Stocks in Europe traded lower on Thursday, with the mood downbeat ahead of the European Central Bank’s interest rate decision, after the Federal Reserve failed to instil market confidence overnight.
Worries for US regional lenders continue to cast a dark cloud over markets, overshadowing the Fed hinting that its 25 basis point hike overnight could be its last.
In London, Hargreaves Lansdown and Trainline were atop the FTSE 100 and FTSE 250, respectively, after well-received updates.
The FTSE 100 index was down 59.39 points, 0.8%, at 7,728.98. The FTSE 250 was down 87.68 points, 0.5%, at 19,277.92, and the AIM All-Share was down 3.29 points, 0.4%, at 824.99.
The Cboe UK 100 was down 0.7% at 773.12, the Cboe UK 250 down 0.6% at 16,893.58, but the Cboe Small Companies up 0.3% at 13,520.37.
In European equities on Thursday, the CAC 40 in Paris was down 0.7%, while the DAX 40 in Frankfurt was down 0.6%.
Market focus for the day will be on the interest rate announcement by the ECB.
The market is expecting the central bank to slow down its pace of interest rate hikes to a 25 basis point hike - the same as the Fed on Wednesday - but with sticky inflation and record low unemployment, there remains the possibility of another 50 basis point move.
The Frankfurt-based central bank will announce its decision at 1315 BST. A press conference with ECB President Christine Lagarde will follow at 1345 BST.
Ahead of the decision, Norges Bank raised interest rates in Norway by 25 basis points to 3.25%.
That followed the Fed also lifting rates by 25 basis points on Wednesday. In a press conference shortly after the announcement, Chair Jerome Powell emphasised a change in language around future policy.
‘In the statement from March, we had a sentence that said: ’the committee anticipates that some additional policy firming may be appropriate’. That sentence is not in the statement any more, we took that out,’ Powell said.
AJ Bell analyst Laith Khalaf commented: ‘It is dropping hints left, right and centre that the tightening cycle may be at an end. As ever, when it comes to central bankers, it’s best to watch their feet rather than their eyes, as they are practised in the art of selling a dummy. There are however reasons to believe that in the US, rate hikes could be over for the time being.’
The Fed’s decision came amid a backdrop of worries for regional US banks. PacWest Bancorp sought to reassure investors late Wednesday after its shares plummeted by more than half, saying its deposit flows had not been unusual and liquidity remained ‘solid.’
‘The bank has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news,’ California-based PacWest said in a statement.
PacWest’s stock was down 45% in pre-market trade in New York on Thursday.
Stocks in New York were called mixed. Both the Dow Jones Industrial Average and S&P 500 index are called down 0.1%, whilst the Nasdaq Composite is called up 0.2%.
The dollar was largely weaker at midday London time.
The pound was quoted at $1.2565 at midday on Thursday in London, up compared to $1.2543 at the equities close on Wednesday. The euro stood at $1.1058, flat against $1.1057. Against the yen, the dollar was trading at JP¥134.64, down compared to JP¥135.09.
Away from interest rates, there were PMI prints from the UK and EU on Thursday.
Growth in the UK’s services sector accelerated sharply in April, helping to drive growth in the private sector overall amid a slump in manufacturing.
The S&P Global/CIPS services PMI rose to 55.9 points in April from 52.9 in March. Rising further above the 50-point mark that separates expansion from contraction, it shows activity in the sector increased sharply.
It was the fastest rise in activity for 12 months, and higher than the flash estimate of 54.9.
The service sector was feeling largely optimistic looking forward, expecting strong demand from the King’s Coronation as well as three bank holidays in May.
Meanwhile, the composite PMI - which weighs the services and manufacturing sectors - rose to 54.9 from 52.2, beating the flash estimate of 53.9.
The eurozone private sector economy saw further expansion in April from March as the service sector rebound gathered momentum.
The HCOB eurozone composite PMI rose to 54.1 points in April from 53.7 in March, and marking an 11-month high for the reading.
The HCOB eurozone services PMI business activity index rose to 56.2 points in April, from 55.0 in March, and marking a 12-month-high.
In London, Vodafone shares rose 0.8%.
Vodafone and CK Hutchison are poised to unveil a £15 billion UK mobile tie-up, the Financial Times reported.
CK Hutchison is a Hong Kong-based telecommunications, ports, infrastructure and retailing conglomerate, and it owns the Three brand.
The agreement is likely to be announced this month following the appointment of Margherita Della Valle as Vodafone chief executive officer, the FT said.
The deal would create the UK’s biggest mobile operator, with 28 million customers, the FT reported, citing ‘three people close to the matter’.
CK Hutchison shares closed up 3.4% in Hong Kong.
In the FTSE 100, Hargreaves Lansdown was up 2.3% at midday, the best performer.
In the three months to March 31, the retail investment platform said net new business rose 14% year-on-year to £1.6 billion. Revenue jumped 28% to £188.1 million, as closing assets under administration rose 4% in the quarter to £132.0 billion.
‘The combination of changes to the tax landscape, our marketing activity, and ongoing developments in our core propositions generated a call to action for clients in the run-up to tax year end,’ CEO Chris Hill explained. The UK tax year ends at the beginning of April.
Shell was up 1.3%.
The oil major said revenue in the first quarter was $86.96 billion, rising from $84.20 billion a year before, but below $101.30 billion in the fourth quarter. Pretax profit rose to $14.35 billion from $10.78 billion the year before, but was behind $16.44 billion in the preceding quarter.
The weakness compared to the fourth quarter ‘mainly reflected unfavourable tax movements, and lower realised oil and gas prices, partly offset by lower operating expenses and higher Chemicals and Products trading and optimisation results,’ Shell said. The company also took impairment charges of $500 million during the first quarter.
Shell announced a $4 billion share buyback, which it expects to complete by the announcement of its second quarter results.
Brent oil was quoted at $72.72 a barrel at midday in London on Thursday, up from $72.01 late Wednesday.
In the FTSE 250, index, Trainline jumped 12%, after reporting annual revenue and profit growth.
Trainline said revenue in the year ended February 28 rose 74% to £327.1 million, from £188.5 million. It swung to a pretax profit of £22.1 million from a £15.5 million loss the year prior.
Net ticket sales totalled £4.32 billion, rising 72% from £2.52 billion the year prior, and 16% from pre-virus levels.
‘Trainline is building great momentum, delivering a record operating performance this year, selling [around] 200 million train tickets across Europe, and expecting further strong growth in the year ahead,’ Chief Executive Officer Jody Ford said.
Looking to the new financial year, Trainline expects both revenue and net ticket sales to grow between 13% to 22%.
Gold was quoted at $2,039.32 an ounce midday Thursday, up against $2,025.44.
Still to come on Thursday’s economic calendar, there is a US manufacturing PMI reading.
Copyright 2023 Alliance News Ltd. All Rights Reserved.
