European shares were mostly lower at midday, after the US Federal Reserve quashed all hope of an interest rate cut this year, while the European Central Bank was set to raise rates again on Thursday.
The FTSE 100 index was fractionally higher, up 2.71 points at 7,605.45 midday Thursday. However, the FTSE 250 was down 144.11 points, or 0.8%, at 19,031.39, and the AIM All-Share was down 5.07 points, or 0.6%, at 789.12.
The Cboe UK 100 was down 0.1% at 758.41, the Cboe UK 250 was down 0.7% at 16,588.66, and the Cboe Small Companies was down 0.2% at 13,280.45.
In European equities, the CAC 40 in Paris was down 0.8% and the DAX 40 in Frankfurt was down 0.6%.
Unlike the US Federal Reserve which held interest rates steady on Wednesday, the Frankfurt-based central bank is expected to lift rates by another 25 basis points.
The ECB will announce its interest rate decision on Thursday at 1315 BST. A press conference with President Christine Lagarde will follow half an hour later.
At its last meeting in May, the ECB raised interest rates in the eurozone by 25 basis points, with the interest rate on main refinancing operations going to 3.75%.
According to UBS, the expected quarter-percentage-point hike on Thursday will be the central bank’s ‘final’ hike, as the broader inflationary environment in the eurozone is expected to improve over the summer.
‘We believe [the ECB] will declare that the first stage of the policy tightening has been completed - reaching terminal rate - and that the second stage will start - keeping rates high until the ECB has sufficient confidence that inflation will return to 2% during 2024/2025,’ the Swiss bank said.
The dollar was higher. The euro stood at $1.0843 at midday on Thursday in London, down from $1.0850 at the equities close on Wednesday.
The pound was quoted at $1.2660, down from $1.2694. Against the yen, the dollar was trading at JP¥141.13, sharply higher compared to JP¥139.37.
Ricardo Evangelista, senior analyst at ActivTrades, said the dollar was stronger because the Fed’s announcement came across as ‘hawkish’, having signalled its intention to ‘reignite’ its monetary policy tightening later in the year. ‘With expectations now set for two more rate hikes in 2023, with the first one likely to come in July, there may be scope for further short-term dollar gains,’ he said.
In New York, stock indices were pointed to a lower start, as investors lamented interest rates remaining higher for longer. The Dow Jones Industrial Average was called down 0.2%, the S&P 500 index down 0.4%, and the Nasdaq Composite down 0.7%.
In London, Halma remained the worst blue-chip performer at midday, down 5.7%.
The safety equipment manufacturer posted pretax profit of £291.5 million, down sharply from £304.4 million the year prior.
Halma said the drop in profitability reflected the non-recurrence of a £34.0 million gain on a disposal in the year prior. Excluding this gain, pretax profit was up 8% year-on-year, it said.
Chief Executive Marc Ronchetti added: ‘We have made a positive start to the new financial year. We have a strong order book, and order intake in the year to date is broadly in line with revenue and ahead of the comparable period last year. Based on current market conditions, we expect to deliver good organic constant currency revenue growth in the year ahead, and return on sales to increase to approximately 20%.’
Shore Capital said Halma’s pretax profit was in line with market consensus on an adjusted basis, and it will leave its financial 2024 profit forecast for the company unchanged.
Vodafone was among the best performing stocks in the FTSE 100, up 1.5%.
The telecommunications firm on Thursday announced that Hyundai Motor and Vodafone Business have extended their existing strategic partnership, which helps to provide customers with in-car connected streaming services. The extension covers more than 40 countries in Europe. Vodafone didn’t specify how long the extension was for, only that it was a ‘multi-year’ partnership.
On Wednesday, Vodafone had announced a major UK merger with CK Hutchison. The companies said they will combine their UK telecommunications businesses, with Vodafone owning 51% and CK Hutchison owning 49% of the combined business. CK Hutchison is a Hong Kong-based telecommunications, ports, infrastructure and retailing conglomerate. It owns the Three UK business.
In the FTSE 250, Asos was up 11%, remaining the index’s best performing stock at midday.
The online fashion retailer said it returned to positive adjusted earnings before interest and tax in the three months ended May 31, despite a drop in revenue.
Adjusted Ebit improved by more than £20 million year-on-year, putting the online fashion retailer on-track to deliver adjusted Ebit guidance of £40 million to £60 million in the second half of its financial year.
Sports Direct-owner Frasers also raised its stake in Asos to 10.6% on Thursday, more than doubled from 5.1% back in May after a series of step-ups.
Shares in Frasers were trading 2.4% lower.
Elsewhere in London, Fuller, Smith & Turner added 2.7%.
The UK pub and hotel chain reported a 10% decline in annual profit but a 33% jump in revenue as its business improved from the impact of Covid-related resections on trade.
Pretax profit totalled £10.3 million, down from £11.5 million the year prior, while revenue climbed to £336.6 million from £253.8 million.
Looking forward, Chief Executive Simon Emeny said he is ‘more optimistic about the future’ than he has been since before the pandemic.
‘While the well-documented inflationary environment has been a challenge, there are positive signs on the horizon. In addition, we are ever hopeful of a resolution to the ongoing train strikes to allow us to further benefit from the increasing numbers of office workers and international tourists returning to the Capital,’ he said.
On AIM, Amte Power plunged 72% after it announced it needs to conclude ‘some form of fundraising’ within ‘no less’ than the next four weeks.
Back in December, the company said it would need to raise additional capital by April in order to meet its current operating costs. On Thursday, the lithium-ion and sodium-ion battery cells manufacturer and developer confirmed it continues to be in discussion with potential investor regarding further financing.
It warned that should the company be unable to secure additional funding, the prospects for the recovery of value, ‘if any’, by shareholders would be ‘uncertain.’
Brent oil was quoted at $73.91 a barrel at midday in London on Thursday, down from $74.27 late Wednesday. Gold was quoted at $1,934.89 an ounce, sharply lower against $1,957.97.
Still to come in Thursday’s economic calendar, in addition to the ECB decision, the US weekly unemployment insurance claims report is out at 1330 BST, alongside US retail sales data.
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