FTSE 100 dragged lower by miners, Rolls Royce soars on broker upgrades

The FTSE 100 had a tepid start to the week as markets prepared for a raft of economic data from China and the US over the coming days.

Investors will learn more about the health of the Chinese economy this week, and on Friday, the last US Non-Farm Payrolls of 2023 will be released. The US consumer has been resilient in the face of rising interest rates and higher inflation. Friday’s jobs number will provide insight into underlying hiring activity in the run-up to the festive period.

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A narrative around US interest rate cuts in early 2024 has been established, encouraging equity bulls to take stocks higher. Friday’s jobs data has the power to validate or dash hopes around rate cuts.

“Any sharp increase in unemployment rates will be watched like a hawk by investors who are searching for clues as to whether the Federal Reserve has reason to start cutting rates. Nervousness about the outlook for the US economy is growing and every data point is being scrutinised for clues as to how the central bank might be thinking,” said Russ Mould, investment director at AJ Bell.

Interest rate optimism has been lost on FTSE 100 stocks that continue to be dictated by developments in Asia and the Middle East.

The FTSE 100 was trading down 0.4% at the time of writing on Monday, with miners and oil majors dragging the index lower.

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A poor session in Asia overnight translated to weakness in commodity prices, sending Anglo American down by over 3% and Glencore down 2.7%.

Softer oil prices weighed on BP and Shell, shaving a considerable number of points from the FTSE 100 index. Shell, the FTSE 100’s largest constituent, was down 1.6%.

S&P 500 futures were pointing to a lower open after recording the best month of 2023 in November.

Rolls Royce

Rolls Royce shares have had their afterburners activated after JP Morgan upgraded the stock to ‘overweight’ and gave the shares an ambitious 400p price target.

“Rolls-Royce extended its rally with another 3.3% share price gain to 285p after JPMorgan upgraded its rating on the stock to ‘overweight’, lifting its price target from 235p to 400p, while Goldman Sachs reinstated its ‘buy’ rating on the stock,” said Russ Mould.

“The British engineer last week announced plans to quadruple profit by 2027 and to sell its electric aircraft division. The stock has now increased by 205% year-to-date.”

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