European markets and the pound had a strong day on Thursday, with the afternoon’s US inflation reading boosting risk appetite.
Markets in New York got off the line slowly, however, amid an apparent rotation out of tech following a bullish run in recent days.
The FTSE 100 index closed up 29.83 points, 0.4%, at 8,223.34. The FTSE 250 was surged 261.15 points, 1.3%, at 21,188.91, and the AIM All-Share rose 8.68 points, 1.1%, at 781.53.
The Cboe UK 100 ended up 0.5% at 820.63, the Cboe UK 250 added 1.4% to 18,431.87, and the Cboe Small Companies climbed 1.1% to 17,312.40.
In European equities on Thursday, both the CAC 40 in Paris and Frankfurt’s DAX 40 closed up 0.7%.
In New York, the Dow Jones Industrial Average was up 0.2% at the time of the European close. However, the S&P 500 was down 0.6% and the Nasdaq Composite slumped 1.4%. The Nasdaq and S&P look set to have their seven-day winning streaks snapped.
The Bureau of Labor Statistics reported that the year-on-year consumer price inflation rate increased 3.0% in June, cooling from a 3.3% rise in May. According to FXStreet, markets were expecting a 3.1% increase for June.
On a monthly basis, consumer prices declined 0.1% in June, after being unchanged in May from April. Prices had been expected to register a 0.1% increase this time around, so the latest reading undershot the consensus.
The yearly core inflation rate, which strips out food and energy, cooled to 3.3% in June, compared to 3.4% in May. Markets had been expecting the core rate of inflation to be steady at 3.4%.
XTB analyst Kathleen Brooks commented: ‘The decline in prices last month in the US has given the green light to traders to fully price in a rate cut from the Fed in September. There is now a greater than 80% chance of a rate cut priced in for two months‘ time, before the CPI was released the chance of a rate cut was [around] 70%. The market is also pricing in more than 2 rate cuts this year, not long ago only 1 rate cut was priced in by the market. This data release was seen as crucial for the timing of rate cuts from the Fed, after Jerome Powell said that the US central bank still wanted to see progress made on inflation before cutting interest rates. This is the progress that they will want to see.’
The pound was quoted at $1.2920 late on Thursday afternoon in London, higher compared to $1.2846 at the equities close on Wednesday. The euro stood at $1.0872, up against $1.0827. Against the yen, the dollar slumped to JP¥158.57 from JP¥161.74.
XTB’s Brooks said the pound is ‘on top of the world’.
The analyst added: ‘$1.30 is now on the cards... the pound is back as the top performer in the G10 FX space so far this year. Looking ahead, we expect a broad-based dollar decline on the back of this surge in rate cut expectations from the Fed. However, we expect the GBP to be one of the best beneficiaries.’
In London, Severn Trent and United Utilities added 3.7% and 2.6%, respectively. The FTSE 250’s Pennon Group jumped 11%.
The UK water watchdog Ofwat said that average water bills in England and Wales are expected to rise by £94 over the next five years. This means that prices will increase by around £19 a year.
Severn Trent also said its financial performance for the year remains on track and it continues to expect to perform in line with guidance.
Meanwhile, Pennon Group said that Steve Buck has stepped down as chief financial officer.
Buck will be succeeded by Laura Flowerdew, as the board enacts its internal succession plan. Flowerdew is chief customer and digital officer of Pennon Group and previously CFO at Bristol Water.
Galliford Try rose 8.8% after it said it expects to report an annual profit beat, with the construction firm hailing progress towards ‘strategic targets’.
The Uxbridge, England-based firm expects full-year revenue and pretax profit before exceptional items to be above the upper end of current analyst forecasts for the financial year that ended June 30.
It puts the analyst forecast range for revenue at £1.44 billion to £1.64 billion, and the profit range at £26.7 million and £29.2 million.
At best, that would represent an 18% revenue rise from £1.39 billion, and a pretax profit before exceptional items rise of 42% from £20.6 million.
Looking ahead, Galliford said it continues to see a strong pipeline of new opportunities across its chosen sectors.
Chief Executive Bill Hocking comments: ‘We expect to report another year of strong performance across all our operations with increased revenue and profit as we continue to progress our updated sustainable growth strategy to 2030.’
In May, it set a target for annual revenue in excess of £2.2 billion by 2030.
Jet2 reported double-digit earnings growth amid an uptick in consumer demand for low-cost travel.
The Leeds, England-based budget airline said in the year that ended March 31, pretax profit jumped 43% to £529.5 million from £371.0 million the year before. Revenue increased 24% to £6.26 billion from £5.03 billion.
Jet2 declared a 10.7 pence per share final dividend, up 34% from 8.0p previously.
Summer 2024 on sale seat capacity is currently 12% higher than last year at 17.2 million seats. Booked to date package holiday customers are up 7.0%, representing 72% of overall flown passengers, with flight-only passengers increasing by 16%.
Shares flew 4.9% higher on Thursday.
Brent oil was quoted at $85.47 a barrel at the time of the London equities close on Thursday, up from $85.40 late Wednesday. Gold was quoted at $2,422.61 an ounce, higher against $2,379.50.
Friday’s economic calendar has a China trade reading overnight, before US producer price data at 1330 BST.
The local corporate calendar has a trading statement from emerging markets investment manager Ashmore Group.
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