A measure of the US economic cycle has ticked a little lower.

The Conference Board Leading Economic Index fell by 0.1% in December 2023 to 103.1 (2016=100), following a 0.5 percent decline in November.

This means the LEI has contracted by 2.9% over the six-month period between June and December 2023, a smaller decrease than its 4.3% contraction over the previous six months.

Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators at The Conference Board, says:

“The US LEI fell slightly in December, continuing to signal underlying weakness in the US economy.

“Despite the overall decline, six out of ten leading indicators made positive contributions to the LEI in December. Nonetheless, these improvements were more than offset by weak conditions in manufacturing, the high interest-rate environment, and low consumer confidence.

Shares in London are also rallying, although they’re nowhere near a record high.

The FTSE 100 index of blue-chip shares is now up 0.36%, or 26 points, today at 7,488 points, as stocks rally after their worst week since mid-October.

It’s nearly a year since the Footsie broke over 8,000 points for the first time.

Here’s Reuters' take on the drama on Wall Street today:

The S&P 500 touched a fresh record high on Monday in another session of gains for Wall Street’s major indexes, with investors monitoring the ongoing corporate earnings season and any clues on interest-rate cuts this year.

The Dow Jones Industrial Average rose 55.75 points, or 0.15% at the open, to 37,919.55.

The S&P 500 opened higher by 13.61 points, or 0.28%, at 4,853.42, while the Nasdaq Composite gained 82.08 points, or 0.54%, to 15,393.05 at the opening bell.

Back in the UK, train drivers’ union Aslef is standing down its five days of additional strikes at LNER, bringing some relief to passengers.

The move comes after LNER, the state-owned operator, withdrew plans to impose minimum service levels during next week’s industrial action.

LNER, which runs trains on the east coast main line from London to Scotland, had told Aslef it intended to use the controversial new laws to run trains during the strikes.

The minimum service levels legislation passed by the Conservatives has not yet been tested until now. Ministers have been privately lobbying train operators to use the new powers during rolling strikes across all of England’s train operators next week and the LNER U-turn throws doubt over how workable the new law is in practice.

While LNER has not confirmed it planned to compel some drivers to work during the strike to run a minimum 40% of the usual timetable, it is understood that its plans prompted the Aslef escalation of action announced last week, which is now to be withdrawn.

Employees at the European Central Bank have given their president, Christine Lagarde, a thumbs-down in a staff survey, according to reports.

Politico say that most participants in a trade union survey of ECB staff said they don’t think Lagarde is the right person to head the ECB now, with 50.6% of respondents ranking her overall performance in the first half of her eight-year term as “very poor” or “poor.”

That’s rather worse than recent predecessors, such as Mario Draghi or Jean-Claude Trichet. Trichet only attracted “very poor” or “poor” ratings from 14.5% of respondents – even though his ECB blundered by raising eurozone interest rates in July 2008, just before the financial crisis exploded, and later threatened to cut off support for Ireland unless it sought a bailout.

Compared to these blunders, what is Lagarde’s crime? Apparently, the former French finance minister and IMF chief has been using the ECB to boost her personal agenda, wading too deeply into politics, and focusing on non-core issues such as gender equality rather than the fight against inflation.

Politico says (with an intriguing ‘ahem’…):

Both her predecessors also received bad marks for their handling of internal affairs, but staff were scathing about Lagarde, with almost three-quarters expressing unhappiness about her approach to management.

Some of that was mundane grumbling over things like hot desking, restrictions on working from home and, ahem, pay rises that don’t keep up with inflation. But other claims went much further.

More here: Christine Lagarde makes a poor central banker, ECB staff say

The shipment delays caused by vessels avoiding the Red Sea (and thus the Suez Canal) is causing problems for Germany’s chemicals industry.

Germany’s chemicals sector relies on Asia for around a third of its imports from outside Europe.

Martina Nighswonger, CEO and owner of Gechem GmbH & Co KG, which mixes and bottles chemicals for big industrial clients, says her procurement department is currently working “three times as hard” to get hold of raw materials.

As a result, Gechem has lowered production of dishwasher and toilet tablets because it can’t get enough trisodium citrate as well as sulfamic and citric acid. More here.

Boeing is facing more scrutiny, after the US aviation regulator recommended that airlines which operate its 737-900ER jets inspect door plugs to ensure they are properly secured.

The advice came after some operators reported unspecified issues with bolts upon inspections.

The recommendation follows the FAA’s grounding of 171 Boeing 737 Max 9 planes after the 5 January mid-air cabin blowout of a door plug on an eight-week-old Alaska Airlines Max 9 jet.

Boeing’s shares were down 2.5% in premarket trading today; they have fallen 17.5% since the beginning of the year.

The 737-900ER is not part of the newer Max fleet but has the same optional door plug design that allows for the addition of an extra emergency exit door when carriers opt to install more seats.

More here:

Reuters also reports that antimony prices have hit their highest since September 2022 as European and U.S. buyers grapple with delayed shipments of the metal from Asia.

Supplies of antimony, which is used in batteries and semiconductors, have been affected by disruptions on the Red Sea route.

Prices of the material that is also used in the manufacture of fire-retardants, ceramics, glass and rubber products have jumped 17% from $11,350 a metric ton since December and were around $13,300 in the European spot market this month, traders said.

German shipping group Hapag-Lloyd has also announced it will introduce land corridors to transport goods through Saudi Arabia to mitigate the impact of Red Sea disruption on its business.

The move comes as Hapag-Lloyd decides to continue routing its vessels around the Cape of Good Hope until further notice (see earlier post).

The company said it would offer land connections from Jebel Ali, Dammam and Jubail to its ocean shuttle service out of Jeddah, explaining:

“Our aim is to provide (customers) with a convenient contingency solution to overcome this unexpected closure until the situation in the Red Sea has been normalized.”

