Share prices were rising in London early Thursday, though not as strongly as in New York and Asia, after the Federal Reserve raised interest rates as expected and expressed bullishness about the US economy.
The Fed enacted its first interest rate hike since 2018 on Wednesday and dot-plot projections indicate there could be six more increases to come before the end of 2022.
The US central bank raised the federal funds rate range to 0.25% to 0.50% on Wednesday, as widely forecast by the market.
Fed Chair Jerome Powell said there was little chance of a recession in the next year and noted that the US economy was ‘very strong and well-positioned to handle tighter monetary policy’.
‘In terms of the pacing, I would point out there are seven remaining meetings this year. This isn't something we discuss or debate or agree on, but there's seven remaining meetings and there's seven rate hikes. I would add, there's also the shrinkage of the balance sheet...that might the equivalent of another rate increase,’ Powell said.
Wall Street ended sharply higher following the remarks, with the Dow Jones Industrial Average up 1.6%, S&P 500 up 2.2%, and Nasdaq Composite up 3.8%.
In London, the FTSE 100 index was up 30.54 points, or 0.4%, at 7,322.22 early Thursday. The mid-cap FTSE 250 index was up 147.34 points, or 0.7%, at 21,052.88. The AIM All-Share index was up 4.15 points, or 0.4%, at 1,019.46.
The Cboe UK 100 index was up 0.3% at 727.81. The Cboe 250 was up 0.6% at 18,574.65, and the Cboe Small Companies up 0.1% at 14,529.01.
In mainland Europe, the CAC 40 stock index in Paris rose 0.4% while the DAX 40 in Frankfurt was flat.
In the FTSE 100, Diageo was up 2.2% after JPMorgan raised the distiller to 'overweight' from 'neutral'.
At the other end of the large-caps, Ocado was the worst performer, down 7.5%. Ocado Retail, the joint venture between Ocado Group and Marks & Spencer, said revenue declined by 5.7% in the 13 weeks that ended February 27 from a year before but was up 32% from 2020.
M&S shares were off 3.0% - the worst mid-cap performer.
Retail revenue fell to £564.7 million from £599.1 million a year before. Average orders per week rose by 12% to 367,500 from 329,500, but average basket size shrank by 15% to £124, ‘as customer behaviours return towards pre-Covid levels’.
Further, Ocado Retail reported inflationary pressures in the quarter. The grocer said significant increases in raw materials and product cost prices, as well as in the prices for energy, utilities and dry ice, added further cost headwinds for the grocery industry.
Ocado Retail's revenue growth, previously expected to be in the ‘mid-teens’ will likely be closer to 10% for the full year, the company said, pointing to inflation, the war in Ukraine and a return to more normal shopping patterns.
M&G was down 4.8% and NatWest was down 2.5% after the stocks went ex-dividend meaning new buyers no longer qualify for the latest payout.
In the FTSE 250, OSB Group was the top gainer, up 12%, after the specialist lender reported robust annual results and launched a share buyback programme.
For 2021, total income rose 24% to £629.0 million from £508.6 million in 2020 and pretax profit jumped 78% to £464.6 million from £260.4 million.
OSB declared a total dividend of 26.0 pence per share, up from 14.5p paid out in 2020. In addition, OSB said it intends to commence a share repurchase programme to return up to £100 million to shareholders, starting on Friday.
National Express was up 1.7% after the transport operator outlined its case for its previously agreed all-share merger with public transport peer Stagecoach.
National Express said its offer presents a superior value creation opportunity compared to that of DWS, which the Stagecoach board now supports. National Express said its all-share offer for Stagecoach is worth 125p to 170p per share compared to 105p in cash from DWS.
The FTSE 250 firm said the DWS cash offer ‘materially undervalues Stagecoach’ and asked Stagecoach shareholders to take no action on the DWS cash offer. National Express made no change to its own offer, saying it ‘will remain disciplined in its assessment of its options going forward’.
Stagecoach was up 1.2%.
Elsewhere, Deliveroo was up 3.8% after the food delivery firm said 2021 was a year of strong growth and strategic progress, which it believes will lead to long-term profitability.
For 2021, revenue was £1.82 billion, up 57% from £1.16 billion in 2020, but Deliveroo's pretax loss widened to £298.2 million from £212.6 million. Deliveroo said delivery orders totalled 300.6 million last year, up 73% from 173.7 million orders in 2020, and gross transaction value was £6.63 billion, up 67% from £3.98 billion in 2020.
Looking ahead, Deliveroo guided for 15% to 25% growth in GTV at constant currency in 2022, with a higher growth rate in the second half than in first half, due to a stronger comparative for the first half.
Deliveroo expects to reach adjusted Ebitda breakeven at some point in the second half of 2023 or first half of 2024.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 3.5%. In China, the Shanghai Composite ended up 1.4%, while the Hang Seng index in Hong Kong gained a hefty 7.0%. The S&P/ASX 200 in Sydney closed up 1.1%.
The Hong Kong market has been off to the races over the past two days, the Heng Seng having closed up 9.1% on Wednesday. Chinese authorities on Wednesday said they would maintain capital market stability and adopt measures to handle risks for troubled property developers.
The pound was quoted at $1.3187 early Thursday, up from $1.3098 at the London equities close Wednesday, ahead of the Bank of England interest rate decision at midday in London.
The BoE is widely expected to enact its third successive rate hike, which would take the key Bank Rate to 0.75%.
The euro was priced at $1.1052, higher against $1.1005. Against the Japanese yen, the dollar was trading at JP¥118.68, up from JP¥118.50.
Brent oil was quoted at $101.12 a barrel Thursday morning, up sharply from $99.33 late Wednesday. Gold stood at $1,940.55 an ounce, higher against $1,908.85.
The economic events calendar on Thursday also has the latest weekly US jobless claims numbers at 1230 GMT.
Copyright 2022 Alliance News Limited. All Rights Reserved.
