London stocks are expected to start the week subdued on Monday. FTSE 100 futures point to an essentially flat open at around 10,831, just 0.2 points above Friday’s closing level of 10,831.09. The blue-chip index finished last week 0.4% higher overall.
Trading volumes could be lighter than usual with US financial markets closed for Labor Day, leaving investors looking towards European data and central-bank developments for direction.
US Jobs Beat Puts Focus Firmly on Inflation
Friday’s US nonfarm payrolls report delivered a significant upside surprise, with the economy adding 162,000 jobs in August, compared with expectations for just 56,000.
The stronger labour market has kept alive the possibility that the Federal Reserve could raise interest rates at its September meeting.
However, attention is now shifting towards Friday’s US inflation report, which could prove more decisive for monetary policy.
Commerzbank analyst Thu Lan Nguyen said the employment figures neither prevented a September rate increase nor made one significantly more likely, arguing that the August inflation figures should be the crucial determinant.
The Dow Jones Industrial Average ended Friday down 0.5%, while the S&P 500 lost 0.4% and the Nasdaq Composite declined 0.3%.
Oil Climbs as Iran Warns of Stronger Response
Geopolitical risk remains a significant restraint on sentiment.
Brent crude climbed to $96.28 a barrel early Monday, compared with $95.18 at Friday’s London close, as tensions between the US and Iran intensified again.
Iranian parliament speaker Mohammad Bagher Ghalibaf warned that Tehran would deliver a “faster, more intense and more painful response” to further attacks on Iranian interests.
Iran’s security leadership has also indicated that the country intends to establish a “prohibited zone” near the Strait of Hormuz, adding further uncertainty around one of the world’s most important energy shipping routes.
The prospect of disruption to oil supplies remains particularly important for equity and bond markets. Persistently elevated energy prices could reinforce inflationary pressures just as investors assess whether major central banks need to tighten monetary policy further.
AI Enthusiasm Sends SoftBank Surging
Asian markets produced a mixed performance, although technology shares were notable outperformers.
Japan’s Nikkei 225 jumped 2.0%, helped by an extraordinary 9.9% rise in SoftBank Group.
The rally followed renewed enthusiasm surrounding artificial intelligence, with SoftBank particularly sensitive to developments at OpenAI because of its substantial investment exposure.
Elsewhere, China’s Shanghai Composite edged 0.1% higher, while Hong Kong’s Hang Seng fell 0.9% and Australia’s S&P/ASX 200 gained 0.1%.
Sterling Slips as ECB Decision Approaches
The pound weakened slightly to $1.3514 early Monday from $1.3522 at Friday’s London close, while remaining broadly unchanged against the euro at €1.1634.
The euro traded at $1.1611, while the dollar stood at ¥155.99 against the Japanese currency.
Gold eased to $4,404.61 an ounce, compared with $4,439.40 on Friday.
Alongside Friday’s crucial US inflation report, investors face a potentially important European Central Bank interest-rate decision on Thursday.
For Monday, the economic calendar includes UK house-price figures, eurozone GDP data and German industrial production.
On the UK corporate calendar, investors will be watching half-year results from Standard Life and full-year numbers from emerging-markets investment manager Ashmore.
With Wall Street closed, oil approaching $100 a barrel and another escalation in the US-Iran conflict hanging over markets, the FTSE 100 looks set for a cautious and potentially quiet start to the week.
