The FTSE 100 opened higher on Thursday, supported by strong gains in GSK, while European peers faltered
The FTSE 100 index traded up 25.77 points, 0.3%, at 8,269.51. The FTSE 250 slipped 12.69 points, 0.1%, at 20,809.69, and the AIM All-Share down just 0.19 of a point at 736.47.
The Cboe UK 100 was up 0.3% at 828.03, the Cboe UK 250 flat at 18,285.44, and the Cboe Small Companies was unmoved at 16,604.10.
In European equities, the CAC 40 in Paris and Frankfurt’s DAX 40 each fell 0.3%.
In Tokyo, the Nikkei 225 rose 0.3%, while in Sydney, the S&P/ASX 200 climbed 0.4%. In China, the Shanghai Composite rose 1.3%, while the Hang Seng in Hong Kong added 3.0%.
China’s central bank boosted support for markets Thursday by opening up tens of billions of dollars in liquidity for firms to buy stocks as part of a raft of measures by Beijing to kickstart the country’s flagging economy.
The People’s Bank of China fleshed out plans to encourage ‘the healthy and stable development of the capital market’ by opening up a ‘swap facility’ worth ¥500 billion, some $70.6 billion, that will allow firms to access cash to buy stocks.
Companies will be allowed to use equities, bonds and other assets as collateral for ‘high-grade liquid assets such as treasury bonds and central bank bills’, it said.
The programme may be ‘further expanded depending on the situation’, it added.
Rabobank analysts commented: ‘This move grants the Chinese government some time, as the market waits for a finance ministry press conference scheduled for Saturday. The ministry is expected to unveil the specifics of the fiscal stimulus package, under the banner of ’intensifying counter-cyclical adjustment of fiscal policy’. However, should this title imply that Chinese authorities view the nation’s economic challenges as ’cyclical’ rather than ’structural’. The market could be setting itself up for yet another letdown.’
In New York, the Dow Jones Industrial Average rose 1.0% on Wednesday. The S&P 500 added 0.7%, while the Nasdaq Composite added 0.6%.
The US Federal Reserve is likely to make one or two more rate cuts this year as it recalibrates policy to focus on the labour market, a senior bank official said Wednesday.
Speaking in the US state of Idaho on Wednesday, San Francisco Fed President Mary Daly said she had backed a larger cut last month in order to ‘recalibrate’ monetary policy.
‘I think that two more cuts this year, or one more cut this year, really spans the range of what is likely in my mind, given my projection for the economy,’ Daly said.
But she cautioned that the Fed was ‘data-dependent,’ and policy would continue to be guided by the incoming data on inflation and the health of the labour market.
Federal Reserve officials were divided over how fast to lower interest rates before ultimately deciding on a 50 basis points cut, minutes published on Wednesday showed.
At the September meeting of the Federal Open Market Committee, the Federal Reserve lowered interest rates by 50 basis points, easing monetary policy for the first time in four years, citing progress on the Fed’s dual mandate. This lowered the interest rate target to a range of 4.75% to 5.00%.
While only one FOMC member, Governor Michelle Bowman, voted against the half-point cut, others mulled whether a smaller 25bp cut was more appropriate, citing solid economic growth and low unemployment.
In the end, a ‘substantial majority’ of participants supported lowering the target range for the federal funds rate by 50 basis points, the minutes showed.
Thursday’s economic calendar has a US inflation reading at 1330 BST.
ING analysts commented: ‘Last night’s release of the September FOMC minutes revealed a Fed intent on ’recalibrating’ restrictive monetary policy. Certainly, there was no sense that the Fed was rushed into a 50bp rate cut.’
Minutes from the European Central Bank’s most recent meeting are released at 1230 BST.
Against the dollar, the pound rose slightly to $1.3083 early Thursday, from $1.3080 at the time of the London equities close on Wednesday. The euro slipped to $1.0939 from $1.0948. Versus the yen, the dollar faded to JP¥149.16 from JP¥149.23.
UK Chancellor Rachel Reeves may need to raise up to £25 billion from tax increases if she wants to keep spending rising with national income, the Institute for Fiscal Studies estimated in a report.
The report, funded by the Nuffield Foundation and using economic forecasting by Citi, analysed the challenges facing the chancellor.
In a scenario modelled by Citi, the report concluded that if there are no cuts to spending outside of public services, Reeves would need a tax rise of £16 billion to remain on course to balance the budget in 2028-29.
This would be on top of the £9 billion tax rise from measures set out in Labour’s manifesto – adding up to almost £25 billion in total.
The budget is announced on October 30.
In London, GSK shares rose 6.7%. It said Wednesday it agreed to pay up to $2.2 billion to settle the vast majority of cases linked to its heartburn medicine Zantac.
In a statement, the London-based pharmaceuticals firm said that it had reached agreements with 10 plaintiff firms representing around 80,000 people who had brought product liability cases against it in state courts, 93% of all claimants. GSK did not accept any liability.
GSK said the participating plaintiff firms are unanimously recommending to their clients that they accept the terms of the settlement, which is expected to be fully implemented by the end of the first half of 2025. Terms of the agreements are confidential.
Tritax EuroBox added 3.0% after it backed a new takeover bid, this time from private equity firm Brookfield. It withdrew its recommendation for an offer from Segro. Segro shares rose 0.7%.
Toronto-based Brookfield will pay 69.0 pence in cash for Tritax Eurobox, a 6% premium to the implied 65.1p value of the Segro offer, based on the latter’s closing price on Wednesday, according to Brookfield and Tritax.
The Brookfield bid values the equity of London-based Tritax EuroBox at £557 million on a fully-diluted basis. The enterprise value, including debt, is £1.10 billion.
At the time that the offer by London-based Segro was agreed in early-September, that offer valued Tritax EuroBox’s equity at £552 million and implied a £1.10 billion enterprise value.
Under the Segro offer, investors in distribution centre investor Tritax EuroBox would have received 0.0765 of a new Segro for every one held in Tritax EuroBox.
However, the Brookfield bid is a cash offer. Tritax EuroBox noted ‘the scope for the implied value of the Segro offer to increase or decrease between now and completion, as compared to a fixed cash amount from Brookfield’.
‘While the deliverability of the two offers is now similar, a cash offer from Brookfield would provide increased certainty for Tritax EuroBox shareholders as compared to continued market risk between now and completion for the Segro offer,’ Tritax EuroBox said.
Gulf Marine services rose 6.8% as it announced the signing of a new deal in Europe, and the extension of two pacts in the Middle East.
The provider of self-propelled and self-elevating support vessels for the offshore energy sector said the developments take its current backlog to $505 million, an increase of 18% from where it stood in June. Its backlog now stands at 3.3 times its 2023 revenue, Gulf Marine added.
In addition, an improving market is aiding in its deleveraging.
‘Market fundamentals are steadily improving, allowing us to meet our deleveraging goals faster than expected. As of the end of September, our net debt has decreased to $221 million, down from $267 million at the start of the year and $238.5 million at the end of June,’ Gulf Marine added.
An ounce of gold rose to $2,615.68 early Thursday, from $2,613.66 at the time of the London equities close on Wednesday. A barrel of Brent fetched $76.95, up from $76.54.
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