European equities ended higher on Thursday, supported by strong corporate updates, while the pound struggled on soft UK economic data.
US interest rate optimism continued to lift the mood after Wednesday’s inflation reading, and one Federal Reserve official said rate cuts can come if the data continues to play ball.
The FTSE 100 index shot up 90.77 points, 1.1%, at 8,391.90. The large-cap benchmark spiked to its highest level since early-December.
The FTSE 250 added 194.08 points, 1.0%, at 20,527.70, and the AIM All-Share rose 2.78 points, 0.4%, at 717.31.
The Cboe UK 100 ended up 1.0% at 840.51, the Cboe UK 250 rose 1.1% to 17,872.60, and the Cboe Small Companies added 0.4% at 15,406.81.
The pound was at $1.2241 late on Thursday in London, flat compared to $1.2243 at the equities close on Wednesday. The euro stood at $1.0305, higher against $1.0293. Against the yen, the dollar was trading lower at JP¥155.19 from JP¥156.51.
The UK economy grew in November, but by less than expected, data from the Office for National Statistics showed on Thursday.
Gross domestic product edged up 0.1% in November, driven by growth in services, after a fall of 0.1% in October. This undershot the FXStreet-cited market consensus of 0.2% growth.
In the three months to the end of November, real GDP is estimated to have stayed unchanged compared with the three months to the end of August.
‘Today’s GDP data was slightly better than we expected, but a little worse than general expectations,’ Deutsche Bank analyst Sanjay Raja commented.
‘What does today’s GDP data mean? The UK economy is heading for stagnation not just in the final quarter of last year, but through the entire second half of 2024. Indeed, after registering the fastest economic growth among G7 economies in the first half of 2024, the UK economy will likely register no growth in the second half. Budget uncertainty and inclement weather won’t have helped output. Our nowcast models point to growth flatlining in Q4-24, but picking up marginally in Q1-25.’
Raja continued: ‘To be sure, we still see activity rebounding to start the year. Economic fundamentals remain healthy. Household balance sheets remain sound. Consumer confidence has grown. Housing demand has picked up too (though could be tempered by rising rate expectations). And businesses – though weary of the increase in taxes coming from April 2025 – still expect to invest. What’s the bad news? We see downside risks to our below-consensus projection for 2025 GDP growth (1.3%). Unless sentiment picks up, we could see the recent disappointment in GDP carry over into the new year.’
In Paris, the CAC 40 added 2.1%, spurred on by luxury retail. In Frankfurt, the DAX 40 added 0.3%. Frankfurt’s DAX hit a record high.
AJ Bell analyst Russ Mould commented: ‘Investors were in a risk-on mood after a ceasefire deal between Israel and Hamas and a positive response to corporate results in the European retail, luxury, and automotive sectors.’
The strong earnings in Europe followed bullish numbers from banking stocks in New York.
In Zurich, Richemont shot up around 15% on consensus-topping numbers. The Cartier owner lifted Paris-listed peers LVMH and Kering, which rose 8.7% and 5.6%.
In London, Watches of Switzerland jumped 8.1%, also in a positive read-across, while Burberry added 4.1%.
On the decline, Taylor Wimpey fell 3.4%. It was among the worst large-cap performers in London.
On Thursday, the High Wycombe, England-based housebuilder said total completions including joint ventures were 10,593 in 2024, down 2.4% from 10,848 in 2023.
UK completions, excluding joint ventures, were 9,972 down 3.7% from 10,356. This was towards the top of the 9,500 to 10,000 range provided by the firm in November.
Chief Executive Jennie Daly called said it was ‘good’ performance, adding operating profit is expected to be in line with previous guidance.
A company compiled consensus puts full year 2024 group operating profit including joint ventures and excluding exceptional items at £416 million. This would represent a 12% drop from £470.2 million in 2023.
JD Sports slumped 5.9%, compounding an already tough start to the year for the shares. UBS cut the athleisure retailer to ’neutral’ from ’buy’.
Elsewhere in London, Wise shares fell 1.0%. The London-based money transfer firm reported that cross-border volume jumped 24% to £37.8 billion in its third financial quarter, ended late December, from £30.6 billion the previous year.
Underlying income rose 13% to £349.5 million from £307.9 million. Account balances rose 26% on-year to £16.2 billion, and Wise reported a 39% surge in ‘card & other revenue’.
Co-Founder & Chief Executive Officer Kristo Kaarmann said: ‘This quarter saw us take another step closer to achieving our mission, most notably through extending the availability of Wise to even more customers. Having seen rapid customer growth from the popularity of the Wise Account for individuals in Brazil, we were pleased to also launch our service for micro-businesses based in Brazil during the quarter. This comes as we work towards integrating with Brazil’s payment system, PIX, which will further enhance the quality of our proposition in the country.’
Wise said it continues to expect between 15% and 20% underlying income growth at constant exchange rates in the current financial year ending in late March. Reported growth is set to be at the lower end of this range, due to a foreign exchange headwind.
Broker Peel Hunt noted Wise’s underlying income of £349.5 million was a 1% miss on consensus.
Wise shares went into Thursday’s results up more than 30% over the past six months.
Brent oil was quoted at $79.90 a barrel at the time of the London equities close on Thursday, slumping from $81.46 late Wednesday. Gold rose to $2,719.78 an ounce against $2,683.65 on Wednesday.
In New York, the Dow Jones Industrial Average was down 0.1% at the time of the closing bell in London. The S&P 500 was flat, while the Nasdaq Composite shed 0.3%.
The US Federal Reserve could cut rates three or four times this year if inflation data cooperates, with a first cut possible before July, a senior bank official said.
‘The inflation that we got yesterday was very good,’ Fed Governor Christopher Waller told CNBC, noting that underlying price pressures excluding volatile food and energy costs had been close to target on a monthly basis.
Waller, who is a permanent voting member of the Fed’s rate-setting committee told CNBC that he could support lowering rates as many as four times this year, depending on the data.
‘I may be a little more optimistic about inflation coming down than the rest of my colleagues,’ he said, adding that if the data didn’t ‘cooperate’, the Fed may be back to cutting just once or twice this year.
Friday’s economic calendar has a Chinese gross domestic product reading overnight, before UK retail sales data at 0700 GMT.
Friday’s local corporate calendar has a trading statement from sofa seller DFS Furniture.
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