An appalling close to US markets on Friday spilled over to the European open on Monday with most major European indices starting the week off in the red.
A slightly better than expected Non-Farm Payroll figure on Friday almost guaranteed the Federal Reserve would kick on with a 75bps point hike at their next meeting, and were a long way off pivoting to a slower pace of rate hikes.
The NASDAQ closed down nearly 4% on Friday and saw the FTSE 100 open well below 7,000 while the DAX fell back towards 12,000.
However, after touching lows of 6,922 in early trade on Monday, the FTSE 100 recovered some losses to trade at 6,971 at the time of writing.
Stronger dollar and UK uncertainty
The dollar gained on the back of the robust jobs data sent GBP/USD back below 1.1100 for the first time in over a week.
The pound had enjoyed a relief rally but looked set to resume declines with pressure on the UK government mounting and no remedy to sterling’s woes in sight.
Investors will also be concerned the doubling of Bank of England bond purchases failed to support the pound or FTSE 100 on Monday.
“Also leaving investors on edge is the news that the Bank of England has doubled the amount of government bonds it is prepared to buy each day under a support initiative. While this programme is designed to provide calm to the markets following concerns about pension funds dumping gilts on the market, the fact it has doubled the previous limit of £5 billion also acts as a reminder that we’re living in unsettled times,” said Russ Mould, investment director at AJ Bell.
There was a slight reprieve for the pound after Kwasi Kwartneg said the government would bring forward the release of their economic projections to 31st October.
The pound typically has an inverse relationship with the FTSE 100 and investors will be looking to see if this holds and provides support for the index this week.
However, the FTSE 100’s largest overseas earners were weaker on Monday with AstraZeneca down 1.7%, Diageo 3% and BP off 1.5%. Shell was down 0.6% after announcing refining margins are declining last week.
DS Smith
Some of the changes the global economy underwent due to the pandemic are here to stay. One of these is the shift towards online shopping and DS Smith’s packaging business is a major beneficiary.
In a world where retailers are issuing profit warnings, the seller of the spades in the gold rush is proving to be a winner.
DS Smith shares were 11% higher at the time of writing after announcing operating profit would exceed prior guidance.