London’s FTSE 100 prospered in early trading on Thursday after the US central bank cut rates by a hefty 50 basis points.
The FTSE 100 index added 56.60 points, 0.7%, at 8,310.28. The FTSE 250 added 168.08 points, 0.8%, at 21,003.39, and the AIM All-Share rose 2.30 points, 0.3%, at 744.86.
The Cboe UK 100 rose 0.7% to 832.14, the Cboe UK 250 added 0.8% to 18,528.62, and the Cboe Small Companies rose 0.1% to 16,685.69.
In European equities on Thursday, the CAC 40 in Paris jumped 1.0%, while the DAX 40 in Frankfurt was up 0.6%.
The pound traded at $1.3254 early Thursday in London, rising from $1.3198 at the time of the London equities close. The euro climbed to $1.1151 from $1.1113. Against the yen, the dollar was trading at JP¥142.31, climbing from JP¥141.97.
Equities in New York, which initially climbed in the wake of the decision, ended lower on Wednesday. The Dow Jones Industrial Average, the S&P 500 and Nasdaq Composite all lost 0.3%.
But stocks in Asia surged. The Nikkei 225 jumped 2.1% in Tokyo. In China, the Shanghai Composite rose 0.7%, while the Hang Seng in Hong Kong rallied 1.9%. The S&P/ASX 200 in Sydney was up 0.6%, as it hit another record high above 8,200 points.
‘Stocks have lurched higher overnight, with ’green on the screen’ across the globe, as buyers come to the fore once more,’ Pepperstone analyst Michael Brown commented.
‘Despite Chair Powell being at pains to stress that participants should not consider 50bp cuts the norm from here on in, the USD OIS curve has priced an aggressively more dovish outlook, seeing around 70bp of further easing by year-end, almost an entire rate cut more than the dots signalled. Reining in market expectations could well be the first task for Fed speakers, when the blackout period ends.’
The BoE announces an interest rate decision at midday on Thursday.
UK annual consumer price inflation remained at 2.2% last month, though services price growth picked up, reinforcing expectations that the Bank of England will leave rates unmoved on Thursday.
Numbers from the Office for National Statistics on Wednesday showed the annual rate of consumer price inflation landed in line with the FXStreet cited consensus of 2.2%. In July, the pace of consumer price growth picked up to 2.2% from 2.0% in June and May. The Bank of England has a 2.0% inflation target.
On-month, consumer prices rose 0.3%, following a 0.2% fall in July from June.
On-year, core consumer prices rose 3.6% in August, picking up speed from 3.3% in July and beating consensus of 3.5%.
Meanwhile, services prices rose 5.6% on-year in August, accelerating from 5.2% in July. Stubborn services price growth has been in focus in recent months.
XS.com analyst Antonio Di Giacomo noted the US and UK central banks are currently on different paths.
‘The US Federal Reserve lowered the interest rate to 5%, a 50 basis point adjustment. This move reflects the Fed’s policy of slightly easing financial conditions after an aggressive tightening period to control inflation. However, the Bank of England may take a more cautious approach. The British institution is expected to keep its rate at 5% on September 19, 2024, with expectations of a possible cut in November of this year,’ the analyst said.
‘Although overall inflation has moderated and is approaching the 2% target, price pressures in certain sectors pose challenges for monetary policymakers. The costs of services and wage increases, which still show accelerated growth, remain a significant concern for economists and the Bank of England. The lack of a quick adjustment in these key indicators makes any abrupt interest rate cuts difficult.’
Di Giacomo continued: ‘The US Federal Reserve and the Bank of England face a complex economic environment. Although both central banks have shown signs of monetary easing, they have done so cautiously to avoid imbalances in their economies. While the US has made a more direct decision with a rate cut, the UK maintains a prudent approach, waiting for the right moment to make future adjustments that balance growth and inflation control.’
In London, Next shares rose 2.5% as the retailer raised profit guidance for the second time in two months.
The Leicester-based clothing and homewares seller raised the outlook on the back of strong sales over the past six weeks.
In the half-year ended July 27, revenue rose 14% to £2.86 billion from £2.52 billion a year earlier. Next’s pretax profit improved 3.9% to £432.1 million from £415.7 million.
Full price sales rose 4.4% during the period, and growth has picked up in the first six weeks of the second half.
Full prices sales during the recent six-week period have ‘materially exceeded our expectations’, rising 6.9% on-year.
Next now predicts pretax profit of £995 million, which would be a year-on-year rise of 8.4%. The outlook was improved from £980 million. In August, Next had increased guidance by £20 million from £960 million.
Ocado jumped 9.8%. It said revenue at its retail joint-venture surged in its third-quarter, and the outlook for the full-year has been lifted. Ocado Retail’s revenue rose 16% to £658.0 million in the 13 weeks to September 1, from £569.6 million a year prior.
Ocado Retail is a joint-venture between grocer and warehouse technology firm Ocado and retailer Marks & Spencer.
Volume and average orders each grew 15%, while active customers climbed 10%. Looking ahead, Ocado Retail is now expected to deliver low double digit revenue growth for the full-year, the outlook raised from mid-high single digits growth.
M&S shares rose 1.3%.
Advertising agency S4 Capital shares slumped 12% as it lowered its revenue outlook. It believes annual like-for-like net revenue to be down on the prior year ‘to a greater extent than assumed in May’.
Revenue in the six months to June 30 fell 18% to £422.5 million from £517.1 million a year prior. Excluding direct costs, net revenue was 16% lower on-year at £376.1 million from £445.5 million. Its pretax loss, however, narrowed to £17.2 million from £23.2 million.
The price of gold rose to $2,582.31 an ounce early Thursday, from $2,569.38 at the time of the London equities close Wednesday. Brent oil was quoted at $74.42 a barrel, rising from $73.03.
The economic calendar has the latest US initial jobless claims reading at 1330 BST.
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