Stocks opened higher in Europe on Friday, as investors shift their attention to rate decisions by the US Federal Reserve and Bank of England next week, after a cut by the European Central Bank on Thursday.
The FTSE 100 index added 16.61 points, 0.2%, at 8,257.58. The FTSE 250 was up 83.91 points, 0.4%, at 20,779.68, and the AIM All-Share rose 2.33 points, 0.3%, at 743.69.
The Cboe UK 100 was up 0.2% at 825.95, the Cboe UK 250 rose 0.3% to 18,289.11, and the Cboe Small Companies was up marginally at 16,734.86.
In European equities on Friday, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt added 0.3%.
In New York, the Dow Jones Industrial Average closed 0.6% higher on Thursday. The S&P 500 ended 0.8%. The Nasdaq Composite rose 1.0%.
Most Asian markets traded higher. The Nikkei 225 ended down 0.7% in Tokyo. In China, the Shanghai Composite fell 0.5, while the Hang Seng in Hong Kong added 0.8%. In Sydney, the S&P/ASX 200 rose 0.3%.
The story so far on Friday has been about ‘Wall Street’s momentum spilling over’, SPI Asset Management analyst Stephen Innes commented.
‘The S&P 500 and Nasdaq both rose for the fourth straight day, and the Nasdaq is on track for its biggest weekly gain of the year. The S&P 500, meanwhile, is within 1% of its July record high,’ the analyst said.
The pound was quoted at $1.3146 early Friday in London, rising from $1.3079 at the time of the London equities close on Thursday. The euro stood at $1.1085, up from $1.1036. Against the yen, the dollar was trading at JP¥140.96, down markedly from JP¥142.33.
The European Central Bank on Thursday cut interest rates as expected, but emphasised it was not ‘pre-committing’ to a set path for monetary policy.
The Frankfurt-based official lender trimmed its key deposit rate by 25 basis points to 3.50%, from 3.75%.
Whilst ECB President Christine Lagarde in July had said the decision for September was ‘wide open’, the market had been widely expecting a cut.
As for what comes next, with the following meeting five weeks away, Lagarde was tight-lipped. Lagarde repeated that the ECB is ‘data-dependent’, although she affirmed that statement should not be confused with the central bank being too focused on any one economic print.
The Federal Reserve announces an interest rate decision on Wednesday, before the Bank of England on Thursday.
As far as the Fed decision goes, recent data has tipped the scales in favour of a 25 basis point cut, instead of a chunkier 50bp move. However, Dutch bank ING noted conviction towards a 50bp cut is growing.
‘Remarks from former FOMC member Bill Dudley and some media reports pointing to a close 25bp-50bp decision have triggered a fresh round of dovish Fed bets ahead of next Wednesday’s meeting. The risks appear skewed to increasing speculation on a half-point move and higher EUR/USD, especially after a cautious ECB meeting,’ ING added.
‘One part of his speech that particularly struck us is this: ’It’s very unusual to go into the meeting with this level of uncertainty – usually the Fed doesn’t like to surprise markets’.
‘One possible interpretation is that markets themselves can tilt the balance towards a half-point move should their doveish bets be pent up into Wednesday’s meeting. There were also some media reports suggesting it would be a close call between 25bp and 50bp, which contributed to the doveish repricing.’
The price of gold rose to $2,568.91 an ounce from $2,552.77. Gold hit a record high of $2,570.41 an ounce. Brent oil was quoted at $72.43 a barrel, up slightly from $72.35.
Pepperstone analyst Michael Brown commented: ‘The yellow metal has started to shine once more, with spot rising to fresh all time highs yesterday, north of $2,550 [per ounce]. Clearly, the bulls continue to believe in their soul, with the power to know, that they’re indestructible.
‘At least for now, that is. Gold’s gains yesterday were not supported by any particularly obvious fundamental driver, with sentiment again relatively firm, the dollar broadly flat, and Treasuries actually trading softer on the day. Central bank demand, particularly in emerging markets, has been the apparent driver of most of the year-to-date gains, though long gold may equally just be turning into a momentum trade once more.’
In London, Fresnillo and Endeavour added 2.9% and 2.2%, tracking the gold price higher.
Diversified miners Glencore and Anglo American also rose, adding 1.5% and 0.9%.
Weighing on the FTSE 100, however, was its largest constituent. Drug maker AstraZeneca lost 1.6% after Deutsche Bank cut it to ’sell’.
On AIM, turnaround investment firm Volvere rose 9.9% on improved half-year results.
Revenue climbed 16% to £22.2 million in first six months of 2024, from £19.1 million a year prior.
Pretax profit jumped to £2.2 million from £441,000.
‘Shire Foods’ results, as our only subsidiary, impacts significantly on how the group performs and its strong trading has been encouraging, reflecting the commitment of our management and staff,’ Volvere added.
Friday’s economic calendar has a eurozone industrial production reading at 1000 BST.
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