European stocks went into Wednesday’s US central bank decision on the up, with eyes on how equities in New York will respond to whatever the Federal Reserve has in store.
Retailer Next flourished after raising profit guidance once again, but Aston Martin Lagonda went into reverse after cutting sales forecasts for its DB12 sports car.
The FTSE 100 index closed up 20.71 points, 0.3%, at 7,342.43. The FTSE 250 ended up 102.84 points, 0.6%, at 17,185.89, and the AIM All-Share closed up 3.72 points, 0.6%, at 683.57.
The Cboe UK 100 ended up 0.4% at 732.48, the Cboe UK 250 closed up 0.8% at 14,973.32, and the Cboe Small Companies ended up 0.3% at 12,625.27.
Stocks in New York advanced ahead of a US interest rate decision at 1800 GMT.
The Federal Reserve is widely anticipated to leave interest rates unchanged at its November meeting despite strong recent economic data.
According to the CME FedWatch Tool, there is a 98% chance the central bank will leave the federal funds rate range unchanged at 5.25% to 5.50%.
At its September meeting, the Fed left rates unchanged after hiking rates by a quarter percentage point in July.
At the time of the London close, the Dow Jones Industrial Average was up 0.2%, the S&P 500 index was up 0.5%, and the Nasdaq Composite was up 0.8%.
The Bank of England will make its interest rate call tomorrow when it is expected to enact a second-successive pause and reiterate its ‘data dependent’ outlook.
The UK central bank decided against a hike in its September meeting, maintaining bank rate at 5.25%, which is a more than 15-year high.
Deutsche Bank analyst Sanjay Raja expects the BoE to still stand pat. He predicts another vote split, however, after the doves won by a slim majority at the last meeting when five of the nine-strong Monetary Policy Committee backing the hold.
‘Our base case is for 6-3 vote count in favour of keeping bank rate steady. The majority of the committee, we think, will lean on the slightly more dovish news on growth, inflation, and the labour market,’ Raja said.
Ahead of the meeting there was mixed economic news with a further contraction in the manufacturing sector, but a surprise rise in house prices.
The UK’s manufacturing sector contracted for an eighth successive month. The S&P Global/CIPS manufacturing purchasing managers’ index posted 44.8 points in October, edging up from 44.3 in September. However, the figure was worse than the previous flash estimate of 45.2.
According to S&P Global, all five sub-components of the survey signalled a deterioration in the sector.
‘Alongside lower new orders, output and employment, stocks of purchases also declined and suppliers’ delivery times improved (traditionally a sign of weak demand),’ S&P Global said.
But UK house prices saw an unexpected rise last month, although digging beneath the headline data, economists maintained the sector is still struggling.
According to Nationwide data, on a seasonally-adjusted basis, UK house prices rose 0.9% in October from September, compared to the 0.1% rise in September from August. FXStreet-cited market consensus had expected a 0.4% decline.
Despite the rise Robert Gardner, Nationwide’s chief economist, warned that housing market activity has remained ‘extremely weak.’
The pound was quoted at $1.2123 at the London equities close on Wednesday in London, little changed when compared to $1.2128 on Tuesday. The euro stood at $1.0537, down against $1.0562. Against the yen, the dollar was trading at JP¥151.07, lower compared to JP¥151.63.
In European equities, the CAC 40 in Paris added 0.7%, while the DAX 40 in Frankfurt climbed 0.8%.
In the FTSE 100, Next rose 4.4% after the retailer raised its annual profit guidance by £10 million to £885 million after its third quarter sales beat expectations.
The Leicester, England-based firm said sales in the three months ended October 28 grew 4.0% from a year ago, £23 million ahead of its guidance which was originally set to be an increase of 2.0%. This was mainly driven by sales growth in its Online division of 6.5%.
Other retailers took heart from the statement with Marks & Spencer up 3.6% and AB Foods, the owner of Primark, rising 2.1%.
But GSK faded after a bright start to close down 2.2%. The pharmaceuticals firm hailed the performance of the world’s first approved respiratory syncytial virus vaccine Arexvy, as it reported a rise in profit and revenue.
‘Competitive performance was broadly based but benefitted particularly from the outstanding US launch of Arexvy, the world’s first RSV vaccine,’ said Chief Executive Officer Emma Walmsley.
GSK’s shingles vaccine Shingrix performed well, with sales rising 8.6% to £825 million from £760 million a year ago.
GSK also raised guidance.
It now expects turnover on a constant exchange ratio basis and excluding Covid solutions to grow between 12% and 13%, compared to a prior range of 8% to 10%. Adjusted earnings per share are set to climb 17% to 20%, upped from a previous guidance of 14% to 17%.
Elsewhere in the FTSE 100, Croda shares slipped 1.1% after Estee Lauder slashed its profit guidance blaming slow growth in Asia and disruption from the Israel-Hamas conflict.
Croda, which supplies chemical ingredients to Estee Lauder and other cosmetics brands, last month cut its profit guidance due to declining demand, especially in its North American beauty care business.
In the FTSE 250, Aston Martin went into reverse, with shares falling 11%. The luxury car manufacturer said it managed to halve its loss in the first nine months of 2023, thanks to rising orders and deliveries of its luxury cars and SUVs.
However, the Gaydon, England-based manufacturer lowered its guidance for 2023 vehicle production by about 4%.
Aston said production of its DB12 had been hit by supplier issues and the integration of its new infotainment system. It now expects to sell 6,700 models this year, down from previous guidance of 7,000.
On AIM, shares in Equals Group rose 11% after confirming that it is conducting a review of the company’s strategic options.
It said it had contacted a limited number of potential counterparties to ‘assess whether such parties could put forward a proposal that would deliver greater value to Equals’ shareholders than pursuing a standalone independent strategy.’
‘Any such proposal could include an offer for the entire issued and to be issued share capital of the company,’ it said.
Brent oil was quoted at $86.36 a barrel at the London equities close on Wednesday, up from $86.09 late Tuesday.
Gold was quoted at $1,978.93 an ounce, down against $1,989.19.
In Thursday’s UK corporate calendar, telecommunications firm BT and grocer Sainsbury’s report half-year results, while oil major Shell, consumer healthcare business Haleon and medical equipment maker Smith & Nephew release third quarter figures. A trading statement from gambling firm Entain is also expected.
Thursday’s global economic calendar sees the UK interest rate decision at 1200 GMT and the US unemployment insurance weekly claims report at 1330 GMT.
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