FTSE 100 today: London markets to trade cautiously ahead of July 4 election

01/07/2024

Moving markets today: Asian stocks mixed; euro rises on French election, yen weakens on Japan’s Q1 GDP revision; All eyes are on French and UK elections, US jobs data

On Monday, Asian stock markets showed caution as investors weighed uncertainties surrounding US interest rates. The euro strengthened slightly after France’s far-right party performed below some expectations in the initial round of snap elections, while the yen weakened following Japan’s revised downward GDP figures due to adjustments in construction data. Oil prices saw a slight increase on expectations of higher summer demand, while gold remained stable amid speculations about potential US interest rate cuts. In economic news, China’s twin PMI data show a mixed picture. Looking ahead, the UK is gearing up for a pivotal election on Thursday, with challenging prospects anticipated for the Conservative Party. Key economic updates this week include final June manufacturing and services surveys, housing market reports from Nationwide and Halifax, and May’s data on mortgages and consumer credit. In the US, all eyes are on upcoming releases such as Federal Reserve minutes, employment figures, final S&P US manufacturing PMI, and trade deficit data, with a keen focus on May job openings and June nonfarm payrolls reports. The FTSE 100 ended lower on Friday, and early futures suggest a muted start for Monday’s trading session. Here are five key takeaways for your day.

Far-right leads in France election first round

In France’s parliamentary election first round on Sunday, Marine Le Pen’s far-right National Rally (RN) party achieved significant success, garnering approximately 34 per cent of the vote according to exit polls. This outcome marks a substantial setback for President Emmanuel Macron, who had called for the snap election after his party’s recent defeat by the RN in European Parliament elections.

The final results will depend on negotiations and coalition-building before the upcoming run-off next week. Macron’s Together alliance and other centrist and leftist rivals were projected to receive between 20.5 per cent and 23 per cent of the vote, while the newly formed left-wing coalition, the New Popular Front (NFP), was expected to secure about 29 per cent, as indicated by exit poll data from Ipsos, Ifop, OpinionWay, and Elabe.

China’s twin PMI data show a mixed picture

A recent private sector survey indicated that China’s manufacturing sector experienced its strongest growth in over three years in June. Despite a slight slowdown in demand growth, increased production propelled the Caixin/S&P Global manufacturing PMI to 51.8 from 51.7 in the previous month.

This exceeded analysts’ expectations of 51.2 and marked the fastest pace since May 2021. The data suggests that while demand growth moderated, the sector remains robust and in good health.

On the other hand, according to official data released on Sunday, manufacturing activity declined for the second consecutive month, with the Purchasing Managers’ Index (PMI) from the National Bureau of Statistics (NBS) remaining unchanged at 49.5.

Japan revises Q1 GDP downward

Japan’s economy contracted more than previously estimated in the first quarter, as the government made a rare unscheduled revision to the GDP data on Monday. This casts a shadow over the already fragile recovery. The updated figures reveal that Japan’s real GDP shrank by an annualized 2.9 per cent from January to March, worse than the initially reported 1.8 per cent contraction.

Additionally, the GDP for the October-December period was revised down to an annualized growth of 0.1 per cent from 0.4 per cent, and the July-September period saw a revised annualized decline of 4.0 per cent, compared to the previously reported 3.7 per cent drop.

Key events to watch this week

This week is pivotal for the UK as voters go to the polls on Thursday to elect their next government, with current forecasts looking bleak for the ruling Conservative party. Key economic data will be released throughout the week, including the final June purchasing managers’ surveys for manufacturing on Monday and services on Wednesday.

The housing market will also be in the spotlight with Nationwide’s house price survey for June due on Monday and Halifax’s house price index on Friday. Additionally, data on mortgage approvals, mortgage lending, and consumer credit for May will be released on Monday.

In the US, Wall Street is bracing for several critical economic reports. This week will see the release of the Federal Reserve minutes, employment numbers, the final S&P US manufacturing PMI, and trade deficit data. Investors will be particularly focused on the May job openings data and the June nonfarm payrolls report.

Asian stocks wobble; euro gains on French election results

In Japan, the Nikkei 225 saw a rise of 0.42 per cent, while the broader Topix index climbed 0.52 per cent. Conversely, South Korea’s Kospi slipped by 0.27 per cent, but the small-cap focused Kosdaq gained 0.79 per cent. Australia’s S&P/ASX 200 decreased by 0.49 per cent. Hong Kong’s markets were closed on Monday for a public holiday.

On Friday in the US, the S&P 500 fell by 0.41 per cent, the Nasdaq Composite dropped by 0.71 per cent, and the Dow Jones Industrial Average edged down by 0.12 per cent. However, futures for both the S&P 500 and Nasdaq showed gains of 0.24 per cent and 0.29 per cent, respectively. In Europe, EURO STOXX 50 futures rose 0.71 per cent. Although the FTSE 100 ended Friday down by 0.2 per cent, its futures indicated a slight increase of 0.06 per cent to 8,217.0 points for Monday.

The dollar index slightly declined to 105.65, while the euro strengthened by 0.32 per cent to $1.0747, influenced by exit polls showing Marine Le Pen’s eurosceptic National Rally leading in the first round of the French elections but with fewer votes than some analysts had predicted.

In the commodities market, spot gold remained steady at $2,323.74 per ounce, after a rise of over 4 per cent in the second quarter. Brent crude futures increased by 0.2 per cent to $85.16 a barrel, and US West Texas Intermediate crude futures also rose by 0.2 per cent to $81.71 a barrel, with both contracts posting gains of about 6 per cent in June.