Wall Street, European stocks and the FTSE 100 were mixed on Monday as investors continued to worry about the US defaulting on its debt amid ongoing talks.
President Joe Biden and House Republican speaker Kevin McCarthy are expected to hold further discussions later on Monday.
The FTSE 100 (^FTSE) was up 0.18% to 7,770.99 points at market close, while the CAC 40 (^FCHI) in Paris fell 0.24% to 7,473.78 points. In Germany, the DAX (^GDAXI) declined by 0.31% to 16,224.15 points.
“China-linked stocks like Burberry (BRBY.L) and Standard Chartered (STAN.L) are at the top of the large-cap index following positive price action overnight from the Shanghai Composite and the Hang Seng,” Victoria Scholar, head of investment at Interactive Investor, said.
JD Sports Fashion (JD.L) also moved up the FTSE 100 basket after the retailer said it was on course to make £1bn in annual profit, while Halma (HLMA.L) and ConvaTec (CTEC.L) were at the bottom of the index in afternoon London trade.
Meanwhile, traders were also watching NatWest (NWG.L) stock as the bank agreed to buy £1.3bn ($1.6bn) of its shares back from the government, which reduces the government's stake to 38.69%.
“The Treasury is aiming to return NatWest to private ownership by 2025-2026 while attempting to ‘achieve the best value for the taxpayer’. In April, the government’s shareholding stood at 42%, down from a peak of 84%, falling further again this week,” Scholar added.
Shares in NatWest have struggled this year, caught up in the banking sector turmoil with the collapse of Silicon Valley Bank and the rescue deal for Credit Suisse (CS).
However, with shares up almost 15% year-on-year to Friday’s close, the government decided it was a good moment to sell some shares, Scholar noted.
It said it flew 168.6 million passengers, up 74% to an all-time high, breaking its pre-pandemic record of 149 million. The group said it is aiming to get to 225 million passengers by 2026 and also highlighted it wants to be debt free in the next three to four years.
The airline said it is also expecting a strong summer for bookings but thinks winter could be more challenging with consumer spending under strain.
US and Asia markets
In the US, two of the three major indices opened in the green as traders waited for a deal to be struck to avert a debt default ahead of the 1 June deadline.
“US-Sino trade tensions are escalating after Beijing banned Micron Technology from selling semiconductors to key industries in China, a move strongly opposed by Washington,” Scholar said.
In Asia, markets rose. Tokyo’s Nikkei 225 (^N225) went up 0.90% to 31,086.82 points, lifting stocks to the highest level since the 1990s, while the Hang Seng (^HSI) in Hong Kong gained 1.54% to 19,750.18. In mainland China, the Shanghai Composite (000001.SS) was also in the green, up 0.36% to 3,294.92 points.
The People’s Bank of China kept its loan prime rate unchanged for a ninth consecutive month in May.
“Central bank policymakers clearly judged that loosening monetary policy would exacerbate the yuan’s weakness and interest rate differentials, despite China’s shaky path to recovery out of the pandemic,” Scholar added.
UK inflation data due in the next couple of days is likely to impact the pound this week, with the report expected to show that price pressures eased in Britain last month.
“Economists are eyeing a near 2% decline in the headline number to just 8.2% that, if confirmed, could weigh on expectations for UK interest rates and the pound,” Matthew Ryan, head of market strategy at global financial services firm Ebury, said.
In commodities, oil prices declined as trader concerns over the US defaulting on its debt overshadowed the demand outlook.
Meanwhile the US Energy Information Administration (EIA) has lowered its oil price forecasts for 2023 and 2024.
"We expect the Brent crude oil price will increase from $74/b in May 2023 to $79/b in September before declining slightly to average $78/b in the last three months of 2023. We expect the West Texas Intermediate price will follow a similar path,” the EIA said.
Investors will also be looking for some clarity on the future outlook of US interest rate policy when the latest US Federal Minutes from the May meeting are released on Wednesday.
“Any comments indicating that the Fed is either concerned about the aggressive pace of US interest rate increases impacting the United States economy over the longer-term or confirmation that no more US interest rate hikes are likely can lead to a pause in the recent USD revival,” Jameel Ahmad, chief analyst at CompareBroker.io, said.
The latest US consumer spending data, the Personal Consumption Expenditures (PCE) price index, is also set to be released this week — another gauge for inflation pressures.
In the UK, traders are also anticipating inflation data on Wednesday and the subsequent implications for the Bank of England (BoE), and consequently for the pound.