The markets continue to recover from the major concern recently over the Japanese carry crade breaking down.

What is interesting is that after the index broke under the 5,400 area it quickly moved the same distance again to the downside, as shown by the blue region in the enclosed chart. Somewhat reminiscent of how a head and shoulders pattern can break lower the same size as the previous head.

So the rally from the 5,100 has not come as a major surprise. What it does do is leave the burning question: Is this the start of a more meaningful recovery back to recent all time highs, or merely a near term blip before the selling returns?

As mentioned last week we do now have concerns that the July all-time highs could be the highs of the year, and that we have now entered into a “sell into rallies” phase. The first real test of this hypothesis will arrive if/when the index moves back towards the 5,400 area.

This is not only just the previous break level, but is also coinciding with the new negative trend line calculated from the July highs. If the market is able to break back above 5,400 then, alright, we would return to being more outright bullish again, and can see the market shaking off the recent concerns.

For the moment though we feel the balance of probabilities has shifted to a more negative stance and our expectation is that any move up towards the 5,400 could run into serious selling pressure.

So in the very near term this buying momentum may continue, a little, but the 5,400 needs to be conclusively broken for us to shift to a more positive medium term.

The FTSE 100 gained in slow trade on Monday as stocks took a break from the wild swings of last week and settled into range as investors awaited fresh catalysts.

After a tumultuous week for global equities last week, Monday’s session presented investors with trading conditions more typical of August. Having started the session around 0.4% higher, London’s leading index traded in a tight range of around 20 points with little in the way of major movers.

“A sense of calm has resumed across financial markets, helping to reverse the tumultuous trajectory of stocks witnessed over the past week. In sharp contrast to last Monday’s slide, the FTSE 100 has a spring in its step, easing into the green helped by gains in Asia and on Wall Street on Friday,” said Susanah Streeter, head of money and markets, Hargreaves Lansdown.

“The stabilisation of sentiment is continuing, following the sell off a week ago, as concerns about an American recession ease off a little. But with light trade volumes expected to continue due to the holidays, any whiff of unease could whip up fresh volatility. 

“The latest inflation data in the US will be in sharp focus this week. With producer price numbers out on Tuesday and the headline consumer figure due Wednesday, investors will be keen for fresh clues about how deep interest rate cuts will be this year.”

BT was the standout performer on Monday, with a 6% gain, on the news India conglomerate Bharti was buying a 24.5% stake in the company from Altice.

“The news Indian telecoms firm Bharti is taking a major stake in BT is reflective of a big power shift between the two companies. Around the turn of the millennium, it was BT which had a substantial holding in Bharti, as well as two seats on its board,” said AJ Bell investment director, Russ Mould.

“Bharti is buying its stake from French telecoms tycoon Patrick Drahi’s vehicle, Altice, and the news will likely be greeted with some relief by shareholders as it holds the promise of a bit more stability. 

“Drahi has been selling assets to pay down debt so his stake in BT represented a significant overhang on the shares.”

JD Sport, down 3.4% to 120p, was the top faller after Deutsche Bank cut its rating to sell with a 110p price target. JD Sports shares have failed to win back investor favour after cutting its profit outlook earlier this year. The biggest concern for investors of late has been Nike’s underwhelming performance. JD Sports is heavily reliant on Nike products for revenue, and a slowing Nike doesn’t bode well for JD Sports, which is eyeing rapid expansion in North America.

Marshalls shares were lower on Monday after the groundwork products group revealed falling revenue for the first half of the year amid slower demand.

Revenue for the first half of 2024 fell 14% while adjusted profit before tax sank 20%.

“Marshall’s shares have performed well this year, up over fifteen percent. This morning’s earnings update however indicates the Yorkshire construction firm is under mounting pressure with demand for UK housing floundering and inconsistent,” said Mark Crouch, Market Analyst at investment platform eToro.

“Marshalls, which supplies building, roofing and landscaping materials is facing a precarious set of circumstances, falling revenues and rising costs, in an industry struggling to get going and in desperate need of a kick start.”

The sounds from Marshalls were similar to brickmaker Ibstock – who reported last week – when it came to market conditions. Both noted a soggy first half but were more confident about the outlook for the rest of the year.

“The Group has delivered a resilient performance in weak end markets.  The result in the first half is encouraging and demonstrates that the strategy of diversification, building on the Group’s historic core Landscape Products business, through the acquisition and improvement of less cyclical businesses in recent years, has resulted in a more balanced Group,” said Matt Pullen, Chief Executive, Marshalls.

“Whilst market conditions affected the Landscape Products result, I have a strong view that the segment’s performance can be substantially improved through a number of self-help measures which we are implementing at pace.  I am excited for the segment’s prospects in a market recovery as it will benefit significantly from operational leverage.

“We are undertaking a review of the Group’s strategy and have identified a number of opportunities to deliver outperformance over the medium term.  These include attractive sustainability-driven markets across bricks and masonry, water management and energy transition alongside a cyclical recovery in our core landscape and roofing businesses, supported by the new Government’s commitment to increase housebuilding significantly.  We will provide more information on our new five-year strategy at a capital markets event on 19 November 2024.

“We remain cautiously optimistic of a modest improvement in the Group’s end markets during the second half of the year predicated on a progressive improvement in the macro-economic environment. Against this backdrop and with the benefit of ongoing management actions, the Board believes that profitability and pre-IFRS16 net debt for the full year will be broadly in-line with its previous expectations.”

Investors will be pleased to see the dividend maintained at 2.6p despite the poor performance for the first half.

Bharti Global, the international investment arm of Indian conglomerate Bharti Enterprises, has agreed to acquire a 24.5% stake in BT Group plc from Altice UK.

The acquisition will occur in two phases: 9.99% will be purchased immediately, followed by the remaining 14.51% pending regulatory approvals. Bharti Televentures UK Ltd, a wholly-owned subsidiary of Bharti Global, will execute the transaction.

In a statement released by Bharti on Monday, the group said the deal underscores Bharti’s confidence in BT’s strategy and the UK’s investment climate, though Bharti has no plans for a full takeover.

This move builds on Bharti’s existing UK investments and its historical connection with BT, which held a minority stake in Bharti Airtel from 1997 to 2001.

“This investment demonstrates the confidence we have in BT and in the UK. BT has a strong portfolio of market leading brands, high-quality assets and an experienced management team with a compelling strategy mandated by the BT Board to deliver value over the long term, which we fully support,” said Sunil Bharti Mittal, Chair of Bharti Enterprises.

“Bharti and BT have enjoyed a longstanding relationship – BT previously owned a 21% stake along with two board seats in Bharti Airtel Limited from 1997 to 2001.

“BT is playing a vital role to expand access to full-fibre broadband infrastructure for millions of people across the UK. Its focus on strengthening its networks, driving consumer growth, and optimising every aspect of its business makes it well-placed to consolidate its position as a leading global telecoms company.”