Stocks in London rose on Wednesday, as softer economic data from the US amplified hopes that interest rate hikes in the world’s largest economy could soon peak.
The FTSE 100 index closed up 8.68 points, or 0.1% at 7,473.67 on Wednesday. The FTSE 250 ended up 95.93 points, or 0.5%, at 18,564.52. The AIM All-Share closed up 1.08 points, or 0.2%, at 742.29.
The Cboe UK 100 ended up 0.1% at 744.60, the Cboe UK 250 closed up 0.4% at 16,221.82, and the Cboe Small Companies ended up 0.1% at 13,031.89.
An updated estimate from the US Bureau of Economic Analysis on Wednesday showed that the US economy grew less than initially expected in the second quarter of 2023.
Quarter-on-quarter gross domestic product in the US increased 2.1% on an annualised basis in the second quarter of the year, downwardly revised from an initial estimate of 2.4% growth.
In the first quarter, real GDP increased 2.0%.
In addition, a second estimate for the personal consumption expenditures index showed that inflationary pressure in the US eased slightly more than originally expected in the second quarter.
The headline PCE reading was downwardly revised to 2.5% in the second quarter of the year from an initial estimate of 2.6%.
Wednesday’s soft data, on top of weak jobs numbers on Tuesday, helped further fuel hopes that the US central bank will pause its current tightening cycle at its next meeting in September.
Markets now see an 91% chance of the Fed holding rates steady at its next meeting in September, according to the CME Fed Watch Tool. On Tuesday, markets saw a 86% chance of this outcome.
The dollar slid in the wake of the data, knocked as markets became more hopeful that interest rates in the US may have reached their peak.
The pound was quoted at $1.2732 at the London equities close on Wednesday, up sharply from $1.2616 at the close on Tuesday. The euro stood at $1.0931, notably higher against $1.0845. Against the yen, the dollar was trading at 145.75 yen, lower compared to yen 146.04 late Tuesday.
Stocks in New York were higher at the London equities close, meanwhile, with the Dow Jones Industrial Average up 0.1%, the S&P 500 index up 0.2%, and the Nasdaq Composite up 0.3%.
In London, housebuilders were among the top blue-chip performers for the second consecutive day on Wednesday. Taylor Wimpey, Barratt Developments and Persimmon closed up 1.7%, 1.2%, and 2.2%, respectively.
The stocks held firm despite data from Zoopla suggesting that the number of home sales taking place across the UK this year is on track to be around 21% lower than in 2022.
About one million sales could be completed in 2023, Zoopla said, which would be the lowest total since 2012 and equate to the average household moving just once every 23 years.
Further, with mortgage costs having increased sharply, the number of house sales with a mortgage is expected to plunge by nearly 28% this year, compared with 2022.
Elsewhere in the FTSE 100, Prudential added 2.0% after reporting a post-pandemic recovery in Asia had boosted its half-year performance, as it unveiled a new growth strategy.
In the six months to June 30, the Asia-focused insurer swung to a pretax profit of $1.18 billion from a loss of $1.35 billion a year prior on an IFRS basis. On an adjusted basis, operating profit rose by 3.5% to $1.46 billion from $1.41 billion the year before.
Chief Executive Officer Anil Wadhwani also announced a new purpose and strategy for the firm alongside its interim results.
The new strategy includes ‘targeted investment in structural growth markets in Asia and Africa’, with Prudential expecting to grow new business profit at a 15% to 20% compound annual growth rate between 2022 and 2027.
In the FTSE 250, Direct Line lost 1.4% after the motor and home insurer named former Aviva UK boss Adam Winslow as its new chief executive officer, succeeding interim CEO Jon Greenwood.
Greenwood will remain acting CEO until Winslow joins in the first quarter of 2024.
AJ Bell’s Russ Mould said the new CEO is a ‘safe pair of hands’ as Winslow should be ‘well versed’ in the challenges facing the UK general insurance market, having joined from Aviva. Mould added, however, that Winslow will need to find ways to improve Direct Line’s balance sheet and ‘reinvigorate’ the brand.
Elsewhere in London, AIM-listed Osirium Technologies surged 75% to 2.10 pence after SailPoint Technologies agreed to takeover the firm for 2.35p per share.
The price represents a premium of 96% to the closing price of 1.20p on Tuesday. It values Osirium’s share capital at £3.11 million on a fully diluted basis, and implies an enterprise value of £6.56 million.
‘As a regional UK privileged access management vendor founded in 2008 and listed on AIM in 2016, despite innovative and customer recognised solutions, Osirium has been challenged in achieving the critical mass necessary to compete with the other large and well-established [privileged access management] vendors. The acquisition will provide the scale, recognition and resources that will enable the full potential of Osirium’s world class PAM, [endpoint privilege management] and [IT process automation] solutions,’ said Osirium Chair David Guyatt.
In European equities on Wednesday, the CAC 40 in Paris ended 0.1% lower and the DAX 40 in Frankfurt ended down 0.2% as fresh data revealed economic sentiment in the eurozone deteriorated further than expected in August.
The economic sentiment indicator fell to 93.3 points from 94.5 in July. August’s reading was lower than the 93.7 expected by FXStreet-cited market consensus.
The DAX 40 underperformed as preliminary data from the German Federal Statistics Office showed consumer price inflation in Germany cooled slightly less than expected in August.
On an annual basis, the consumer price index rose 6.1% in August, cooling slightly from a 6.2% rise in July. Markets had expected the annual inflation rate to slow to 6.0% in August, according to FXStreet.
Brent oil was quoted at $84.70 a barrel at the London equities close on Wednesday, up from $84.24 late Tuesday. Gold was quoted at $1,945.03 an ounce, higher against $1,936.07, as the yellow metal benefited from a weaker dollar.
In Thursday’s UK corporate calendar, there are half-year results from Grafton, Aferian and PPHE Hotel Group, as well as full-year results from Revolution Beauty and Oxford Cannabinoid.
The economic calendar has a flash inflation print for the EU at 1000 BST and the US weekly unemployment claims report at 1330 BST.
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