European markets were lifted on Thursday as the European Central Bank enacted its second consecutive rate cut following cool inflation prints from the eurozone.
The FTSE 100 index closed up 56.06 points, or 0.7%, at 8,385.13. The FTSE 250 ended up 121.42 points, or 0.6%, at 21,100.92, while the AIM All-Share closed up 2.96 points, 0.4%, at 742.39.
The Cboe UK 100 ended up 0.7% at 840.03, the Cboe UK 250 closed up 0.5% at 18,668.02, but the Cboe Small Companies fell 0.6% at 16,978.85.
In Europe, the CAC 40 in Paris ended up 1.2%, while the DAX 40 in Frankfurt closed 0.8% higher.
The ECB cut interest rates by a quarter point at its October meeting, as expected, while President Christine Lagarde stated a ‘safe landing’ is possible despite recent data pointing to economic weakness.
The interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be 3.25%, 3.40% and 3.65% respectively, the ECB said.
‘The European Central Bank’s decision to cut interest rates by 25bp shows that policymakers have grown more concerned about the eurozone’s growth outlook,’ said Carsten Brzeski at ING.
But while Lagarde said risks to the euro area economy are tilted to the downside she does not ‘see a recession’.
Pepperstone analyst Michael Brown commented: ‘Policymakers will be hoping that today’s move, which comes just five weeks after the previous rate reduction, serves to insulate the eurozone economy against these risks, and ensures that the current economic contraction implied by the latest PMI surveys remains relatively shallow.’
The data followed softer-than-expected eurozone inflation figures.
According to Eurostat, the harmonised consumer price index rose by 1.7% in September from a year before, slowing from a 2.2% annual rise in August. The final inflation reading was a notch below the flash estimate of 1.8% that Eurostat had published on the start of October.
Analysts see a growing likelihood of a further cut at the December meeting.
‘For now, the base case remains that the ECB will deliver another 25bp cut at the December meeting, followed by further such cuts at every meeting in early-2025 until the deposit rate reaches a neutral rate of around 2% next summer,’ said Pepperstone’s Brown.
Brzeski at ING agreed.
‘It’s hard to see how today’s rate cut cannot be seen as a signal that the ECB is now in a hurry to bring interest rates down to a more neutral level,’ he remarked.
The euro weakened in response, standing at $1.0838 at the European equities close on Thursday, against $1.0874 at the same time on Wednesday.
Stocks in New York were higher at the London equities close, with the Dow Jones Industrial Average up 0.4%, the S&P 500 0.2% higher - notching another intra-day all-time high - and the Nasdaq Composite 0.5% to the good.
The mood was lifted by strong retail sales data, while chip stocks were buoyed after Taiwan Semiconductor Manufacturing Co raised its target for 2024 revenue growth.
The US Census Bureau reported that advance monthly sales for retail and food services rose 0.4% to $714.4 billion in September from $711.3 billion in August. Growth of 0.3% was expected.
Oxford Economics analyst Michael Pearce said the data showed there ‘is no quit in the US consumer’.
Meanwhile, figures showed weekly jobless claims fell in the most recent week, although they remain elevated.
In the week ending October 12, the advance figure for seasonally-adjusted initial claims fell to 241,000 from 260,000 a week before. The prior figure was upwardly revised from 258,000. The latest number was lower than the FXStreet-cited consensus, which had expected 260,000 claims.
Analysts at Barclays noted the figures showed an unwinding of some of the Hurricane Helene effects in the prior week.
The pound was quoted at $1.3014 at the London equities close on Thursday, slightly higher compared to $1.3006 at the close on Wednesday.
Against the yen, the dollar was trading at JP¥149.94, up compared to JP¥149.65 late Wednesday.
On London’s FTSE 100, Rentokil Initial was the star performer, rising 8.8%.
In a trading update, the Crawley, England-based pest control services provider left full-year guidance unchanged, providing relief to investors after tricky recent trading.
Rentokil expects second-half organic growth in the North American business of around 1% and a full-year adjusted operating margin of around 17.2% in the region.
Group adjusted operating profit margin is expected to be around 15.5%. Group adjusted profit before tax and amortisation is expected of around £700 million. This would be down 8.6% from £766 million in 2023.
Earlier in September, Rentokil warned slower growth in North America and the strong pound would dent full-year profit. It was the latest blow for the firm, which cut guidance in July, and also back in October 2023.
Entain advanced 2.8% after it upgraded full-year guidance for 2024, following a ‘stronger than expected’ third-quarter performance.
The owner of Ladbrokes and Coral betting firms said net gaming revenue was up 8% during its third quarter that ended September 30. Online net gaming revenue, excluding the US, performed ahead of expectations, growing 10%.
‘All key markets delivered growth in the third quarter’, the company said.
Entain upgraded its full-year guidance to mid-single-digit growth in online net gaming revenue, up from its previous low single-digit prediction. It now expects earnings before interest, tax, depreciation and amortisation to be towards the top of the previously stated £1.04 billion to £1.09 billion guidance range.
Elsewhere, 3i rose 2.7% after Bank of America increased its share price target to 3,650 pence from 3,350p.
Heading lower, Mondi fell 7.6%.
For three months to September 30, the packaging group reported underlying earnings before interest, tax, depreciation of €233 million, lower than €351 million the previous quarter.
Mondi said this was expected and primarily due to more planned maintenance shuts and a forestry fair value loss. This was in addition to softer seasonal demand and higher input costs.
On the FTSE 250, Chemring climbed 3.3% after reporting order intake for its 2024 financial year to date has risen in line with market expectations, despite current foreign exchange headwinds.
The Hampshire, England-based company is a provider of technology products and services to the aerospace, defence and security markets.
Its order intake for the eleven months to September 30 was £638 million, rising 5.6% from £604 million last year. Its order book grew 28% to £1.11 billion from £869 million last year.
St James’s Place was also in favour, rising 3.0%.
The wealth management firm reported a positive quarter for fund inflows and said investor concerns about the upcoming UK government budget will keep its client advisers in demand.
Funds under management on September 30 were £184.40 billion, up 1.4% from £181.86 billion on June 30 and up 16% from £158.57 billion a year before.
Silver and gold miner Hochschild Mining shone bright, gaining 9.0% as the gold price hit a new high.
Gold was quoted at $2,693.53 an ounce at the London equities close on Thursday, up against $2,673.31 at the close on Wednesday.
Elsewhere, N Brown soared 44% after agreeing to be taken over by a vehicle controlled by Non-Executive Director Joshua Alliance, a member of the firm’s founding family.
Falcon 24 Topco Ltd will pay 40 pence in cash per N Brown share, valuing the Jacamo and Simply Be owner at £191 million.
Brent oil was quoted at $74.25 a barrel at the London equities close on Thursday, up from $73.83 late Wednesday.
Friday’s UK corporate calendar sees a trading statement from William Hill owner Evoke and third quarter results from Intercontinental Hotels.
The economic calendar has UK retail sales figures at 0700 BST.
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