Early Morning Call: hesitant start for FTSE 100 amid warnings of further slowdown in housing market
Crest Nicholson posted a slump in half-year profit down to £20.9 million, from £52.5 million a year ago.
European equity markets opened mostly lower on Thursday, after a negative session in the Asia-Pacific region. On Wednesday, only the Dow Jones ended the session higher by 0.27%.
Japan's economy grew more than initially thought in the first quarter (Q1). Final estimates show the Japanese economy expanded 0.7% quarter-on-quarter (QoQ), after a preliminary reading of 0.4% and economists' forecast for a 0.5% increase. On an annualised basis, GDP rose 2.7%, up from an estimated 1.6%.
This upward revision was mainly driven by domestic demand, which contributed 1% percentage point to the revised growth. Capital spending rose 1.4%, upgraded from 0.9%.
In Australia, the trade surplus narrowed in April to A$11.2 billion, below the market forecast of A$14Bln. It was the smallest trade surplus since January, dragged down by a fall in exports. Shipments shrank 5% from the previous month to a nine-month low of A$56Bln. Total exports to China, Australia's largest trade partner, fell 15.4% from a month earlier.
Following the Reserve Bank of Australia's (RBA) surprise hike on Tuesday, Reuters released a snap poll, revealing that economists have also revised their expectations. A large majority of them, 20 out of 26, now think the RBA will hike its key interest rate once more by the end of September to 4.35%. Nearly two-thirds, 16 of 26, however expect the RBA to hold fire at its next meeting on July 4.
And after the RBA on Tuesday, the Bank of Canada (BoC) surprised the markets on Wednesday with an increase of its overnight rate to 4.75%, its highest level since May 2001, sending the Canadian dollar to a one-month high against the greenback.
Since January, the central bank had been on hold to assess the impact of previous hikes. The BoC took the opportunity to raise interest rates sooner rather than later, after the inflation uptick in April. Canada's economy has been relatively resilient so far this year. GDP growth for the first three months hit 0.8% QoQ, the unemployment rate has been stuck at a 49-year low for the past five months.
In its statement, the Bank of Canada said that "monetary policy was not sufficiently restrictive to bring supply and demand back into balance and return inflation sustainably to the 2% target." Markets and analysts immediately forecast yet another 25 basis point increase next month.
The Federal Reserve (Fed) is the next major central bank to decide on its rates. The two-day meeting will be held next week on Tuesday and Wednesday. For now, Fed Funds implied rates show a 33% chance of a 25 basis point hike, up from 22% yesterday.
On the UK equity market, Crest Nicholson warned of a further slowdown in the housing market. The British housebuilder posted a slump in half-year profit down to £20.9 million, from £52.5Mln a year ago. Crest Nicholson says demand is dampened by higher mortgage rates and broader economic worries.
Mitie posted a record full year revenue of £4.05 billion. Profit before tax more than doubled to £106Mln.
On the commodity markets, US crude oil stockpiles fell unexpectedly last week. EIA data showed crude inventories were down by 450,000 barrels. Analysts in a Reuters poll had expected a one million barrel rise.
Gasoline and diesel stocks rose during the period. Gasoline stocks rose by 2.75 million barrels in the week, distillate stockpiles rose by 5 million. This was due to an increase in the refinery utilisation rate, up 2.7 percentage points in the week to a staggering 95.8%, its highest level since August 2019.
London robusta is at 15-year high, on expected tight supplies from Brazil. Yesterday the US department of Agriculture forecast a 6% increase in coffee production in Brazil, but the detail showed that the country is likely to increase its arabica production by 12%, while the yield of robusta beans is seen down by about 5%.
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