Must read: FTSE 100, China, Rolls-Royce, UK house prices

Our head of investment rounds up the morning's big news.

GLOBAL MARKETS

European markets have opened higher with the FTSE 100 trading above 7,600 as investors digest key economic data in China, Europe and the US today. However, the FTSE 100 is on track to end the month more than 3% lower.

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China’s manufacturing PMI hit 51.9 in March, beating expectations for a reading of 51.5, above the key 50 boom-bust divide. This is the third straight month of expansion as the world’s second largest economy rebounds following the unwind of Beijing’s strict anti-covid measures.

France’s consumer price inflation hit 5.6% in March, dropping from a 38-year high in February of 6.3%. It echoes similar declines in Spain and Germany this week which hit 3.3% and 7.8% respectively. However, Germany’s reading came in ahead of expectations whereas Spain’s data almost halved versus 6% in February.

Citigroup has upgraded US equities from underweight to overweight. In terms of sectors, it raised global tech to overweight and downgraded global financials from overweight to neutral. The analyst team has downgraded European equities excluding the UK to neutral from overweight.

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MONTH-END

Gold is on track for its best month since July 2020 thanks driven by strong demand for safe-havens amid the turmoil in the banking sector. The S&P 500 is on track for its second consecutive positive quarter, up 2% so far over the past month.

The FTSE 100 is down over 3% over a one-month period but remains in positive territory year-to-date thanks to a strong January. Endeavour Mining (LSE:EDV) is the top-performing stock on the FTSE 100 this month up over 16%, while Standard Chartered (LSE:STAN) is the worst performer so far down nearly 22% caught up in the banking sector volatility with the collapse of SVB and the takeover at Credit Suisse (SIX:CSGN).

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ROLLS-ROYCE

Rolls-Royce (LSE:RR.) is hiring Helen McCabe, a BP executive as chief financial officer starting later this year. CEO Tufan Erginbilgic who has been in the top job since the start of the year said ‘her track record of promoting rigorous financial discipline and experience of delivering performance management to achieve dramatic improvements will be invaluable as we move, at pace, to transform Rolls-Royce.

Shares in Rolls-Royce have had enjoyed an incredibly strong first quarter, rallying by more than 50% amid optimism towards the new CEO and a rebound in demand post covid. The engine maker reported a strong earnings performance last year thanks to the recovery in international aviation post pandemic. Erginbilgic has been spearheading a major transformation programme with hopes that this will revitalise its share price. Although shares have rebounded this year, the stock price is still trading at half of its value from five years ago.

Erginbilgic is making his mark by appointing a new CFO, in another sign that he is willing to take drastic action to reinvigorate the bull case.

UK BUSINESS CONFIDENCE

The Lloyds Bank Business Barometer rose by 11 points to 32% in March, the highest level since May 2022. Business sentiment has been picking up after the UK managed to stave off a recession with the gloomiest economic forecasts being wound back. Plus businesses are anticipating the inflation could ease off in the coming months, reducing pressure on costs and wages. The Bank of England is approaching the peak of its rate hiking cycle, which could also help by alleviating the headwind from elevated borrowing costs if interest rates remain on pause or are even cut.

Separate data out this morning saw fourth-quarter UK GDP rise by 0.1%, outpacing expectations for zero growth in the final three months of 2022.

UK NATIONWIDE HOUSE PRICES

UK March house prices fell by 3.1% year-on-year, the largest annual decline since July 2009. It came in below expectations for a drop of 2.2%, accelerating from February’s decline of 1.1%. All regions suffered slowing growth in the first quarter with Scotland performing the weakest while Wester Midland was the strongest performing region. The month-on-month figure dropped by 0.8%, the seventh decline in a row, also below forecasts for -0.3% and faster than the previous month’s 0.5% fall. The quarterly average UK house price now stands at £258,115. Nationwide said ‘it will be hard for the market to regain much momentum in the near term.

The UK housing market has been in disarray since the fiscal fiasco around the mini-budget last September which sent mortgage rates sharply higher while many mortgage deals were pulled from the market. Since then, although mortgage rates have been normalising, house prices have been hurt by rising interest rates from the Bank of England, sluggish economic growth, falling real wages and soft consumer confidence. Many would be buyers are holding off in anticipation that inflation, house prices and mortgage rates will cool further this year, helping the market to become more affordable, which should entice buyers back.