Federal Reserve Chair Jerome Powell told markets ‘what they want to hear’, though his supportive words failed to boost the FTSE 100 which was held back by a stronger pound.
The FTSE 100 index closed down 14.56 points, 0.2%, at 7,558.49. The FTSE 250 ended up 246.09 points, 1.3%, at 19,409.42, and the AIM All-Share closed up 1.06 points, 0.1%, at 849.65.
The Cboe UK 100 ended down 0.4% at 755.61, the Cboe UK 250 closed up 0.9% at 16,728.88, and the Cboe Small Companies ended up 0.1% at 13,024.29.
In European equities on Thursday, the CAC 40 in Paris ended up 0.2%, while the DAX 40 in Frankfurt ended 0.5%.
‘For the first time in an age, it feels like Federal Reserve chair Jerome Powell is telling markets what they want to hear,’ said AJ Bell investment director Russ Mould.
‘The time for moderating the pace of rate increases may come as soon as the December meeting’ of Fed policymakers, Powell said in a speech at the Brookings Institution think tank.
He added that the full effects of the bank’s moves are yet to be felt, but also warned that policy will likely have to remain tight ‘for some time’ to restore price stability.
Monetary policy affects the economy and inflation with ‘uncertain lags,’ he said.
According to CME’s Fedwatch tool, the market is now pencilling in a 79% chance of a 50 basis point rate hike by the central bank at its December meeting, which will start on December 13 and conclude with a policy announcement on December 14.
The Fed has raised the benchmark lending rate by 0.75 percentage point four consecutive times in recent months, out of six rate hikes this year, in an aggressive effort to contain inflation.
On Thursday, the US annual core personal consumption expenditures index, the Federal Reserve’s preferred gauge of inflation, eased to 5.0% in October from 5.2% in September. It had picked up in September from 4.9% in August.
The cooling of inflation further strengthen the case for less aggressive interest rate hikes.
The dollar was considerably softer on Thursday afternoon.
The pound was quoted at $1.2266 at the market close on Thursday in London, surging from $1.1907 at the London equities close on Wednesday. The euro stood at $1.0487, notably higher against $1.0295 late Wednesday. Against the yen, the dollar was trading at JP¥135.93, down sharply from JP¥139.54.
The weaker dollar gave a boost to the price of gold, which fetched $1,796.43 an ounce, jumping from $1,753.29.
Meanwhile, closer to home, new economic data painted a gloomy picture for the UK’s manufacturing sector.
The seasonally adjusted S&P Global/CIPS UK manufacturing purchasing managers’ index edged up to 46.5 points in November from 46.2 points in October. The October reading was a 29-month low.
‘A lethal cocktail of Brexit, logistics constraints, high costs and low demand contributed to the continued decline in manufacturing output in November which also fed into deteriorating job numbers for a second month in a row,’ said John Glen, chief economist at Chartered Institute of Procurement & Supply.
In London, blue-chip oil majors were weighing the FTSE 100 index down, with BP down 1.7% and Shell losing 2.6%, despite higher oil prices. The dollar earners were likely losing out on account of the stronger pound.
Brent oil was quoted at $88.89 a barrel late Thursday, up from $85.44 late Wednesday.
Spirax-Sarco was up 1.6% after it completed its acquisition of Durex International, a US-based specialist in custom electric thermal solutions for ultra-high criticality equipment.
The thermal energy management and pumping company bought the firm also known as Durex Industries for a total of $342.2 million on a cash and debt free basis.
Durex Industries is now part of Spirax-Sarco’s Electric Thermal Solutions business.
Clothing retailer Next edged down 0.5%, on news it is buying a majority stake in fellow retailer Joules, which last week Friday said it was preparing to be wound up.
The move comes weeks after Next snapped up assets of furniture seller Made.com after it had collapsed, buying the brand name, domain names and intellectual property of Made.com for £3.4 million.
Clothing and homewares retailer Next agreed with Joules founder Tom Joule that it will own 74% of the equity, with Joule owning the remaining 26% under a £34 million deal. Further, Next bought the current head office of Joules for £7 million.
In the FTSE 250, Auction Technology dropped 8.1% despite swinging to an annual profit in the financial year that ended September 30 and reporting a double-digit rise in revenue.
The online auction operator swung to a profit of £9.3 million for financial 2022 from a loss of £25.0 million, as revenue surged 71% to £119.8 million from £70.1 million thanks to growth in gross merchandise value and an additional boost from value-add services.
Elsewhere in London, Foresight Group jumped 7.1% as it reported a sharp rise in interim profit and revenue. Foresight is an investment fund focused on sustainable infrastructure.
In the six months ended September 30, Foresight posted pretax profit of £25.4 million, up from £13.1 million the previous year. Revenue jumped to £50.7 million from £39.7 million.
This came as assets under management climbed to £12.5 billion at September 30 from £8.8 billion at the same time a year prior. It explained this rise was driven by the significant acquisition of Australia-based Infrastructure Capital Group, which added around £3.0 billion to the firm’s AuM.
AIM-listed Invinity Energy Systems surged 45%.
The energy storage manufacturer signed a reseller agreement with Taiwanese industrial technology firm Everdura Technology Co for an initial purchase order totalling 15 megawatt hours of vanadium flow batteries.
The agreement includes the ability for Everdura to purchase a further 255 MWh of Invinity products for the of fulfilling follow-on orders over the next three years.
As a reseller, Everdura will promote Invinity’s products throughout Taiwan and Southeast Asia. A deposit for the initial order is due shortly, the firm said.
Stocks in New York were mostly lower at the London equities close, with the DJIA down 0.9%, the S&P 500 index down 0.2%, and the Nasdaq Composite marginally higher.
Whilst the mood on Wall Street was jubilant in the wake of the Fed comments late Wednesday, sentiment took a hit on Thursday as dark clouds set in over the US manufacturing sector.
The latest S&P Global US manufacturing purchasing managers’ index fell to 47.7 points in November, from 50.4 in October. Falling beneath the 50.0 no-change mark, it shows the sector is in contraction.
‘A combination of the rising cost of living, higher interest rates and growing recession fears have led to slumping demand for goods in both the home-market and abroad. Companies are consequently cutting production at a rate not seen since the global financial crisis, if the initial pandemic lockdowns are excluded,’ explained Chris Williamson, chief business economist at S&P Global Market Intelligence.
While respondents still noted worries over the supply chain, their focus was shifting to the ‘darkening outlook’ for demand.
‘The business mood remains among the gloomiest seen over the past decade,’ Williamson concluded.
In Friday’s UK corporate calendar, there are half-year results from behavioural science firm Mind Gym and real estate investor Industrials REIT, and annual results from asset manager Premier Miton Group.
The economic calendar for Friday has the Japanese monetary base overnight, EU producer inflation figures at 1000 GMT, and US nonfarm payrolls at 1330 GMT.
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