Stock prices in London opened little moved on Thursday as investor mood remained cautious after Wednesday’s stark falls amid the surprise uptick in UK inflation, and the evolving outlook for US rate cuts.
The FTSE 100 index opened down 6.72 points, 0.1%, at 7,439.57. The FTSE 250 was up 0.41 of a point at 18,864.78, and the AIM All-Share was down 0.35 of a point at 738.45.
The Cboe UK 100 was flat at 743.36, the Cboe UK 250 was down 0.1% at 16,311.97, and the Cboe Small Companies was up 0.1% at 14,845.86.
In European equities, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt was up 0.1%.
A combination of cautious words from the Federal Reserve on Tuesday, Wednesday’s robust US retail sales data, and the recent uptick in inflation served to damp the market’s expectations of interest rate cuts from the Fed.
According to CME’s FedWatch tool, the probability of a 25 basis point rate cut in March has dropped to 60% from 70% a week ago.
Hopes for rate cuts from other major central banks have also been tempered in recent days. European Central Bank President Christine Lagarde suggested monetary policy in the eurozone would not be eased until the summer. Meanwhile, the latest rebound in UK headline inflation has cast doubt over the timing of when the Bank of England will bring down bank rate.
‘Central bankers, bank CEOs and other influential figures continue to talk in Davos. They continue to push back on the interest rate cut expectations, they highlight the need to consider the upside risks for inflation due to the rising geopolitical tensions and they continue to warn that the market‘s optimism regarding the rate cuts may have the opposite impact on rate policies: too much optimism could delay the rate cuts,’ commented Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Sterling was quoted at $1.2696 early Thursday, higher than $1.2668 at the London equities close on Wednesday. The euro traded at $1.0887, higher than $1.0853. Against the yen, the dollar was quoted at JP¥147.82, down versus JP¥148.43.
In the FTSE 100, Flutter Entertainment jumped 9.9%.
Flutter, which owns Paddy Power, Sky Bet and Betfair, said it traded well over the fourth quarter, reporting double digit revenue growth at the end of 2023, and for the year as a whole. In the fourth quarter, the gaming firm said total revenue rose 11% year-on-year to £2.67 billion, while average monthly players rose 12% to 13.6 million. In 2023 overall, revenue jumped 24% year-on-year to £9.51 billion from £7.69 billion, as average monthly players rose 20% to 12.3 million.
In the US, net revenue was £1.14 billion, about £147 million below its guidance, amid ‘customer friendly’ sports results. However, Flutter noted its performance excluding the US was in line with its annual guidance provided in the third quarter.
The firm said it was on track for a New York listing by January 29. It will remain in the FTSE 100 as its premium listing in London is unaffected.
In a positive read-across, fellow gambling company Entain rose 3.8%.
At the other end of the large-cap index, discount retailer B&M European Value Retail fell 3.6% as the stock went ex-dividend.
BAE Systems fell 1.7%, as Exane BNP cut the firm to ’underperform’ from ’neutral’.
In the FTSE 250, Watches of Switzerland plunged 25%, as it reported weaker consuming spending in the luxury sector, confirming a trend reported in Burberry’s recent update.
The luxury watch seller said it expects these challenges to persist for the remainder of its financial year. It cut its annual guidance for the year, now expecting revenue between £1.53 to £1.55 billion compared to prior guidance of £1.65 to £1.70 billion, which would constitute constant currency growth year-on-year of just 2-3%, versus 8-11% previously guided. It now expects its earnings before interest and tax margin to be 8.7% to 8.9%, compared to prior guidance that it would be in line with financial 2023.
‘The festive period was particularly volatile this year for the luxury sector, with consumers allocating spend to other categories such as fashion, beauty, hospitality and travel. Whilst we are disappointed with this trend, we are encouraged by our market share gains in both the US and UK,’ said CEO Brian Duffy.
Among London’s small-caps, Ceres Power jumped 31%.
The clean energy tech developer announced the signing of its first hydrogen licence with Taiwan’s Delta Electronics. The agreement will bring in £43 million in revenue to Ceres, half of which is expected to be recognised in 2024. Ceres said there’s the potential for additional revenue from the sale of development stacks to Delta.
In the UK, investors will be keeping an eye out for comments from Chancellor Jeremy Hunt, as he visits Davos in Switzerland. Hunt will tell political and business leaders at the World Economic Forum that the UK is ‘on the up and open for business’.
Hunt’s trip to the exclusive Swiss ski resort to join the annual gathering of international movers and shakers will be the first time a UK chancellor has attended the forum in five years.
The Treasury said the chancellor will use his visit to champion the UK’s ambition to be a science and technology superpower and pitch that the country is ripe for investment from the international business community.
In the US on Wednesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.3%, while the S&P 500 and the Nasdaq Composite both closed down 0.6%.
In Asia on Thursday, the Nikkei 225 index in Tokyo closed marginally lower. In China, the Shanghai Composite closed up 0.4%, while the Hang Seng index in Hong Kong rose 0.8. The S&P/ASX 200 in Sydney closed down 0.6%.
Gold was quoted at $2,012.40 an ounce early Thursday, rising from $2,009.77 on Wednesday.
Brent oil was trading at $78.37 a barrel, higher than $77.55.
Thursday’s economic calendar has the latest US initial jobless claims reading at 1330 GMT.
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