British farmers are calling on MPs to support tougher regulations to protect them from “unfair” treatment by the “big six” supermarkets.

A protest by dozens of ‘scarecrows’ outside Parliament today comes as MPs are set to debate reforms to the grocery supply chain, after more than 110,000 people signed a petition pressing the Government to overhaul the grocery supply code of practice.

Veg box firm Riverford Organic, which initiated the petition, said the scarecrows standing outside Parliament represented fruit and vegetable farmers who claim it is likely they will go out of business in the next 12 months, with many blaming supermarkets’ buying practices as a threat to their livelihoods.

The petition calls for regulations that ensure supermarkets adhere to “fair” purchasing agreements, including buying agreed quantities and paying the agreed amount on time “without exception”.

Riverford said current government policies failed to provide adequate support for farmers and were rarely enforced.

More shipping news: Danish shipping group Maersk is diverting its ME2 container service away from the Red Sea and Gulf of Aden.

Instead, the vessels will be rerouted around the Cape of Good Hope, the company said in an advisory to clients today, Reuters reports.

The ME2 service links Italy and the western Mediterranean Sea to the east coast of India and the United Arab Emirates.

The value of farmland in England and Wales grew twice as fast as blue-chip shares on the London stock market last year, new research shows.

Knight Frank’s Farmland Index, released this morning, shows that the value of bare land in England and Wales rose by 7% in 2023, trading over £9,000/acre on average for the first time.

That’s almost twice as fast as the 3.8% increase in the FTSE 100 last year.

Knight Frank reckons scarcity of supply and persistent strong demand from a diverse selection of buyers supported farmland prices, in the face of high inflation, rising borrowing rates, weak commodity markets, and a decline in farm subsidies.

Rising prices could also be due to the growth in the nature capital market, which provides farmers with new funding sources, such as carbon sequestration and enhancing biodiversity.

Will Matthews, Head of Farms & Estates at Knight Frank, says:

“The absence of forced sellers has certainly created a unique market dynamic. A persistent low supply makes it challenging to envision farmland trading at levels below those we’ve witnessed. The robust demand and intense competition among affluent buyers frequently pushes values to £10,000 per acre, and large blocks can even exceed £15,000 per acre.”

2023 also ended badly for German exporters.

Exports from Europe’s largest economy to countries outside the European Union fell by 4.0% in December compared to November 2023, the Federal Statistical Office reports.

Exports to the United States fell by 9.9% compared to December 2022, while exports to China fell by 12.7%, and exports to Russia fell by 32.3% compared to the same month last year.

But, German exports to the United Kingdom increased by 19.7% year-on-year.

Stocks have opened a little higher in London this morning, at the start of a new week.

The blue-chip FTSE 100 index has gained 16 points, or 0.2%, to 7479, which still leaves it down 3.2% so far this year after a weak start to 2024.

The FTSE 250 index of medium-sized firms has gained 0.7%, led by thermal processing specialist Bodycote (+4%) which announced a £60m share buyback programme this morning after completing the takeover of US rival Lake City HT for less than expected.

Investors are in a somewhat upbeat mood, after rising tech shares lifted the US S&P 500 to a record high on Friday.

Richard Hunter, Head of Markets at interactive investor, says UK markets also joined the bullish turnaround this morning, albeit at a more measured pace, adding:

The FTSE100 was buoyed by a broad mark-up which included a broker upgrade for Segro. In addition, retailers recovered some poise with gains for the likes of Ocado, JD Sports and Kingfisher ahead of a week which will see an update from Primark owner Associated British Foods.

A broker downgrade to Sage scuppered what little hopes there may have been for strength in UK tech stocks, such as they are.

There’s also a little takeover drama in the City today.

British catering firm Compass Group is has agreed a deal to buy rival CH&CO, as it looks to expand its UK and Ireland business.

CH&CO, which caters to sectors including businesses, sports and universities, is one of the royal warrant holders for catering services ,and cates for some iconic and landmark venues including the Royal Opera House, Kew Gardens, and Abbey Road Studios.

The deal is at an enterprise value (equity plus debt) of £475m.

Economic gloom has also hit UK industrial components manufacturer Trifast, which warned on profits this morning.

Trifast, which makes high end industrial fastenings such as bolts, nuts, screws, rivets and washers, is cutting 10% of its non-operational staff worldwide, after concluding that results this year will be “significantly below” its previous expectations.

Trifast says demand was “volatile” in the last quarter, including significantly lower than forecasted volumes in December.

It told the City that demand was slowing, as “geopolitical events” also hit sales, saying:

The more testing environment that we are now experiencing in 2024 in terms of growth is being severely impacted by a further slowdown in customer demand and volumes across the business and to an extent by the reported macro-economic challenges and geopolitical events.

Shares in Trifast have dropped 20% in early trading.

This is the third profit warning from the company in 15 months. It warned in October 2022 that underlying profits would miss market expectations, then in Febuary 2023 it announced annual profit would fall well below market expectations, and the surprise departure of its CEO.

Today’s forecasts suggest the UK’s period of economic stagnation is slowly coming to an end, adds Hywel Ball, EY UK Chair.

Ball says:

Households and businesses are still facing a tough outlook in 2024, due in part to the lagged effect of interest rate rises, but slowing inflation and anticipated Bank Rate cuts should help build economic momentum as the year progresses.

Business investment, which has been disappointing for some time, is also expected to see a resurgence in the medium term, Ball adds:

A modest contraction is forecast for 2024, but this should be followed by a revival in capital expenditure in subsequent years. Falling inflation and declining market interest rates, coupled with the potential for additional tax cuts in the Chancellor’s spring budget, suggest the UK is at a turning point in 2024 and about to enter a more positive phase of growth.”