London pre-open: Positive start expected on first trading day of 2024

UK stocks are expected to open the first trading session of 2024 in positive territory, with the FTSE 100 tipped to rise 0.3% from the previous close of 7,733.24 – its highest finish since May 2023.

Rising tensions in the Middle East could keep a cap on gains, though sentiment is continuing to be lifted by hopes that the Federal Reserve could soon make a move to loosen monetary policy.

Tuesday will see a host of manufacturing purchasing managers' indices (PMIs) from Spain, Italy, Germany, France, the UK and US – all of which are expected to show that the industrial downturn continued in December with figures remaining below the key 50-point level. However, Chinese data showed that growth unexpectedly picked up, with the Caixin manufacturing PMI rising from 50.7 to 50.8, ahead of the 50.4 consensus estimate.

Looking ahead, markets will be focusing on leading indicators from the US, with minutes of the latest Federal Open Market Committee meeting due on Wednesday, the ADP Employment Report on Thursday and the all-important non-farm payrolls figure on Friday.

"Outside of year-end dynamics and sparsely covered Wall Street trading desks, there remains an increasing belief that Fed rate cuts, which have bullishly marked all capital market trends in the last eight weeks, are still fully ingrained in stock market sentiment," said Stephen Innes, managing partner at API Asset Management.

"While a stronger-than-expected US jobs report could shake this conviction, a reversal would require a resurgence in realised inflation, triggering a significantly more assertive hawkish stance from Chair Powell and other key figures to discourage March or May rate cuts bets."

In other news, oil prices were higher after an Iranian warship entered the Red Sea, a channel that handles around one eighth of global commerce, as nations continue to take action against Yemen's Houthi rebels who have attacked ships bound for Israel. Brent crude futures were up 1.8% at $78.46 a barrel early on.

In company news, Diversified Energy Company has completed the sale of producing assets in Appalachia to a special purpose vehicle (SPV), DP Lion Equity Holdco, while retaining a 20% minority interest and operational control, it announced on Tuesday. The transaction generated around $200m in proceeds, allowing the company to reduce its debt by 12% by repaying its sustainability-linked loan, and improving liquidity. It said the implied valuation of the transaction was 5.7 times the expected hedged 2024 EBITDA of $35m, with the sold assets having a PV-10 of $230m and being previously used as collateral for its revolving credit facility.

Infrastructure specialist Balfour Beatty has appointed its brokers to oversee the initial phase of its 2024 share buyback programme of up to £50m by 30 June. The complete scope of the buyback would be disclosed with its full-year results in March. It said the maximum number of shares to be acquired would be 63,162,140.