23 on Friday.

The Confederation of British Industry economists have forecast that from the highest to the lowest point in the recession, UK gross domestic product will drop by 0.7%.

The CBI estimates that GDP will drop by 0.4% in 2023, then return to growth the following year when it rises 1.6%.

It is a considerably more positive forecast than that produced by the Bank of England just a month ago, when the central bank predicted a drop of 1.5% in 2023 and a further fall of 1% in 2024.

The dollar weakened over the weekend, with sterling quoted at USD1.2327 early Monday, higher than USD1.2240 at the London equities close on Friday. The euro traded at USD1.0573, up from USD1.0478. Against the yen, the dollar was quoted at JPY134.61 versus JPY135.41.

A weaker dollar helped to drive up the price of gold, which was quoted at USD1,806.34 an ounce early Monday, higher than USD1,788.36 on Friday.

Monday's economic calendar has a slew of services purchasing managers' index readings, including from the eurozone at 0900 GMT, the UK at 0930 GMT and the US at 1445 GMT. There are also EU retail trade figures at 0900 GMT.

Brent oil was trading at USD85.87 a barrel, lower than USD86.65, as the EU embargo and price cap on Russian oil becomes effective.

Imports of Russian crude oil now are prohibited in the EU, with limited exemptions. The embargo, agreed in a package of sanctions to punish Russia for invading Ukraine, technically entered into force after adoption but allowed for a transition period for EU member states to phase in the ban.

At the same time, a price cap on seaborne Russian oil, designed to hit Kremlin revenues from energy exports, is now also in effect and limits exports to other countries at USD60 per barrel.

On Sunday, the Organization of the Petroleum Exporting Countries, led by Saudi Arabia and Russia, agreed to maintain their current output levels.

"OPEC+ also agreed to maintain its existing policy on oil production over the weekend, despite concerns they might have looked at another cut due to recent weakness in the oil price, with the slow relaxing of Covid rules in China perhaps playing a part in that decision," said CMC Markets' Michael Hewson.

In China on Monday, the Shanghai Composite was up 1.5%, while the Hang Seng index in Hong Kong was up 3.6%.

In Shanghai, authorities will scrap some testing requirements as China continues to loosen its strict zero-Covid policy following recent protests across the nation.

The restrictions have been a blight on the Chinese private sector, as demonstrated by the latest PMI print. The Caixin China services PMI fell to 46.7 in November, from 48.4 in October. Falling further beneath the 50.0 no-change mark, it shows the contraction in the sector has worsened.

"Both supply and demand weakened at a faster pace in the sector due to a spike in Covid infections and subsequent tightening of containment measures. The gauges for business activity and total new business each logged its worst performance in six months," said Wang Zhe, Caixin's senior economist.

In Tokyo, the Nikkei 225 index was up 0.2%.

Growth in Japan's service sector waned in November, with latest au Jibun Bank S&P Global services PMI falling to 50.3 points in November, from a previous reading of 53.2 in October.

It came in higher than the flash estimate of 50.0.

"Business activity rose for the third successive month while order book volumes expanded at a moderate pace. Anecdotal evidence suggested that a boost in demand following a sustained Covid recovery and the launching of the National Travel Discount Programme primarily drove the sector expansion," said S&P Global economist Laura Denman.

Business sentiment slipped to an eight-month low, however.

The S&P/ASX 200 in Sydney closed up 0.3%. 

In the US on Friday, Wall Street ended mostly flat, with the Dow Jones Industrial Average up 0.1%, the S&P 500 down 0.1% and the Nasdaq Composite down 0.2%

In the London corporate calendar, there are annual results from miner Tharisa, as well as half-year results from Fusion Antibodies and Induction Healthcare.

By Elizabeth Winter; [e-mail]

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