Gains by miners and industrial shares were helping the London stock market to outperform European peers on Wednesday, as investors start to bank on an economic boost from interest rate cuts in the new year.
The FTSE 100 index was up 43.08 points, 0.6%, at 7,740.59. The FTSE 250 was up 55.22 points, 0.3%, at 19,686.17, and the AIM All-Share was up 7.04 points, 0.9%, at 761.44.
The Cboe UK 100 was up 0.5% at 772.79, the Cboe UK 250 was up 0.4% at 17,174.23, and the Cboe Small Companies was up 0.1% at 14,746.53.
The CAC 40 in Paris and the DAX 40 in Frankfurt were both up 0.2%.
Market sentiment remained cheery in Europe, as investors responded to a cooler-than-expected US inflation reading before Christmas.
After the early close in London on Friday, data from the US showed inflation eased a bit more in November.
The Bureau of Economic Analysis said the core personal consumption expenditures price index rose annually by 3.2% in November, slowing from 3.4% in October, which was first reported at 3.5%. The latest figure was just below the FXStreet-cited market consensus of 3.3%.
The core reading, the Fed’s preferred inflation gauge, does not include food or energy.
According to CME’s FedWatch tool, a majority of market participants are pricing in five consecutive 25-basis-point rate cuts beginning from the March policy meeting. This would bring the target range on federal funds to a 400 to 425 basis point range - meaning 4.00% to 4.25% - come September, from the current 525 to 550. Another 25 basis point cut is expected before the close of 2024.
‘It’s safe to say that the mood heading into the new year is significantly more favourable than a year ago. Inflation is moderating; a soft landing is now the consensus view, and approximately 150 basis points of easing are priced in for 2024. So what possibly could go wrong?’ mused SPI Asset Management’s Stephen Innes.
‘I guess the question is, what will be the next significant catalyst for stocks to move higher, especially with so much rate-cut euphoria baked into the holiday cake?’ he considered.
Stocks in New York were called to open fairly flat on Wednesday. The Dow Jones Industrial Average and the S&P 500 index were called marginally lower, but the Nasdaq Composite was pointed slightly into the green.
The dollar lost ground against the pound and the euro over the long holiday weekend in Europe but made gains against the yen.
Sterling was quoted at $1.2730 at midday in London on Wednesday, higher than $1.2719 at the London equities close on Friday. The euro traded at $1.1054, up from $1.1019. Against the yen, the dollar was quoted at JP¥142.60, up versus JP¥142.14.
Gold was quoted at $2,065.93 an ounce at midday on Wednesday in London, higher than $2,055.55 shortly after midday in London on Friday. Brent oil was trading at $80.65 a barrel, up from $80.02.
In London, Aviva edged into the green, up 0.1%.
The insurer said it will receive an extra £80.0 million of additional proceeds for its 26% stake in Singaporean insurance provider Singapore Life. This would bring the total amount Aviva will receive to around £930 million from Osaka, Japan-based buyer Sumitomo Life Insurance.
AstraZeneca added 1.6%.
Astra announced on Tuesday it has agreed to buy Nasdaq-listed Gracell Biotechnologies and will pay about $1.2 billion for the clinical-stage company. The Cambridge, England-based pharmaceutical company said it expects the acquisition to close in the first quarter of 2024.
Gracell is a Suzhou, China-based biopharmaceutical firm developing cell therapies for cancer and autoimmune diseases. AstraZeneca will pay $2.00 per share, or $10.00 per American depositary share, for Gracell at closing, plus $0.30 per share ‘upon achievement of a specified regulatory milestone’.
The upfront cash portion represents a transaction value of around $1.0 billion, with the total value being about $1.2 billion if the milestone is achieved. Gracell ADSs closed up 60% at $9.92 in New York on Tuesday.
Also in London, large-cap miners and industrial firms held on to their morning gains, with Anglo American up 3.5%, Ashtead up 1.8%, and Glencore up 1.7%.
Retailers such as Next and Marks & Spencer saw some weakness, down 0.6% and 0.4% around midday.
According to MRI Software, footfall at the UK’s retail destinations was more than a fifth lower this Boxing Day than a year ago. MRI said footfall had been 2.3% higher than last year by 3pm, but across the full day shoppers dropped off significantly compared to 2022.
On AIM, shares in Horizonte Minerals surged 25%.
The London-based nickel development company celebrated securing a $20 million funding package ‘that will allow for critical construction streams to advance at its flagship Araguaia nickel project’ in Brazil, and serve as working capital.
Still to come on Wednesday’s economic calendar, there’s the Johnson Redbook retail sales index in the US.
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