European equities were mostly in the red on Thursday morning amid a threat of higher for longer interest rates, following a lofty UK inflation reading and a caution against turbocharged US easing from a Federal Reserve official.
The FTSE 100 index added just 0.40 of a point at 8,085.47. The FTSE 250 lost just 7.21 points at 20,237.55, and the AIM All-Share rose 3.18 points, 0.4%, at 725.52.
The Cboe UK 100 was flat at 812.71, the Cboe UK 250 was down 0.1% at 17,733.93, and the Cboe Small Companies lost 0.5% at 15,570.40.
The CAC 40 in Paris and the DAX 40 in Frankfurt each lost 0.3%.
The pound was quoted at $1.2641 early Thursday in London, rising from $1.2634 at the time of the European equities close on Wednesday. The euro stood at $1.0536, up from $1.0515. Against the yen, the dollar was trading at JP¥154.55, fading from JP¥155.36.
The US Federal Reserve should be careful not to cut rates ‘too quickly’ and risk reigniting stubborn inflation, a senior bank official said Wednesday.
‘With the US economy remaining strong, moving the policy rate down too quickly, in my view, would carry the risk of stoking demand unnecessarily and potentially reigniting inflationary pressures,’ Fed Governor Michelle Bowman told a conference in Florida, according to prepared remarks.
‘Progress seems to have stalled in recent months,’ she continued, adding that the Fed should pursue a ‘cautious approach’ on rate cuts going forward.
According to the CME FedWatch Tool, there is now only a 56% chance the Fed cuts next month. About a week ago, there was more than a 70% chance.
In the UK, lofty inflation data all but ensured the Bank of England will leave rates unmoved next month.
‘And because things are expected to get worse before they get better with Donald Trump’s tariff plans and the expansionary fiscal policy from the British government, the first rate cut from the BoE is fully priced in for March, and a second for August,’ Swissquote analyst Ipek Ozkardeskaya commented.
‘Moving forward, a smaller divergence between the Fed and the BoE outlook should help throw a floor under cable near the current levels and encourage recovery in the coming weeks,’ the analyst added, referring to the pound-dollar exchange rate.
Ozkardeskaya continued: ‘Across the Channel, news weren’t encouraging for the European Central Bank doves, either. Wages in the Eurozone jumped by 5.4% from a year ago, the most since the single currency exists. Germany is to blame. Wages, there, jumped by 8.8% in Q3 from a year earlier. The jump in wages growth will complicate the ECB’s plans to cut rates at the desired speed. Consequently, the retreat in dovish ECB expectations could slow down the euro selloff, and levels near $1.05 could serve as a dip to shoulder a rebound toward the 1.07-1.08 range.’
In China on Thursday, the Shanghai Composite ended up 0.1%. The Hang Seng in Hong Kong fell 0.5%. In Tokyo, the Nikkei 225 lost 0.9%, while the S&P/ASX 200 in Sydney fell marginally.
In New York, the Dow Jones Industrial Average ended up 0.3% on Wednesday. The S&P 500 closed marginally higher, while the Nasdaq Composite lost 0.1%.
Nvidia declined 2.5% after hours following its earnings.
‘The negative market reaction to Nvidia‘s results suggests investors are now focusing on the minutiae rather than the big picture. That’s a natural evolution as the more people zoom in on a company, the more they learn about it, and the more granular detail they want,’ AJ Bell analyst Dan Coatsworth explained.
In London, National Grid and Vodafone were down on the FTSE 100, falling 2.1% and 2.8%. The duo’s shares went ex-dividend.
On the up, Shell and BP added 0.4% and 0.7%, on a rising oil price amid continued geopolitical tensions. Conflict-related worries also boosted defence firm BAE Systems, which added 0.5%.
Storm Shadow missiles supplied to Ukraine by Britain have been used in Russia, according to reports.
Brent oil was quoted at $73.50 a barrel early Thursday, up from $73.20 at the time of the London equities close on Wednesday. Gold rose to $2,668.91 an ounce from $2,648.58, benefitting from safe haven trade amid global tensions.
Gold miners Endeavour Mining and Fresnillo added 1.9% and 0.9%, among the best performers on the FTSE 100 so far.
Halma led the way, however, surging 9.6%. It lifted its half-year payout and reported a rise in revenue and profit. The safety equipment maker said pretax profit in the six months to September 30 rose 16% on-year to £174.0 million from £150.2 million a year prior. Revenue climbed 13% to £1.07 billion from £950.5 million.
JD Sports slumped 12%, however. It predicted annual profit will be at the lower end of guidance, as a decent start to its third-quarter was hampered by a ‘volatile’ October.
The athleisure retailer said the tricky trading conditions were particularly evident in North America and the UK towards the back end of the 13 weeks to November 2. Group like-for-like sales fell 0.3% on-year during the third-quarter, but rose 5.4% on an organic basis.
Its pretax profit before adjusting items guidance range stands at £955 million to £1.04 billion so it still expects an increase from the £917.2 million it achieved in the 53 weeks to February 3, its prior financial year. On a 52-week basis to January 27, it achieved profit of £912.4 million.
Elsewhere in London, Ithaca Energy and CMC Markets stood at either end of the FTSE 250s.
North Sea operator Ithaca announced a $200 million, or $0.1209 per share, special dividend.
The oil and gas company also hailed its recent tie-up with Eni UK, which has created a ‘dynamic growth player with significant organic and inorganic growth optionality’.
Ithaca’s net income in the nine months to September 30 amounted to $134.7 million, declining 44% from $238.5 million a year prior.
Ithaca affirmed its aim of distributions totalled $500 million in 2024. The stock traded 10% higher.
CMC Markets slumped 12% despite the online trading platform for contracts-for-difference and other financial instruments reporting half-year growth. Shares went into the report up more than three-fold, however.
Net operating income in the six months to September 30 rose 45% to £177.4 million from £122.6 million. It raked in pretax profit of £49.6 million, swinging from a loss of £2.0 million.
CMC tripled its annual dividend to 3.10p per share from 1.00.
Jet2 surged 8.7%. The airline and package holiday operator said revenue in the half-year to September 30 rose 15% to £5.09 billion from £4.41 billion 12 months earlier. Pretax profit jumped 20% to £791.4 million from £660.5 million.
Excluding foreign exchange revaluation, pretax profit was 16% higher at £772.4 million from £664.6 million.
‘With a material amount of the winter 2024/25 season still to sell, we are currently on track to deliver group profit before FX revaluation and taxation for the year ending 31 March 2025 ahead of market expectations,’ Jet2 added, putting consensus at £541 million.
The global economic calendar has US weekly jobless claims numbers at 1330 GMT and a flash eurozone consumer confidence reading at 1500 GMT.
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