Stocks were higher across the UK and Europe at midday on Tuesday, as the US Federal Reserve looks increasingly likely to cut interest rates by half a percentage point.
The FTSE 100 index added 62.68 points, 0.8%, at 8,341.12. The FTSE 250 rose 106.27 points, 0.5%, at 21,035.86, and the AIM All-Share added 0.38 of a point, 0.1%, at 744.12.
The Cboe UK 100 was up 0.8% at 834.51, the Cboe UK 250 rose 0.7% to 18,530.35, and the Cboe Small Companies was up 0.5% at 16,889.45.
In European equities on Tuesday, the CAC 40 in Paris and the DAX 40 in Frankfurt each added 0.9%.
Stocks in New York are called to open higher. The Dow Jones Industrial Average and S&P 500 are called up 0.3%, and the Nasdaq Composite up 0.6%.
The pound was quoted at $1.3212 early Tuesday afternoon, up from $1.3195 at the London equities close on Monday. The euro stood at $1.1133, rising from $1.1119. Against the yen, the dollar was trading at JP¥140.66, down from JP¥140.75.
According to the CME FedWatch Tool, there is a 67% chance that the Fed will cut interest rates by 50 basis points on Wednesday and a 33% chance of a 25 basis point cut. The federal funds rate range is currently at between 5.25% and 5.50%.
The dial has shifted dramatically in favour of a 50bp cut. Some commentators previously believed that this would spook markets, as it would not scream confidence in the US economy.
However, with markets now expecting a cut of that size, anything less could lead to volatility for equities.
In the days leading up to the decision major central banks, the likes of Goldman Sachs and Bank of America included, have predicted a 25bp cut.
But Scope Markets analyst Joshua Mahony noted how the pendulum has swung in favour of 50bp this week.
‘With the CME signalling a 67% chance that the Fed will cut rates by 50-basis points tomorrow, there is no smoke without fire,’ Mahony added.
The price of gold eased to $2,570.85 an ounce on Tuesday afternoon in London, from $2,579.31 at the time of the European equities close on Monday. Brent oil was quoted at $72.67 a barrel, rising from $72.49.
In London, Kingfisher added 6.8%. It tightened profit guidance and increased its cash flow outlook after a mixed first-half performance.
The DIY products retailer, which owns B&Q, Castorama, and Screwfix, said sales in the six months to July 31 declined 1.8% on-year to £6.76 billion from £6.88 billion. Sales missed the Vuma consensus of £6.81 billion.
But pretax profit increased 2.3% to £324 million from £317 million a year prior. Gross margin improved by 40 basis points to 36.7% from 36.3%.
‘Trading overall in the first half was in line with our expectations. This was underpinned by customers continuing to repair, maintain and renovate their existing homes, driving resilient volume trends in our core product categories,’ said Chief Executive Officer Thierry Garnier said.
Kingfisher said Screwfix delivered positive like for like sales and TradePoint achieved strong LFL sales growth of 7.1%, now representing 22% of B&Q’s sales.
Looking ahead, Kingfisher predicts adjusted pretax profit for the full-year between £510 million and £550 million, the bottom-end of the range lifted from £490 million. It upped its free cash flow guidance to a £410 million to £460 million range, from £350 million to £410 million previously.
‘With positive early signs of a housing market recovery, notably in the UK, Kingfisher is strongly positioned for growth in 2025 and beyond,’ Garnier said.
Among London’s mid-caps, Essentra plunged 19% after it cut guidance.
The company warned that it expects annual profit to fall short of current market expectations, as market conditions in Europe ‘softened’.
The provider of components, with a focus on plastic injection moulded, vinyl dip moulded and metal items, had predicted a ‘modest improvement in volumes in the second half’ of 2024.
‘However, through August and into September, consistent with the weak [purchasing managers’ index] metrics widely reported, market conditions in Europe, (including Turkey) have softened. Whilst the Americas region has reported a slower than anticipated rate of recovery, APAC remains broadly in line with expectations,’ Essentra warned.
‘The impact of the market back drop on trading since the half year 2024 results, combined with a consequently more cautious view of the likely timing of further modest improvements in market conditions has led to the board revising its expectations for full year 2024.’
Essentra now expects adjusted operating profit for 2024 between £40 million and £42 million, which would be below company-compiled market expectations of £48.4 million to £49.7 million. In July, it said it expected profit ‘aligned with market expectations’.
Essentra added: ‘Management remain confident in the business model and that the company is well positioned, supported by a right-sized cost base and robust operations, to benefit from high levels of operational leverage when normalised growth returns.
‘The group continues to balance its investment in value creating opportunities across the business alongside cost mitigation activities and driving efficiencies, which has supported strong gross and operating margins. The balance sheet remains robust, and full year leverage guidance remains unchanged.’
Wizz Air rose 5.2%. It expects passenger volume to rise by 15%-20% next year, Reuters reported on Monday.
Wizz Chief Executive Jozsef Varadi told Reuters that the budget carrier will get a handy boost from routes to Abu Dhabi.
Also on the up, Auction Technology added 2.8%. JPMorgan raised the company’s stock to ’overweight’ from ’neutral’.
Elsewhere in London, Avacta slumped 17%.
Deutsche Bank cut the stock to ’sell’ from ’hold’ as it was underwhelmed by trial results. The life sciences company on Monday reported data on its AVA6000 cancer drug.
‘Data show that of 57 patients treated with increasing doses of AVA6000, three have shown a partial response and six have shown a minor response,’ Deutsche summarised. ‘We do not believe these rates of response are competitive relative to either standard of care or emerging therapies and so move back to sell.’
Next 15 fell 5.7%, as it reported interim results in light of shares being rocked by the loss of a contract earlier this month.
The London-based public relations agency said revenue decreased 0.2% to £364.1 million in the six months to July 31, from £364.9 million for the same period in 2023. Pretax profit increased 37% to £33.4 million from £24.3 million.
Earlier in September, it said that a contract with Mach49’s largest customer has not been renewed after its initial three-year term and will now end this year. This contract had been expected to contribute just over £80 million of revenue in financial 2026, which means forecasts for that year will need to be adjusted.
The stock had plunged 48% on September 6, following Next 15’s announcement.
The global economic calendar for Tuesday has US retail sales data at 1330 BST and US industrial production numbers at 1415 BST.
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