The FTSE 100 gained on Monday as investors positioned for the Federal Reserve to pause hiking rates at their next meeting after last week’s jobs report indicated that the US employment market was slowing.

The FTSE 100 was 0.4% higher at 7,494 at the time of writing in a broad rally spearheaded by cyclical stocks. US markets were closed for the Labor Day holiday on Monday.

“Investors are growing warm to the idea that the Federal Reserve might not rush to raise interest rates again at its next meeting. An increase in unemployment for August and lower than expected wage growth suggest the Fed may sit on its hands and make no change to rates,” said Russ Mould, investment director at AJ Bell.

“Judging by the messages from US corporates regarding a slowdown in trading, it does feel like we could be at a turning point for monetary policy. Nonetheless, it is impossible to say for certain what the Fed will do, given these are only data points from a brief period of time.

“Any sign that interest rates might have peaked is good news, in theory, as it implies consumers and businesses may now have seen the worst when it comes to pressures from an appreciating cost of borrowing. However, existing pressures from current rate levels are still troublesome. One must also consider that any lack of further rate rises might be down to a weakening economy, so it is not a simple ‘no rate hikes = better times’ scenario.”

Improving news coming out of China helped propel mining shares higher after authorities took additional steps to help stimulate the struggling property market.

“Sentiment across Asian markets improved after the weekend vote by creditors in favour of restructuring a bond repayment by troubled Chinese property developer Country Garden,” said Russ Mould.

“Chinese authorities also lowered downpayment requirements for first and second-time home buyers, thereby providing yet another stimulus initiative to drive greater economic growth.”

UK housebuilders gained as investors dared to think a pause in US rates could be a precursor to the Bank of England keeping rates around current levels.

Persimmon was up 0.6%, and Taylor Wimpey added 0.4%.

Tekcapital shares were higher on Monday as appreciation for their portfolio companies’ progress was starting to be reflected in shares.

Although Tekcapital remains heavily undervalued compared to the sum of the parts of their portfolio companies, Tekcapital shares have begun to tick higher as investors look forward to key events that could unlock further shareholder value.

In a recent update, Tekcapital said food technology company MicroSalt “has been making steady progress towards its planned IPO” and was in “advanced discussions with commercial partners including key players in the snack food industry”.

The potential IPO and traction with ‘key players’ in the food industry could lead to a step change in MicroSalt’s value and drive a substantial re-rate in Tekcapital shares. One may argue this isn’t adequately reflected in shares.

Belluscura has recently demonstrated Tekcapital’s ability to identify technologies with a broad addressable market after announcing two separate deals that represent significant revenues for Belluscura.

Having founded Belluscura, conducted early funding, and subsequently listing Belluscura on London’s AIM, Tekcapital retains an 11% stake in the medical device company, which recently announced a landmark $55m royalty agreement with a Chinese partner.

Tekcapital issued a separate update on Guident in August and alluded to the testing of their regenerative shock absorbers with a Teir-1 tire organisation and progress in developing their autonomous vehicle safety technology.

Both of Guident’s technologies target multibillion-dollar industries, and commercial traction could result in a valuation that dwarfs the current $20m recorded on Tekcapital’s balance sheet.

Finishing with Innovative Eyewear, we recently spoke with CEO Harrison Gross, who spoke of excitement around licensing deals with Reebok, Eddie Bauer and Nautica launching in the coming months. Innovative Eyewear has developed the world’s first ChatGPT-enabled smart eyewear and hopes to capitalise on its first-mover advantage through partnerships with leading fashion and lifestyle brands.

Advanced Medical Solutions Group shares tanked on Monday after announcing the removal of key royalty revenue from their profit forecasts for the year ending 31 December 2023.

The company stated that due to uncertainty around the revenue outlook for products licensed from AMS, it believes it is prudent to remove royalty income from Organogenesis Inc. in its entirety from Q4 2023 guidance onwards.

Advanced Medical Solutions (LON:AMS) shares were down over 30% at the time of writing on Monday.

This removal of this royalty revenue is expected to significantly impact AMS’s adjusted pre-tax profit. For the 2023 full year, AMS anticipates the lower royalty will reduce its profit by £2 million. Additionally, in fiscal years 2024 and 2025, eliminating the royalty is forecast to cut pre-tax profit by £4 million annually. A similar pro-rata reduction is projected through September 2026 until the conclusion of the licensing agreement.

The update comes after AMS’s first half was affected by decreased royalties from the patent deal with Organogenesis. Recently, Organogenesis reported US reimbursement changes that have created uncertainty around revenues for key products using AMS patents.

With Organogenesis withdrawing its own guidance and AMS having minimal visibility into its sales, AMS stated it cannot quantify the financial impact at this stage. The combined impact is expected to lower AMS’s 2023 revenues to approximately £124-127 million and adjusted pre-tax profit to about £25-27 million.

AMS said its confidence remains intact, and guidance beyond 2023 is unchanged except for the Organogenesis royalty adjustment. Further details will be shared when AMS announces interim results on 20 September.

CleanTech Lithium shares rose on Monday after announcing progress at their Direct Lithium Extraction (DLE) pilot plant in Chile.

However, there may be some disappointment with the reaction in CTL shares as far as the news failed to drive a retest of key resistance levels. 

CleanTech Lithium shares were 5% higher at 55.75p at the time of writing as an early rally began to fade.

