London’s FTSE 100 ended in the green on Thursday, though its gains fell short of the loftier progress delivered by European peers, as equity markets recovered from Wednesday’s sell-off.
Central to the drab mood in markets has been the dialling back of Federal Reserve rate cut expectations. Though a Fed cut in March is still the most likely scenario, the odds of one have dwindled in recent days, and it is no longer the safe bet it once was.
The FTSE 100 index closed up 12.80 points, 0.2%, at 7,459.09. The FTSE 250 ended up 83.67 points, 0.4%, at 18,948.04, and the AIM All-Share closed up 2.21 points, or 0.3%, at 741.01.
The Cboe UK 100 ended up 0.3% at 745.55, the Cboe UK 250 closed up 0.5% at 16,402.47, and the Cboe Small Companies ended up 0.4% at 14,887.62.
US data was in focus once again on Thursday. New jobless claims fell by more than expected in the most recent week, signalling a strong labour market.
According to the US Department of Labor, new jobless claims totalled 187,000 in the week ended January 13. This is down from last week’s revised level of 203,000. The previous week’s level was revised up by 1,000 from 202,000.
The latest reading came in much lower than FXStreet-cited consensus of 207,000 and is the lowest level for initial claims since September 24, 2022 when it was 182,000.
Continuing jobless claims for the week ended January 6 totalled 1.806 million, down from 1.832 million a week earlier.
‘Looking past the seasonal noise, the initial and continued claims data are consistent with a labour market that will need further loosening before the Fed considers rate cuts and bolsters our assumption that the March FOMC meeting will be too soon,’ said analysts at Oxford Economics.
‘However, we expect job growth to moderate further but remain positive in the months ahead, giving the Fed room to start cutting rates at its May meeting as long as inflation continues to decelerate.’
US has come in slightly hot recently, which has seen expectations for early cuts in interest rates fade further.
The CME FedWatch tool showed the probability of rates easing as soon as March dropping to 56% - compared with 80% as recently as last Friday.
Stocks in New York were higher at the London equities close, with the Dow Jones Industrial Average up marginally, the S&P 500 index up 0.5%, and the Nasdaq Composite up 1.2%.
Hopes for rate cuts from other major central banks have also been tempered in recent days.
ECB policymakers gave little time to the prospect of an interest rate cut, minutes from its December’s meeting showed on Thursday.
In December, the Frankfurt-based official lender left the interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility at 4.50%, 4.75% and 4.00%, respectively.
On Thursday, minutes from December’s meeting were released, which showed that all members agreed to keep the three key ECB interest rates at their current levels.
Focus remained on inflation and the so-called ‘last mile’ to bring it back down to target, minutes showed. There was little talk about rate cuts in the minutes.
Analysts at ING said: ‘The minutes of the ECB’s December meeting show that the bank was still far away from discussing rate cuts. This is unlikely to change at next week’s meeting.’
In European equities on Thursday, the CAC 40 in Paris ended up 1.1%, while the DAX 40 in Frankfurt ended up 0.8%.
The pound was quoted at $1.2687 at the London equities close Thursday, higher compared to $1.2668 at the close on Wednesday. The euro stood at $1.0867 at the European equities close Thursday, up against $1.0853 at the same time on Wednesday. Against the yen, the dollar was trading at JP¥148.11, down compared to JP¥148.43 late Wednesday.
In the FTSE 100, Flutter Entertainment was the top performer. It jumped 16%.
Flutter, which owns Paddy Power, Sky Bet and Betfair, said it traded well over the fourth quarter, reporting double-digit revenue growth at the end of 2023, and for the year as a whole. In the fourth quarter, the gaming firm said total revenue rose 11% year-on-year to £2.67 billion, while average monthly players rose 12% to 13.6 million. In 2023 overall, revenue jumped 24% year-on-year to £9.51 billion from £7.69 billion, as average monthly players rose 20% to 12.3 million.
The firm said it was on track for a New York listing by January 29. It will remain in the FTSE 100 as its premium listing in London is unaffected.
In a positive read-across, fellow gambling company Entain rose 5.7%.
In the FTSE 250, Watches of Switzerland plunged 36%.
The Leicester, England-based watch retailer, which sells brands such as Rolex, Cartier and Patek Phillipe, said it had experienced a ‘volatile’ trading performance during the festive season.
Watches pointed to the impact of ‘challenging economic conditions’ on consumer spending and warned that these circumstances would continue for the remainder of its financial year, which goes to the end of April.
Harbour Energy lost 8.5%.
The London-based oil and gas company with operations in the UK North Sea, Norway, Mexico, Indonesia and Vietnam said it expects revenue of $3.9 billion for 2023, down 28% from $5.4 billion in 2022.
Further, it said production averaged 186,000 barrels of oil equivalent per day in 2023, down 11% from 208,000 boepd in 2022.
Ferrexpo shot up 17%.
The Baar, Switzerland-based iron ore pellet producer reinstated its dividend. It said it will pay an interim dividend of 3.3 US cents. The last dividend announced before that was an interim dividend of 19.8 cents in August 2022.
Executive Chair Lucio Genovese said: ‘We exceeded our expectations in 2023 thanks to improved demand, production optimisation and higher iron ore prices.’
On AIM, Strategic Minerals jumped 50%, as it celebrated the return of a client.
The miner with projects in New Mexico, South Australia and the UK reported the return of an unnamed major client, with a purchase order for 30,000 tonnes in 2024. In 2023, the firm’s sales volumes at Cobre dropped by around 50% year-on-year, in the absence of the client.
Brent oil was quoted at $78.61 a barrel at the London equities close Thursday, up from $77.55 late Wednesday. Gold was quoted at $2,015.55 an ounce at the London equities close Thursday, higher against $2,009.77 at the close on Wednesday.
In Friday’s UK corporate calendar, there are trading statements from promotional products marketer 4imprint, merchant bank Close Brothers, and food delivery firm Deliveroo.
The economic calendar for Friday has UK retail sales out at 0700 GMT, as well as German producer price data at the same time.
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