Shares opened lower in Europe on Thursday amid caution ahead of an interest rate decision by the European Central Bank.
New York had closed lower on Wednesday, after the US Federal Reserve strongly hinted it had reached the end of its current tightening cycle but gave no hope of rate cuts within 2023.
The FTSE 100 index opened down 16.64 points, 0.2%, at 7,771.73. The FTSE 250 was down 42.25 points, 0.2%, at 19,323.35, and the AIM All-Share was down 0.50 of a point at 827.78.
The Cboe UK 100 was down 0.2% at 777.49, the Cboe UK 250 was down 0.2% at 16,951.36, and the Cboe Small Companies was flat at 13,485.51.
Market focus for the day will be on the interest rate announcement by the ECB.
The market is expecting the central bank to slow down its pace of interest rate hikes to a 25 basis point hike - the same as the Fed on Wednesday - but with sticky inflation and record low unemployment, there remains the possibility of another 50 basis point move.
The Frankfurt-based central bank will announce its decision at 1415 CEST. A press conference with ECB President Christine Lagarde will follow at 1500 CEST.
Ahead of the decision, Norges Bank raised interest rates in Norway by 25 basis points to 3.25%.
Daiwa Capital Markets said it expects a 25 basis point hike by the ECB.
‘We don’t entirely reject the possibility of another hike of 50 basis points today,’ Daiwa said. ‘While it was more than three and a half percentage points off its peak, Tuesday’s flash estimate of consumer price inflation in April of 7.0% year-on-year was still too high for the Governing Council’s comfort, particularly as the core rate of 5.6% year-on-year was a mere 0.1 percentage point off the series high and services inflation continues to rise.’
In European equities, the CAC 40 in Paris was down 0.7%, and the DAX in Frankfurt down 0.6%.
The Federal Reserve lifted US interest rates by 25 basis points on Wednesday, and, in a press conference shortly after the announcement, Chair Jerome Powell emphasised a change in language around future policy.
‘In the statement from March we had a sentence that said: ’the committee anticipates that some additional policy firming may be appropriate’. That sentence is not in the statement any more, we took that out,’ Powell said.
Wall Street ended lower on Wednesday, with the Dow Jones Industrial Average down 0.8%, the S&P 500 down 0.7% and the Nasdaq Composite down 0.5%.
The dollar was weaker in early exchanges in Europe.
Sterling was quoted at $1.2569 early Thursday, rising from $1.2543 at the London equities close on Wednesday. The euro traded at $1.1071, higher than $1.1057. Against the yen, the dollar was quoted at JP¥134.54, down versus JP¥135.09.
In the FTSE 100, Shell was up 2.3%.
The oil major said revenue in the first quarter was $86.96 billion, rising from $84.20 billion a year before, but below $101.30 billion in the fourth quarter. Pretax profit rose to $14.35 billion from $10.78 billion the year before, but was behind $16.44 billion in the preceding quarter.
The weakness compared to the fourth quarter ‘mainly reflected unfavourable tax movements, and lower realised oil and gas prices, partly offset by lower operating expenses and higher Chemicals and Products trading and optimisation results,’ Shell said. The company also took impairment charges of $500 million during the first quarter.
Shell announced a $4 billion share buyback, which it expects to complete by the announcement of its second quarter results.
Brent oil was trading at $73.37 a barrel, higher than $72.01 at Wednesday’s market close in London.
Hargreaves Lansdown was up 4.2%, after a well-received trading statement on its third quarter.
In the three months to March 31, the retail investment platform said net new business rose 14% year-on-year to £1.6 billion. Revenue jumped 28% to £188.1 million, as closing assets under administration rose 4% in the quarter to £132.0 billion.
‘The combination of changes to the tax landscape, our marketing activity, and ongoing developments in our core propositions generated a call to action for clients in the run up to tax year end,’ CEO Chris Hill explained. The UK tax year ends at the beginning of April.
Endeavour Mining was up 1.9%, as first-quarter results beat consensus.
The gold miner, with assets in nations including Senegal and Burkina Faso,
said pretax profit rose to $60 million from $51 million a year before, compared to a $299 million loss in the fourth quarter. Revenue fell to $591 million from $689 million a year before.
Gold production fell 16% year-on-year to 301,000 ounces, but realised gold price rose 7.3% from the previous quarter to $1,886 per ounce.
The FTSE 100 was held back by some stocks going ex-dividend, with Glencore down 3.7%, St James’s Place down 4.2% and Admiral down 2.9%.
Flutter Entertainment lost 1.4%, as Wells Fargo cut the gambling operator’s stock to ’equal weight’.
In the FTSE 250, Trainline jumped 10%.
The train ticket platform said net ticket sales were £4.32 billion in the financial year that ended February 28, up more than 70% from £2.52 billion in financial 2022. Revenue jumped to £327.1 million from £188.5 million, and Trainline swung to a pretax profit of $22.1 million from a £15.5 million loss.
Trainline’s guidance was upbeat, projecting double-digit revenue growth. It expects the recovery across its core markets to continue despite strike action in the UK and France.
Shore Capital said Trainline’s net ticket sales and revenue were broadly in line with market consensus. ‘However, we note that the growth within the UK continues to be offset by the ongoing rail strikes which is estimated to have an average gross sales impact per strike day of £5 million to £6 million,’ the broker noted.
Liontrust Asset Management fell 3.5%, as it announced it has conditionally agreed to acquire Zurich-listed GAM Holding in an all-share deal valuing GAM at fr.107 million, or £96 million.
The offer is equivalent to fr.0.67 per share. GAM has some fr.23.3 billion assets under management and advice as at March 31, and the combination of the firms would create a global asset manager with £53 billion AuMA.
Should the acquisition receive shareholder approval, Liontrust expects it to complete in the fourth quarter. GAM shareholders will have a 12.6% stake in the enlarged Liontrust.
On AIM, Mothercare fell 20%.
The retailer of products for parents and young children said it has begun refinancing discussions with its lender over an existing debt facility.
Following recent interest rate increases, the interest on the loan is around 18.2%.
‘Coupled with the extended time to return to pre-pandemic retail sales levels, particularly in our Middle Eastern markets...[it] means the board’s current forecasts for continuing operations show the group may require waivers to future periods’ covenant tests,’ the firm warned.
Mothercare is also looking at financing alternatives, including equity and equity linked structures, for further flexibility and to cut cash financing costs.
‘For the avoidance of doubt the group does not require (and is not seeking through this refinancing) additional liquidity,’ the firm stressed.
Gold was quoted at $2,035.66 an ounce early Thursday, higher than $2,025.44 on Wednesday.
In Asia on Thursday, markets in Japan were closed for Greenery Day. The S&P/ASX 200 in Sydney closed marginally lower. The Hang Seng index in Hong Kong was up 1.0%.
In China, the Shanghai Composite closed up 0.8%, the Shanghai market reopening for the first time since Friday last week after an extended Labour Day holiday in China.
The Caixin manufacturing purchasing managers’ index fell to 49.5 points in April from 50.0 in March. Falling below the 50-point mark that separates expansion from contraction, it points to a slight deterioration in the sector.
‘A recent slew of official first-quarter economic data beat market expectations, suggesting that China’s economy was recovering at a fast pace after the country lifted Covid controls. Yet it remains to be seen if the rebound is sustainable after a short-term release of pent-up demand,’ said Wang Ze, Caixin senior economist.
In the economic calendar, in addition to the ECB decision, there are services PMI prints from the UK and the EU starting from 0900 BST.
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