Shares in the lithium explorer look akin to a coiled spring. The good news is building, waiting for a specific catalyst to see the CleanTech Lithium share price pop above 60p.

What this catalyst is remains to be seen. The company has enjoyed resource upgrades and today progress on their Direct Lithium Extraction plant, but there isn’t the enthusiasm for the stock to test the 60p level.

Recent upgrades to the Francisco Basin and Laguna Verde projects disappointingly couldn’t get shares convincingly through crucial resistance levels. CleanTech Lithium has world-class lithium resources across three projects located in the Chilean salt flats, which one may argue isn’t reflected in the current price.

Nonetheless, should 60p persistently fail to be broken, there may be a trading opportunity in CleanTech shares. 

Some traders, no doubt, will be eyeing a retest of the 37p level for an entry. This has held consistently, and the stock has naturally undulated down and back off this level on many occasions. 

The FTSE 100 extended gains on Friday after the highly anticipated US jobs report indicated the US economy was cooling, suggesting the Federal Reserve would hold off hiking rates at their next meeting.

The FTSE 100 was 0.4% higher at the time of writing as London’s leading index joined in a global equity rally.

The question of whether ‘bad news is good news’ has been swirling all week. Bad news for the US economy is good news for equities because the Federal Reserve will likely pause hiking rates.

After several softer economic releases this week, today’s Non-Farm Payroll report will increase hopes the Federal Reserve will keep rates on hold at their next meeting.

The headline 187,000 jobs added in August beat expectations, but the US jobs market showed signs of cooling as the unemployment rate rose to 3.8% from 3.5%, and average hourly earnings growth was less than expected.

This is just the news those hoping for a pause in rate hikes wanted. US bond yields fell, and US equity futures rose in the immediate reaction.

This year, perceptions of when the Federal Reserve will stop hiking and eventually cut interest rates have dictated equity trade. This shows no signs of abating in the short term.

The Federal Reserve will next meet 19th – 20th September to decide on interest rates.

FTSE 100 movers

Johnson Matthey was the FTSE 100’s top riser after Standard Industries doubled its chemical company stake to around 10%. Johnson Matthey shares were 11% higher at the time of writing.

Natural resource companies were doing a lot of the heavy lifting on Friday, with BP, Rio Tinto, Glencore, Shell and Antofagasta up in the region of 1.5%-2.6%.

After a prolonged period of disappointing Chinese economic data, hopes of another wave of stimulus helped support Asian indices overnight, spilling over into today’s session in London.

“What supported the FTSE 100, in particular, was news of more Chinese stimulus, which helped break a losing streak for China’s mainland indices and lifted UK-listed stocks with exposure to the world’s second-largest economy – most notably the miners,” said AJ Bell investment director Russ Mould.

Gfinity shares jumped on Friday after a major shareholder increased their stake in the company. Gfinity is undergoing a strategic transformation to focus on its media business in an effort to become profitable.

Major shareholder Robert Napier Keith increased his stake from 12% to 20.7% according to a holdings update released on Friday.

Gfinity shares were 13% at the time of writing having hit the highest point since June earlier in the session.

The company has recently divested its esports assets to focus solely on its media business which has historically generated the lion’s share of their revenue.

The company is targeting cash breakeven and 10m monthly users in the coming months.

Physiomics (LON: PYC) announced two contract awards yesterday and the share price continues to rise with a further 54.7% gain to 2.05p. The mathematical modelling company has won a £125,000 with a UK biotech company for an immune-oncology project to be completed by the end of the year. A previous contract with Merck has been extended.

Robert Napier Keith has increased his stake in Gfinity (LON: GFIN) from 12% to 20.7% following the recent fundraising at 0.06p/share. The share price recovered 13.2% to 0.1075p.

Frasers Group (LON: FRAS) continues to build up its stake in online fashion retailer boohoo (LON: BOO) from 9.1 to 10.4%. The boohoo share price rose 9.47% to 39.025p. Frasers has also edged up its interest in ASOS (LON: ASC) from 19.3% to 19.8%, although 9.2% is held through financial instruments.

EnSilica (LON: ENSI) has secured a $2.4m contract with an existing European customer for the development of an advanced networking ASIC. Most of this revenue will be recognised in the year to May 2024, which underpins forecasts. The share price improved 4.55% to 69p.

FALLERS

Linear Generator technology developer Libertine Holdings (LON: LIB) says fees expected from Hyliion may not be recognised this year. This means that the loss would be higher than the £2.6m forecast. The first phase of development is complete and Hyliion has a six-month option period to negotiate IP rights. Work on the MAHLE powertrain was completed later than scheduled. There is £1.2m in the bank, which should last until May. The share price slumped 47.4% to 2.5p.

Verditek (LON: VDTK) is raising £500,000 at 0.45p/share to provide working capital for the cleantech company. The share price dived 36.7% to a new low of 0.475p.

Sustainable wood products supplier Accsys Technologies (LON: AXS) made a strong start to the financial year, but it warns that demand from the construction market is declining. Sales volumes for the year to March 2024 will be worse than expected and profit will be much lower than anticipated. Operating costs are being reduced. The share price fell 24.2% to 73.5p.

Healthcare services provider Totally (LON: TLY) says that the cost of agency staff exceeds forecasts and the decisions for some new contract awards are on hold. Totally is streamlining operations to reduce the overhead base. The share price dipped 14.4% to 9.1p.