Stock prices in London returned from a Christmas break by posting solid gains on Wednesday, as the holiday-shortened final week of the year kicked off positively on US interest rate cut hope.
Recent data, including Friday’s personal consumption expenditures print, has aided the ’soft-landing’ narrative. There is an 87% chance that Fed cuts rates in March, according to the CME FedWatch Tool.
The FTSE 100 index ended up 27.44 points, 0.4%, at 7,724.95. The FTSE 250 closed up 89.80 points, 0.5%, at 19,720.75, and the AIM All-Share rose 8.63 points, 1.1%, at 763.03.
The Cboe UK 100 closed up 0.3% at 771.49, the Cboe UK 250 ended up 0.5% at 17,202.29, and the Cboe Small Companies rose 0.6% to 14,813.98.
‘Last year started amid a cloud of pessimism that turned out too extreme. Stocks rose smartly as a result. This year, we set the stage for 2024 amid growing optimism with inflation receding and profit forecasts rising,’ Tower Bridge Advisors analysts commented.
The CAC 40 in Paris closed marginally higher, while the DAX 40 in Frankfurt added 0.2%.
The Bureau of Economic Analysis on Friday said the core personal consumption expenditures price index rose annually by 3.2% in November, slowing from 3.4% in October, which was first reported at 3.5%. The latest figure was just below the FXStreet-cited market consensus of 3.3%.
The core reading, the Fed’s preferred inflation gauge, does not include food or energy. It has been slowing steadily in recent months. It stood at 4.2% in July, cooling to 3.7% in August and 3.6% in September.
The headline PCE index rose 2.6% year-on-year last month, cooling from October’s annual rise of 2.9%, which was first reported at 3.0%, and September’s 3.4% rise.
The cooler inflation prints solidified market betting on US interest rate cuts.
Brown Brothers Harriman analysts commented: ‘Six cuts are fully priced in by end-2024. While we still strongly disagree with this market pricing, it will now take a much longer string of stronger data to shift the narrative than what was needed before the Fed’s dovish hold.’
The Fed has enacted three successive pauses. Equipment rental firm Ashtead Group, exposed to the ebbs and flows of the US economy, rose 1.2% in London, on hope that the Fed will soon start cutting rates.
Stocks in New York were mixed, but had kicked off the holiday-shortened week positively on Tuesday. The Dow Jones Industrial Average was up 0.1% at the time of the European equities close, the S&P 500 was flat and the Nasdaq Composite was down 0.1%.
CPT Markets analyst Vikas Lakhwani commented: ‘The market remains on a strong uptrend since the end of October thanks to an optimistic sentiment. All major indices rose, with the Nasdaq and the S&P 500 reaching toward new highs. Despite the low volumes typical of the holiday season, performance remained positive overall. At the same time, market expectations of early rate cuts in March could continue to boost sentiment and performances on the market.’
Sterling was quoted at $1.2797 late Wednesday afternoon in London, higher than $1.2719 at the early London equities close on Friday. The euro traded at $1.1115, up from $1.1019. Against the yen, the dollar was quoted at JP¥141.88, down versus JP¥142.14.
UK Chancellor of the Exchequer Jeremy Hunt on Wednesday announced a spring budget will be set out on March 6, in what could be his last chance to introduce tax changes before the next general election.
Hunt has commissioned the Office for Budget Responsibility to prepare an economic and fiscal forecast to be presented to Parliament alongside the budget next year.
The Tories have been dropping hints they could make attention-grabbing pledges on housing and taxes as UK Prime Minister Rishi Sunak struggles to turn around his party’s major deficit in the polls.
Housing Secretary Michael Gove suggested to the Times that the Conservatives will promise to cut the up-front cost of a home for first-time buyers in a pre-election giveaway.
Back in London, Anglo American rose 2.3%, its fifth successive daily gain and seventh in the previous eight trading days. Shares in the miner are still down some 10% since December 7, the day it announced an underwhelming outlook.
Next lost 0.9%, Frasers fell 0.8% and B&M gave back 1.2% as bricks and mortar retailers struggled despite some ‘encouraging’ Boxing Day footfall data.
MRI Software said footfall was 4% higher on-year during the busy shopping day. However, it was down 15% from pre-virus levels amid ‘the continued impact of the rise of online shopping, the close proximity of Black Friday deterring further spend and the potential restrictions of the cost of living crisis’.
Online-only electricals retailer AO World climbed 2.1%.
Elsewhere, AstraZeneca added 0.9%.
Astra announced on Tuesday it has agreed to buy Nasdaq-listed Gracell Biotechnologies and will pay about $1.2 billion for the clinical-stage company. The Cambridge, England-based pharmaceutical company said it expects the acquisition to close in the first quarter of 2024.
Gracell is a Suzhou, China-based biopharmaceutical firm developing cell therapies for cancer and autoimmune diseases. AstraZeneca will pay $2.00 per share, or $10.00 per American depositary share, for Gracell at closing, plus $0.30 per share ‘upon achievement of a specified regulatory milestone’.
The upfront cash portion represents a transaction value of around $1.0 billion, with the total value being about $1.2 billion if the milestone is achieved. Gracell ADSs closed up 60% at $9.92 in New York on Tuesday.
On AIM, shares in Horizonte Minerals surged 67%.
The London-based nickel development company celebrated securing a $20 million funding package ‘that will allow for critical construction streams to advance at its flagship Araguaia nickel project’ in Brazil, and serve as working capital.
WH Ireland shot up 20%. The stockbroker and wealth manager reported a weaker period for six months that ended September 30, with a sharp drop in revenue and a widened pretax loss. CEO Phillip Wale said this reflected the ‘well documented challenging market backdrop’, in addition to non-recurring costs associated with its refinancing over the summer.
However, market conditions have shown ‘some tentative signs of improvement’ since November, he added, which has enabled WH Ireland to undertake some its largest fundraising in many months across public and private markets. The business delivered underlying monthly profitability in November, he noted.
Gold was quoted at $2,080.29 an ounce late Wednesday in London, higher than $2,055.55 shortly after midday in London on Friday. Brent oil was trading at $80.15 a barrel, up slightly from $80.02.
Thursday’s economic calendar has retail sales and industrial production data from Japan overnight. There is the latest US jobless claims data at 1330 GMT.
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