Another positive day for Asian markets after the National People’s congress in China signalled plans to stimulate growth has so far failed to see much follow through into Europe, which is sagging in the after-effects of Friday’s US employment report. Reports last week that there is a lack of unity within the European Central Bank over potential new monetary stimulus measures has removed some of the appetite for stocks on the continent.
Stocks in China rose for the fifth straight session after Chinese authorities said they would expand the budget deficit to 3% of GDP and increase the money supply to finance a rate of growth of 6.5 to 7%. Chinese bonds rose (as yields fell) on the idea interest rates would fall while the government borrows more to support the economy.
The Basic resource sector of the stock market as well as the price of oil, iron ore and base metals had largely priced in the Chinese announcements by Friday and as such were flat to lower on Monday. Basic resource shares continue to lead the rebound in markets, with the FTSE 350 mining index up 28% YTD versus a decline of just over 1% in the FTSE 100.
Old Mutual was top gainer on the FTSE 100 on speculation the company is considering a break-up as part of a strategic review it began in November. Old Mutual has four very distinct units which makes it very ripe for splitting up. The drop in the South African rand, in which the insurance company gets most of its revenue, will have hurried the need for action. The UK wealth management arm has attracted the most interest from private equity within the square mile. More details are expected during the company’s earnings report on Friday.
Metro Bank shares begin conditional trading on Monday.
US stocks look set for a lower start, breaking the tight correlation with a higher oil price ahead of comments from central bankers Brainard and Fischer after last week’s payrolls data saw monthly wages decline.
USA pre-opening levels
S&P 500: 10 points lower at 1,989
Dow Jones: 69 points lower at 16,937
Nasdaq 100: 28 points lower at 4,301
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