Proactive Investors -
- FTSE 100 makes strong progress, up 46 points
- Oil prices soar after Opec+ agrees production cut
- Mixed start seen in the US
Mixed start seen across the pond
The FTSE has come off its highs but remains comfortably higher, up 46 points, ahead of the restart in New York.
Wall Street looks set to open mixed as second-quarter trading gets underway, with investors digesting the decision by members of Opec+ to cut production in a week that culminates with the key non-farm payroll data for March.
Futures for the Dow Jones Industrial Average rose 0.4% in Monday pre-market trading, while those for the broader S&P 500 index were flat and contracts for the Nasdaq-100 shed 0.6%.
Oil prices jumped the most in nearly a year after a surprise announcement on Sunday by Opec+, which includes Russia, of an additional production cut of about 1.16 million barrels per day (bpd) of oil, on top of an earlier output cut of 2 million bpd. Benchmark Brent crude was up 5.5% early Monday to $84.28.
The Nasdaq Composite led gains on Friday, jumping 1.7% to 12,222 to take the tech-heavy index’s gains for the first quarter to 17%. The S&P 500 rose 1.4% to 4,109 for a quarterly gain of 7% while the DJIA added 1.3% to 33,274, ending the quarter flat.
“Markets finished a tough opening quarter on a positive note, boosted by signs of slowing inflation and in the absence of any further shocks from the banking sector,” commented Richard Hunter, head of markets at interactive investor.
“In the US, the Federal Reserve’s preferred inflation indicator, the Personal Consumption Expenditures index, rose by 0.3% in February, marginally less than the 0.4% expected. However, US markets have not yet been able to react to a subsequent announcement from oil producers that output cuts could be on the way," he added. This could reignite inflationary concerns and the oil price surged by some 5% on the news, although remaining down by 2.5% in the year to date.”
Ahead of the release of March’s non-farm payrolls report on Friday, today’s data dockets provide further manufacturing updates from the US, the UK, the Eurozone and China, said TickMill Group market analyst Patrick Munnelly.
“Today’s US ISM manufacturing report will likely remain sub 50 as with other major economies factory production remains short of the output seen in the services sector,” he added.
EY faces German audit ban - reports
EY has been banned from taking on listed companies as new audit clients in Germany for two years over flawed work for payments company Wirecard (ETR:WDI), according to reports in German business daily Handelsblatt and the Financial Times.
The ruling is set to be announced today by the country’s audit watchdog, Apas.
Citing people familiar with the matter, the FT said the Big Four firm and five current and former employees have also been fined up to €500,000 each.
The regulator did not come to any formal decision over whether EY acted with intent or with negligence, dodging a contentious question over the firm’s criminal and civil liabilities.
Wirecard (ETR:WDI) collapsed into insolvency in June 2020 in one of Europe’s largest postwar accounting scandals, after disclosing that half of its revenue and €1.9bn in corporate cash did not exist.
The Munich-based company had received unqualified audits from EY for more than a decade.
EY has lost several large audit clients in the wake of the scandal, including Commerzbank (ETR:CBKG), DWS and KfW, and has not won any significant new mandates since then.
Green shoots in manufacturing PMI?
Gabriella Dickens at Pantheon Macroeconomics felt while the “manufacturing sector is not out of the woods just yet, March’s PMI suggests that the downturn now is bottoming out.”
The PMI fell to 47.9 in March, down from February's seven-month high of 49.3 and the earlier flash estimate of 48.0. The PMI has stayed below the neutral 50.0 mark for eight successive months.
She highlighted that the new orders index rose back above 50.0 for the first time since May 2022 while manufacturers also were the most upbeat about the 12-month outlook since February 2022.
She did caution however that manufacturing output still was boosted in March by the firms working through order backlogs; this support won’t last much longer.
The EY ITEM Club agreed the rise in new orders and business optimism "suggest there may be some light at the end of the tunnel for the sector," but added current headwinds mean this is unlikely until the second half of the year.
Martin Beck, chief economic advisor to the EY ITEM Club also highlighted input cost inflation cooled further on the back of better resource availability and lower commodity prices.
He noted evidence that lower cost pressures are starting to feed through to customers, with prices charged inflation also slowing.
This reinforces his view that that inflation peaked at the end of 2022 and should fall at speed in 2023.