The FTSE 100 was marginally weaker on Monday as investors assessed the current geopolitical landscape and attempted to draw conclusions from the recent raft of economic data, and implications for interest rates.
US cash equity and bond markets will be closed for Martin Luther King Day on Monday, and trading volumes are expected to be lower than usual.
“The focus is being trained on tense geopolitics, economic malaise and the impact of artificial intelligence on nations around the globe as leaders gather at the World Economic Forum in Davos,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“Amid the uncertain economic outlook, the FTSE 100 is set to struggle for a sense of direction. It managed to gain small ground in early trade, before losing ground, with energy giants helped by the recent uplift in oil prices. Activity is expected to be lighter, given that exchanges in the US are largely closed for Martin Luther King Day.”
The FTSE 100 was down 0.35% at the time of writing.
Oil has been in focus since the UK and US launched air strikes on Houthi targets in Yemen last week amid concerns about wider escalation throughout the region.
“An escalation of tensions in the Red Sea amid US and UK strikes on Houthi rebels raises the prospect of renewed inflationary pressures as the resulting disruption to global shipping pushes up freight costs. Oil prices continued to bubble but are below the $80 per barrel levels reached last week,” said AJ Bell investment director Russ Mould.
“There was some positive news on inflation on Friday thanks to an unexpected contraction in producer price inflation in the US – so called factory gate prices are often a leading indicator for consumer prices so this offers some encouragement.
“There was mixed performance and messaging from US banks as the latest earnings season across the Atlantic got underway – with some signs of stress in consumer debt.”
Corporate updates
After a busy week for FTSE 100 corporate updates last week, Monday represented a break in play before Ocado, Rio Tinto and Experian report on Tuesday.
Ocado was the top faller on Monday as investors booked profits after a good run for the stock. Ocado was down over 5% at the time of writing.
