European markets flat as US jobs data joy fades away, UK property market springs back into life, BP reported to be rowing back on oil and gas cuts, Rio Tinto moves on lithium miner

“The party on the markets triggered by last Friday’s stronger than expected US jobs data seems to have fizzled out,” says Russ Mould, Investment Director at AJ Bell.

“European equities were lacklustre at the start of the new trading week despite the latest labour figures implying the US isn’t heading towards recession.

“The FTSE 100 was flat at 8,279, with strength in energy and banking stocks offset by weakness in miners and utilities. The jobs data surprise quickly wiped the shine off the price of gold and demand has weakened further as investors reassess their portfolios and slightly dial up risk.

“However, it doesn’t look like a major shift in market sentiment given how European equities ground to a halt on Monday and futures prices imply a similarly quiet session on Wall Street when US markets open later on. Investors might be holding out for more data points to support the suggestion that an economic downturn can be avoided.

“In the UK, house prices grew at their strongest rate since November 2022, according to Halifax’s latest survey. The year-on-year price growth of 4.7% suggests the Bank of England’s interest rate cut in August has breathed new life into the property market, helped by falling mortgage rates making the dream of getting on the housing ladder a reality for more people.

“A pick-up in housing market activity should drive more business to mortgage lenders, hence why the likes of NatWest and Lloyds were among the top risers on the FTSE 100.”

BP / Shell

“Reports suggest BP chief executive Murray Auchincloss is planning to water down the company’s commitment to sustainability goals.

“BP may feel it is being punished by the market for a strategy which included a 25% cut to oil and gas output by 2030 – already down from the original 40% reduction outlined in 2020 – so it appears this plan will now be ripped up completely.

“The problem with reducing hydrocarbon production is it generates most of the cash which allows BP to reward shareholders with dividends and share buybacks. There is speculation that BP will not only scrap the output reduction plan, but it will also seek to increase the volume of oil and gas it produces by investing in geographies like the Middle East and Gulf of Mexico.

“Auchincloss needs to demonstrate he has a genuine plan apart from not doing what the market doesn’t like. If the reporting is correct, the company can expect to catch significant flak from regulators, politicians and environmental campaigners. However, that is probably easier to ignore than a stagnant share price.

“Shell, which has fared better than BP in share price terms in 2024, has been on its own journey of backsliding on net zero commitments. However, it does have a more established strategy of focusing on natural gas, which some believe will play an important role as part of the transition away from more polluting fossil fuels like coal and oil.

“The company’s liquefied natural gas business seems to be in decent fettle, with production guidance lifted in a teaser ahead of third-quarter results. However, an uncertain economic backdrop and an increase in capacity is hurting margins for its refining business.”

Rio Tinto

“Rio Tinto appears to have learned from its mistakes in the commodities boom a decade ago where it overpaid for assets at the top of the market. Miners should be acquiring when commodity prices are weak, not strong, as they have a better chance of getting something at a bargain price.

“The move on Arcadium Lithium suggests Rio has finally got the memo to buy low, not high. The lithium market has been going through a bad patch of late, depressed by Chinese oversupply and weak demand for the battery material as the adoption of electric vehicles has been slower than expected. That’s depressed shares in Arcadium and created an opportunity for Rio to pounce while the target is down on its luck.

“Rio Tinto will be taking a long-term view of lithium by making this takeover approach. The demand and supply dynamics might be unfavourable now, but longer-term they are expected to improve. Rio Tinto will no doubt want to beat its top tier rivals and become one of the world’s key sources of lithium so as to capitalise on the structural shift to electric vehicles and ongoing demand for consumer electronics. That means securing the best assets now before the market improves.”

These articles are for information purposes only and are not a personal recommendation or advice.