Stock prices in Europe were generally lower on Friday morning, after optimism from rate cuts in the US and UK wore off, as China unveiled a huge support package under which it will raise the local government debt ceiling.
China’s top lawmakers have approved a proposal to increase the debt ceiling for local governments by $840 billion, state media said as a key meeting wrapped up in Beijing.
Meanwhile investors are also digesting the impact of rate cuts from the Bank of England and the US Federal Reserve.
Swissquote’s Ipek Ozkardeskaya noted that Fed Chair Jerome Powell has said ‘that the Fed doesn’t rule ’out or in’ a rate cut in December, that the US economy is expanding solidly, that conditions in the labour market eased but the unemployment rate remains low, that inflation ’made progress’...that the Trump policies won’t have an immediate impact on the US fundamentals as they don’t know how much time it will take the new Trump administration to implement them, and that he wouldn‘t step down if Trump asked him to do so.
‘But the Fed has no choice but to dance to Trump’s tune, whether it likes it or not. That reality comes with the risk of higher-than-otherwise inflation and deserves careful attention.’
The FTSE 100 index was down 16.97 points, 0.2%, at 8,123.77. The FTSE 250 was down 49.90 points, 0.2%, at 20,585.47, and the AIM All-Share was down 0.60 points, 0.1%, at 737.63.
The Cboe UK 100 was down 0.3% at 814.85, the Cboe UK 250 was down 0.1% at 18,072.46, and the Cboe Small Companies was down 0.1% at 16,289.72.
International Consolidated Airlines was the 100’s biggest winner, rising 7.7%.
The company said third-quarter revenue rose 7.9% on-year to €9.33 billion while operating profit rose 15% to €2.01 billion. It said it expects the strong financial performance to continue for the rest of the year.
Vistry by contrast plummeted 15%.
The housebuilder’s year-to-day average weekly sales rate rose 42% to 1.02 from 0.72 last year, although in September and October conditions were ‘slower than anticipated’.
However it expects ‘issues’ to its South division to impact profits by £165 million over the next few years, including £25 million in financial 2024.
On the 250, TI Fluid Systems rose 4.4%.
The firm said ABC Technologies’ deadline to make a formal takeover offer has been extended to November 22. ABC reached out in October with a non-binding 200p per share proposal.
Serco was the biggest loser, dropping 12% after losing a lucrative immigration detention contract with the Australian government.
It also warned that promised changes to UK national insurance tax rules would increase its direct labour costs.
Among smaller companies, Minoan gained 6.3%.
It expanded on plans to reduce certain liabilities following a deal with creditors, saying it will issue 77.9 million new shares at average 1.68p each. Of these, 53.3 million will be issued at 2p ‘to settle certain Group balance sheet liabilities totalling [£1.3 million]’.
In European equities on Friday, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was marginally lower.
EU leaders are in Budapest on Friday for an informal summit to find ways to reboot the bloc’s competitiveness versus the US and China.
The EU has long struggled with economic growth since the Covid-19 pandemic and the repercussions of an energy price shock linked to the full-scale Russian invasion of Ukraine. The re-election of Donald Trump has lent fresh urgency to the challenge with the incoming president calling for a US tariff hike on all imports as high as 10% and 20%.
The pound was quoted lower at $1.2953 early on Friday in London, compared to $1.2985 at the equities close on Thursday. The euro stood at $1.0777, down against $1.0791. Against the yen, the dollar was trading lower at JP¥152.34 compared to JP¥153.11.
In Asia on Friday, the Nikkei 225 index in Tokyo was up 0.3%. In China, the Shanghai Composite was down 0.5%, while the Hang Seng index in Hong Kong was down 0.7%. The S&P/ASX 200 in Sydney closed up 0.8%.
Policymakers were keeping tabs on the US vote as they gathered in the Chinese capital this week for a meeting of the country’s top lawmaking body.
The move would raise ‘the local government debt limit by ¥6 trillion [around $840 billion], which will be used to replace existing hidden debts, freeing up space for local governments to better develop the economy and protect people’s livelihood,’ state broadcaster CCTV said.
Hidden debt is borrowing for which a government is liable, but which is not disclosed to its citizens or to other creditors, according to the International Monetary Fund.
‘This ¥6 trillion debt ceiling will be arranged over three years,’ Finance Minister Lan Fo’an told a press conference in Beijing.
It will be raised from 2024 to 2026 ‘to support local governments in replacing all kinds of hidden debt’.
In the US on Thursday, Wall Street ended mostly higher, with the Dow Jones Industrial Average down 0.59 points, the S&P 500 up 0.7% and the Nasdaq Composite up 1.5%.
Brent oil was quoted lower at $74.41 a barrel early in London on Friday from $74.91 late Thursday.
Gold was quoted lower at $2,688.73 an ounce, lower against $2,697.24.
Still to come on Friday’s economic calendar, the US releases the Michigan consumer sentiment index.
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