Stock prices in Europe were in the green on Thursday morning, in anticipation of an interest rate cut by the European Central Bank.
Meanwhile, the Swiss National Bank enacted a chunkier than expected rate cut on Thursday.
The FTSE 100 index traded up 15.34 points, 0.2%, at 8,316.96. The FTSE 250 was down just 5.35 points at 20,968.10, and the AIM All-Share was up 2.16 points, 0.3%, at 739.70.
The Cboe UK 100 was 0.1% higher at 834.80, the Cboe UK 250 was flat at 18,508.73, and the Cboe Small Companies fell slightly to 16,248.28.
The CAC 40 was up 0.2% in Paris. The DAX 40 in Frankfurt was 0.1% higher.
Sterling rose to $1.2759 early Thursday, from $1.2746 at the time of the London equities close on Wednesday. The euro climbed to $1.0506 from $1.0490, while against the yen, the dollar faded to JP¥152.46 from JP¥152.49.
The economic calendar sees interest rate decisions by the European Central Bank at 1315 GMT. US weekly jobless claims figures are due at 1330 GMT.
‘The market has firmed up its view that the ECB will cut by 25bp today. Our team agrees, although does not completely rule out the chances of a 50bp cut. We think there could be some downward revision to growth and perhaps even inflation forecasts today. In focus will be whether the ECB reduces these inflation forecasts which in September were set at 2.5%, 2.2% and 1.9% for 24, 25 and 26 respectively. For example, dropping the 2025 forecast closer to 2.0% could potentially lay the path for an accelerated easing cycle,’ analysts at ING commented.
The last monetary policy meeting of the ECB took place in October. The ECB cut interest rates by 25 basis points at its October meeting. It took the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility to 3.25%, 3.40% and 3.65% respectively.
Elsewhere, the Swiss National Bank enacted a chunkier than expected rate cut on Thursday. It cut its benchmark rate by 50 basis points to 0.50% from 1.00%. A less steep 25 basis point cut was expected, according to FXStreet cited consensus, however.
In New York on Wednesday, the Dow Jones Industrial Average lost 0.2%, but the S&P 500 added 0.8% and the tech-heavy Nasdaq Composite powered 1.8% higher.
Numbers on Wednesday showed the pace of US consumer price inflation picked up to 2.7% in November, from 2.6% in October.
Analysts at Lloyds Bank commented: ‘The overall disinflation process has got stuck in the mud and, even if that still leaves the Fed room to unwind a bit of the restrictiveness of policy with a 25bp rate cut next week, it also points to a potentially meaningful rewrite of the summary of economic projections too. Even the Bank of Canada talked about moderating the pace of its easing cycle after a 50bp cut to 3.25% yesterday, and its growth rate is set to be much less than half the consensus 2.7% expected for the US this year.’
In Asia, Tokyo’s Nikkei 225 surged 1.2%. The Shanghai Composite in China was up 0.9%, while the Hang Seng Index in Hong Kong was up 1.2%. The S&P/ASX 200 in Sydney lost 0.3%.
An ounce of gold slipped to $2,716.13 early Thursday from $2,716.47 at the London equities close on Wednesday. A barrel of Brent rose to $73.88 from $73.05.
In London, shares in Currys rose 9.6%. It reported an improved half-year performance, but hit out at ‘unwelcome headwinds from UK government policy’. Currys predicted that measures announced in the UK government budget are ‘likely to add around £32 million of annual cost to our business’.
‘We will seek to mitigate as much of this as possible through cost saving measures including process improvement, automation, offshoring, outsourcing and other overhead efficiencies. Some price rises are also inevitable. We will further update on this in due course,’ it added.
Currys said its trading performance ‘continues to strengthen, with profits and cashflow growing significantly’. Its pretax loss in the half-year to October 26 narrowed to £10 million from £44 million. Revenue improved 1.3% to £3.92 billion from £3.87 billion a year prior.
SThree plunged 23%. It warned tough market conditions are expected to continue in its new financial year. SThree, focused on the science, technology, engineering and mathematics fields, said net fees declined 12% in the year to November 30 to £369.1 million from £418.8 million. At constant currency, net fees fell 9%.
‘As has been widely reported across our industry, the past year has been characterised by protracted challenging market conditions which have impacted new business activity,’ CEO Timo Lehne said. ‘It is our specialism in STEM and Contract, combined with careful cost management, that has delivered a resilient performance, with FY24 expected to be in line with market consensus.’
It puts market consensus for pretax profit at £67.4 million, which would represent a 13% fall from the £77.9 million achieved in financial 2023. Looking to the new year, it is making the ‘prudent assumption’ that tough market conditions will persist, hurting net fees. It now expects pretax profit of £25 million for financial 2025, down more than 60% from what it expects for the year just gone.
SThree announced it plans to launch a new buyback of £20 million to be completed over the next six months.
Among London’s large-caps, Diageo added 3.0%. UBS raised the brewer to ’buy’ from ’sell’.
Elsewhere in London, Velocity Composites added 8.7%. The composite material kits to aerospace said revenue for the year to October 31 was ahead of current market forecasts.
Revenue rose 40% to £23.0 million from £16.4 million, ‘driven by growing US sales’.
It achieved positive earnings before interest, tax, depreciation for the first time since the pandemic. Its Ebitda totalled £400,000, swinging from a loss of £1.6 million.
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