Stock prices in Europe were in the green on Thursday as investors awaited several US data prints and remarks from Fed Chair Jerome Powell.
The People’s Bank of China ‘has ’thrown the proverbial kitchen sink at the economy‘, Pepperstone’s Michael Brown said.
‘Fresh from big stimulus measures earlier in the week, all eyes remained focused on China amid talk that Beijing might inject up to ¥1 trillion of capital into its top banks and to support the economy through interest rate cuts,’ AJ Bell analyst Russ Mould said.
‘It is debatable the degree to which any of these measures will turn the tide for the Chinese economy, which continues to grapple with deep-rooted structural issues, remains stuck in a debt-deflation loop, and is struggling with serious demographic issues,’ Pepperstone’s Brown commented. That said, the message is clear...the [PBoC’s] pain threshold has been hit, and policymakers have responded in kind.‘
Still, Mould noted: ’The SSE Composite index is now up 9.5% since the start of the week, delivering a repeat of the stellar rally we saw in early February. It’s been a while since China was the talk of the town among investors, but it has certainly turned heads this week.‘
More recently, the Swiss National Bank on Thursday cut its key policy rate by 25 basis points, to 1.00% from 1.25% as expected, and signalled further rate cuts ’may become necessary‘.
‘Inflationary pressure in Switzerland has again decreased significantly compared to the previous quarter,’ the SNB explained, saying this reflects the appreciation of the Swiss franc with prices of imported goods and services falling.
As Capital Economics put it, ‘the accompanying statement was very doveish and indicated that there are at least two more rate cuts on the way, probably in 25bp increments in December and March’.
The SNB left forecasts for GDP growth unchanged at 1.0% for 2024, and 1.5% in 2025.
The FTSE 100 index was up 15.48 points, 0.2%, at 8,284.18. The FTSE 250 was up 201.56 points, 1.0%, at 20,957.00, and the AIM All-Share was up 1.43 points, 0.2%, at 742.90.
The Cboe UK 100 was up 0.2% at 829.84, the Cboe UK 250 was 1.1% at 18,453.27, and the Cboe Small Companies was up 0.1% at 16,970.79.
In the large-caps, AstraZeneca edged up 0.2%.
The Cambridge-based pharmaceutical company said that its cancer drug Tagrisso has been approved by the US Food & Drug Administration.
In this case, the drug can now treat adults with unresectable, stage 3 epidermal growth factor receptor-mutated non-small cell lung cancer whose disease has not progressed during or following concurrent or sequential platinum-based chemoradiation therapy.
The approval followed a priority review by the FDA based on results from a phase 3 trial, which showed Tagrisso reducing the risk of disease progression or death by 84% compared to placebo.
On the FTSE 250, Future lost 4.1%.
The Bath, England-based Go Compare owner said it expects its full-year performance for the year to September 30 to be in line with market expectations, citing a company-compiled consensus of £786 million in revenue and £220 million in adjusted operating profit.
Future, which will announce its full-year results in December, said it delivered a ‘return to organic revenue’ during its second half, while also ‘maintaining its strong financial characteristics’.
Elsewhere, Videndum was one of the day’s biggest losers, falling 19%.
The film industry-focused software and hardware manufacturer said revenue for the first half of 2024 decreased to £153.3 million from £165.0 million, reflecting ‘post-strike recovery in the cine and scripted TV market’ which Videndum said is ‘taking longer than anticipated’.
Videndum said it has ‘good medium-term prospects’ but that it expects 2024 orders to be below previous expectations.
In European equities on Thursday, the CAC 40 in Paris was up 1.4%, while the DAX 40 in Frankfurt was up 1.1%.
A group of leading German economists lowered their growth forecasts for the German economy, predicting that the country’s GDP would shrink slightly during the current year.
German GDP will decline by 0.1% over the course of 2024, according to the Joint Economic Forecast Project Group, down 0.2 percentage points from the group’s forecast from six months ago.
The economists predicted only a tepid recovery in the next two years, with growth of 0.8% in 2025 and 1.3% in 2026. Six months ago, the group had predicted growth of 1.4% in 2025.
The report also warns of further political uncertainty in Germany, where Chancellor Olaf Scholz’s three-party coalition argued for months over how to make cuts to the 2025 budget.
The pound was quoted at $1.3376 at midday on Thursday in London, up compared to $1.3351 at the equities close on Wednesday. The euro stood at $1.1152, down against $1.1155. Against the yen, the dollar was trading at JP¥144.53, higher compared to JP¥144.44.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.5%, the S&P 500 index up 0.8%, and the Nasdaq Composite up 1.4%.
‘On Wednesday, [US Federal Reserve] Governor Adriana Krugler refrained from signalling any further rate cuts, prompting some analysts to suggest a lack of consensus among US policymakers,’ ActivTrades’ Ricardo Evangelista said. ‘Against this backdrop, [Fed Chair] Jerome Powell’s upcoming remarks, scheduled for later today, will be closely scrutinised by traders eager for insights into the central bank’s next steps, potentially adding to dollar volatility.’
Brent oil was quoted at $71.67 a barrel at midday in London on Thursday, down from $74.38 late Wednesday.
AJ Bell’s Mould noted that ‘the commodities market wasn‘t entirely basking in glory. Oil prices retreated...on fears of increased supplies amid talk that Libya’s output could improve after a dispute, knocking shares in BP and Shell.’
BP was down 3.7%, while Shell was down 3.6% on the FTSE 100.
Oddo BHF cut Shell to ’neutral’, while Goldman Sachs cut its price target to €45 from €46 and maintained its ’buy’ rating. For BP, Goldman also kept a ’buy’ recommendation while cutting the price target to 580 from 600p.
Gold was quoted at $2,673.50 an ounce, up against $2,656.90.
Still to come on Thursday’s economic calendar, all eyes remain on the slew of US readings including GDP, jobless claims data and remarks from Fed Chair Powell.
European Central Bank President Christine Lagarde, and Vice-President Luis De Guindos, will also speak this afternoon.
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