Written by: Sophie Lund-Yates | Hargreaves Lansdown
- FTSE 100 regains some ground as house prices rise
- American stock markets post strongest monthly gains in over a year amid peak-rate optimism
- Metrobank looks for cost savings of £50m a year
- Oil market weakens on economic concerns
The FTSE 100 has regained some confidence from investors, helping to erase losses of recent days. The unexpected increase in house prices helps support the builders and also paints a picture of an economy with a reasonable pulse. Optimism is also being brought over from the US.
The US market is well and truly behaving like we are at peak interest rates in an early Christmas present for investors. Major stock markets have posted their strongest gains in over a year amid hopes that lower interest rates are within touching distance – and this is an especially potent possibility for the tech-laden Nasdaq. Data yesterday showed the US economy is cooling faster than expected, which adds weight to the interest-rate cutting narrative, but does throw up another challenge. Lower interest rates are introduced in times of economic challenges, and the size and shape of an incoming recession – should there be one – does have the ability to derail gains.
With the so-called Magnificent Seven riding high on jet-fuelled hopes for generative AI in the coming quarters, there is a lot of froth being kicked up. While the excitement is rooted in something real, the question of valuation is another thing entirely. There is some profit-taking from retail investors and if this becomes more pronounced it can create an unwanted ripple effect. Underlying conviction in tech remains very strong, as signalled by the relatively muted response to spiking treasury yields. The simple fact is that these companies essentially have a license to print money and that makes valuing future flows a different task to market cycles gone by.
After Metrobank was saved from collapse in October thank to a £925m emergency refinancing, it’s now carrying the weight of expensive debt. Up to a fifth of the workforce could go in a bid to try and save £50m a year. The extended opening hours, which are one of the banks’ unique selling points, are also under threat. There is a difference between companies trimming fat and major surgery, and unfortunately Metrobank has landed in the latter category.
The oil price has come under renewed pressure, with Brent crude trading at around $80 a barrel. There are concerns about economic activity, as well as scepticism about producers sticking to cuts. A situation where oversupply and economic slump happen at the same time could see sharp reductions in the price of the black stuff.
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