The FTSE 100 closed higher on Thursday and sterling made gains, following dovish Federal Open Market Committee meeting minutes.
The FTSE 100 index closed up just 1.36 points at 7,466.60 on Thursday. The FTSE 250 ended up 39.84 points, or 0.2%, at 19,540.34. The AIM All-Share closed up 4.09 points, or 0.5%, at 844.39.
The Cboe UK 100 ended flat at 747.69, the Cboe UK 250 closed up 0.5% at 16,929.98, and the Cboe Small Companies ended up 0.1% at 13,144.43.
Minutes released by the US Federal Reserve on Wednesday revealed most US Federal Reserve policymakers thought that slowing the pace of interest rate increases would ‘soon’ be appropriate.
‘A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,’ the November meeting minutes read.
In its November meeting, the US central bank lifted interest rates by 75 basis points, as expected, to 3.75% to 4.00% from 3.00% to 3.25%.
The minutes said that a slower pace would better allow the Federal Open Market Committee to ‘assess progress toward its goals of maximum employment and price stability’.
Russ Mould at AJ Bell said that while there’s no suggestion the Fed will stop hiking interest rates anytime soon, the messaging ‘at least allows markets to start to look forward to that point.’
The release of the minutes had a clear impact on the dollar, meanwhile, which pulled back against the pound, euro and the safe-haven Japanese yen.
‘The market reaction has been quite straightforward: risk-on, dollar-off,’ said Francesco Pesole at ING.
The euro stood at $1.0405 at the European equities close on Thursday, higher against $1.0362 at the same time on Wednesday. Against the yen, the dollar was trading at JP¥138.49 late Thursday, lower compared to JP¥139.64 late Wednesday.
The pound was quoted at $1.2125 at the London equities close on Thursday, up from $1.2062 at the close on Wednesday.
Sterling also benefited from some hawkish rhetoric from a top Bank of England official who vowed to vote to respond ‘forcefully’ to tackle inflation, should price pressures persist.
Speaking at the Bank of England Watchers’ Conference, Dave Ramsden, the bank’s deputy governor for Markets & Banking, said he expects further increases in bank rate will be needed to return inflation to the bank’s 2% target.
Sterling reached an intraday high of $1.2153.
Stocks in New York were closed for the Thanksgiving holiday. US markets will return for a shortened day of trading tomorrow.
In European equities on Thursday, the CAC 40 in Paris ended up 0.4%, while the DAX 40 in Frankfurt ended up 0.8%.
The European Central Bank said it might want to ‘pause’ monetary tightening if there was a prolonged and deep recession, minutes from its own October meeting showed.
The minutes revealed that a ‘very large majority’ supported the 75 basis point hike, though a ‘few’ members expressed a preference for a 50 basis point hike.
Policymakers argued that in the event of a ‘shallow recession’, the governing council should continue normalising and tightening monetary policy.
However, it said it might want to ‘pause’ if there was a prolonged and deep recession, which ‘would be likely to curb inflation to a larger extent’.
‘All in all,’ said analysts at ING, ‘there were only some signs between the lines that the ECB could slow down the pace of rate hikes at the December meeting.’
In the FTSE 100, Intertek finished the best blue-chip performer on Thursday, closing 2.9% higher.
The London-based quality assurance service provider said revenue in the 10 months to October 31 grew 16% to £2.63 billion from £2.28 billion a year prior. In the four months to October 31 alone, revenue surged 19% year-on-year.
‘We have an excellent business in China with leading and scale positions. The lockdown restrictions had a significant impact in our China business between March and June, with Shanghai the most impacted. It has been operating as normal from July onwards and as expected, our business has rebounded quickly delivering a good like-for-like revenue growth at constant currency in the July to October period,’ Chief Executive Officer Andre Lacroix explained.
DIY retailer Kingfisher closed down 1.5% after it lowered its annual adjusted pretax profit guidance.
The firm said it now expects adjusted pretax profit between £730 million to £760 million, down from a previous estimate of around £770 million.
This was despite the B&Q owner reporting sales in the three months ending October 31 were up 0.6% year-on-year to £3.26 billion as the company benefited from new industry trends such as more working from home and a ‘clear step-up’ in customer investment in energy saving and efficiency.
In the FTSE 250, Dr Martens plunged 20% after a margin caution, as the boot maker grapples with slower-than-expected growth in its direct-to-consumer arm.
In the six months to September 30, it achieved an earnings before interest, tax, depreciation and amortisation margin of 21.2%, in line with guidance, but down from 24.0% a year prior.
However, looking forward, the firm now expects its annual earnings before interest, tax, depreciation and amortisation margin to be 100 to 250 basis points weaker than a year earlier.
Its Ebitda margin in financial 2022 was 29.0%.
Safestore finished 3.0% higher. The Hertfordshire, England-based self-storage provider said revenue in the three months ended October 31 amounted to £56.8 million, up 11% from £51.1 million a year prior.
It also confirmed a host of new sites were secured across Europe since its third quarter announcement, including three new sites in the UK, two in Paris, one in Spain and two in the Netherlands.
Elsewhere in London, Headlam dropped 5.5% as it reported that trading is still affected by the cost of living crisis in the UK.
The Birmingham-based floor coverings distributor said trading in the first 10 months of 2022 was marginally below the same period a year prior. Headlam also reported a seasonal uplift below historic levels and expects this trend to continue until the end of the year.
As a result, underlying profitability for 2022 is set to be ahead of 2021 but ‘marginally’ below the low end of the range of market expectations.
Brent oil was quoted at $85.08 a barrel at the London equities close Thursday, up from $84.66 late Wednesday.
Gold was quoted at $1,756.76 an ounce at the London equities close Thursday, sharply higher against $1,743.02 at the close on Wednesday. The yellow metal was benefiting from a lower dollar, with which it has an inverse relationship.
In Friday’s UK corporate calendar, there’s trading statements from collagen food products manufacturer Devro and construction materials firm Breedon Group.
In the economic calendar, Germany will publish a GDP reading, alongside a consumer confidence survey at 0700 GMT.
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