Markets shaky ahead of US jobs data, gold hits new high, Rolls-Royce extends rally and Spotify slashes jobs

“A mixed session across Asia and Europe set the tone for what could be an uneven week on the markets. Tomorrow sees the first of several important US updates on jobs,” says Russ Mould, Investment Director at AJ Bell.

“The Job Openings and Labor Turnover Survey (or JOLTS) on 5 December will be followed by ADP payrolls on 6 December and the Challenger, Gray & Christmas job losses survey on 7 December.

“Amid a decline in job vacancies, the market will want to see if workers are feeling confident enough to look around for new opportunities or whether they are feeling nervous and are staying put with their current employer.

“Any sharp increase in unemployment rates will be watched like a hawk by investors who are searching for clues as to whether the Federal Reserve has reason to start cutting rates. Nervousness about the outlook for the US economy is growing and every data point is being scrutinised for clues as to how the central bank might be thinking.

“The FTSE 100 slipped 0.1% to 7,519, dragged down by weakness among diversified miners and oil and gas producers. Brent Crude fell by 1.2% to $77.91 per barrel, extending Friday’s weakness amid market scepticism about a new agreement from oil producers’ cartel OPEC+ to cut production by 2.2 million barrels of oil per day in the first quarter. That might not be sufficient, given worries that oil demand will weaken going in 2024.

“Rolls-Royce extended its rally with another 3.3% share price gain to 285p after JPMorgan upgraded its rating on the stock to ‘overweight’, lifting its price target from 235p to 400p, while Goldman Sachs reinstated its ‘buy’ rating on the stock. The British engineer last week announced plans to quadruple profit by 2027 and to sell its electric aircraft division. The stock has now increased by 205% year-to-date.

“Gambling group 888 jumped 14% on press reports that Playtech had been sniffing around the business during the summer with a £700 million takeover proposal. Playtech has turned from prey to predator, having last year fought off bid interest from a Hong Kong consortium and an Australian business.”

Gold

“The big story of the day was gold hitting a new all-time high with an intraday price of $2,111.39 per ounce.

“The precious metal has been driven higher by renewed violence in the Middle East, a weaker US dollar and falling government bond yields. Investors often put money into gold where there are geopolitical tensions as it is considered to be a safe-haven asset. The weaker dollar can also make gold more affordable for non-US buyers.

“Investors increasingly believe the US central bank will start to cut interest rates next year and that could put further pressure on the dollar.

“One must also consider the attention gold is getting from markets and the media, which in turn could drive more people to put money into funds tracking the price of gold. Many of these funds purchase the physical gold so more investor demand equates to more buying of gold, which can further push up the precious metal price.”

Spotify

“It’s a wrap for nearly a fifth of music streaming platform Spotify’s workforce. There is a continuing trend of tech and tech-adjacent companies which built up their employee base during the pandemic having to right-size against a more uncertain economic backdrop and in the face of higher interest rates.

“Spotify has an enviable position with a leading share of its market but, like its counterparts in the TV space, it has spent heavily on content, with a big move into podcasting during the pandemic, in an attempt build its audience. The effectiveness with which some of this cash has been spent is questionable – more than $2 million an episode for 12 podcasts from Harry and Meghan, for example.

“The company has undoubtedly changed the way many of us consume music. Spotify now needs to demonstrate it can translate this into reliable earnings and cash flow.

“The wave of redundancies will come as something of a jolt after the company recorded its first quarterly profit in more than a year. It suggests management are serious about making Spotify sustainably profitable in the long run by keeping a lid on costs.

“This message will be music to the ears of many shareholders but the company needs to be careful it doesn’t cut back too much and undermine the performance of its platform.”

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