Blue-chip equities in Europe ended on the up on Wednesday, unfazed by hawkish comments from major central bankers, as a conference in Portugal continued.
Federal Reserve Chair Jerome Powell affirmed that the US central bank is not done hiking, while the Bank of England’s Andrew Bailey spoke of the need for policymakers to enact a more aggressive 50 basis point rate lift, in the wake of red-hot inflation data.
Inflation data from across the eurozone will be in focus for the remainder of the week, before the key US personal consumption expenditures reading on Friday.
The FTSE 100 index climbed 39.03 points, or 0.5%, at 7,500.49. The FTSE 250 rose 357.97 points, or 2.0%, at 18,412.81, and the AIM All-Share edged up 0.99 of a point, 0.1%, to 756.60.
The Cboe UK 100 rose 0.5% to 748.79, the Cboe UK 250 surged 1.5% to 16,061.11, though the Cboe Small Companies fell 0.7% to 13,653.67.
In mainland Europe, peers made more convincing gains than what the FTSE 100 achieved. The DAX 40 in Frankfurt climbed 0.6%, while the CAC 40 in Paris rose 0.9%.
The pound was quoted at $1.2741 at the time of the London equities close on Wednesday, down from $1.2748 on Tuesday. The euro stood at $1.0916, down against $1.0959. Against the yen, the dollar was trading at JP¥144.22, higher compared to JP¥144.01.
Federal Reserve Chair Jerome Powell on Wednesday said the US averting a downturn is the most likely outcome, though as monetary policy gets tighter, the risks between tightening too little and too much ‘become more in balance’.
Speaking at a European Central Bank forum in Sintra, Portugal, Powell noted that US labour market conditions are ‘softening’, though at a slower pace than expected. The US economy has been ‘quite resilient’, however, the Fed chair said.
There is a ‘significant probability’ of a downturn, though Powell said that is not the most likely outcome for the US economy.
Powell said monetary policy has not been in restrictive territory too long. Since enacting its first hike in over three years back in March 2022, the Fed has since lifted rates nine more times. In total, it has hiked by 500 basis points in the current tightening programme.
However, it decided against a hike earlier this month, keeping the federal funds rate range at 5.00%-5.25%.
‘The first question was how fast should we go and we went pretty fast to a level that we believe is restrictive. I think we have steadily slowed the pace of our moves, for one reason... the more information we get the better decision we make., The risks of doing too much versus doing too little become more in balance,’ Powell said, though he added they are not in balance yet.
‘The committee clearly believes there’s more work to do.’
He added that the Fed has not decided whether it will raise rates every other meeting, as some analysts have suggested.
‘I wouldn’t take, you know, moving to consecutive meetings off the table at all,’ he said.
Bank of England policymakers, meanwhile, had to make a ‘strong move’ as they sat down and studied a surprisingly bad inflation report last week.
Andrew Bailey said he thought it was better to increase interest rates by 50 basis points in one go, rather than to hike in that increment through two steps.
‘The cumulative data both particularly on the labour market, and on the inflation release, to us showed clear signs of persistence (and) caused us to conclude that we had to make really quite a strong move at that point. It was justified,’ Bailey said.
‘My own view on that was if we were really of the view that we were going to do 25 (bps) and then, we were really baked in for another 25, based on the evidence we’d seen, it was better to do 50.’
In London, Sage shares rose 5.1% on the back of an upgrade from JPMorgan. The US bank lifted the accounting software maker to ’overweight’ from ’neutral’ and placed it on its ’analyst focus list’.
Scottish Mortgage Investment Trust climbed 0.7%. Shares in some of its tech holdings climbed overnight during a bullish session in New York on Tuesday.
The going was slightly tougher for US stocks on Wednesday, however, with shares mixed. The Dow Jones Industrial Average was down 0.3% at the time of the London equities close, while the S&P 500 was flat and the Nasdaq Composite added 0.5%.
Chipmakers were lower, with Nvidia down 0.7% and Intel falling 1.4%. The Wall Street Journal reported the US is milling curbs on exports of artificial intelligence chips to China.
The Joe Biden administration is wary of getting the burgeoning technology into the hands of US rivals.
Back in London, Carnival jumped 10%, with its stock continuing its rise after a sharp sell-off in the wake of quarterly results on Monday. Shares in the cruise firm slumped 12% on Monday, but rallied 11% on Tuesday.
AIM listed Revolution Beauty jumped 29% as shares resumed trading and its war of words with 27% shareholder boohoo continued. boohoo shares fell 0.3% on Wednesday.
boohoo flagged ‘serious concerns’ regarding the conduct of the board of the beauty product retailer, a day after a dramatic annual general meeting saw three directors ousted, before later returning.
boohoo called the Revolution board ‘self-serving’ and said it was not acting in the best interest of shareholders. It pointed to the attempts of the company’s board to adjourn a quorate meeting with the approval of shareholders present, the annual general meeting proceeding with defeated resolutions, and the conduct of independent director Jeremy Schwartz as evidence of this.
boohoo called on the Revolution board to convene a requisitioned general meeting, proposing to remove three directors and appoint another two.
Revolution Beauty responded: ‘The board of Revolution Beauty remains focussed on value creation at this critical time for the company, and continues to believe that boohoo’s hostile actions are value-destructive, opportunistic and self-serving, as well as not being in the interests of the company’s shareholders as a whole.’
Revolution Beauty said the re-election of Chief Executive Bob Holt, Chief Financial Officer Elizabeth Lake and Chair Derek Zissman were rejected during Tuesday’s AGM. However, Schwartz, at that point the sole remaining director, helped to hand them a reprieve.
Revolution Beauty must have at least three directors, according to its articles of association. Schwartz appointed Rachel Maguire and Matthew Eatough as non-executives. Maguire is the founding CEO of strategic advisory Arko Iris Ltd. Arko provides governance counsel to mid-cap and large-cap leadership teams. Eatough ‘is an experienced entrepreneur who has founded and run a number of successful businesses’.
The trio then re-appointed the ousted Holt, Lake and Zissman to the Revolution Beauty board and their previous posts.
Brent oil was quoted at $74.05 a barrel late Wednesday in London, up from $73.55 late Tuesday. Gold was quoted at $1,910.97 an ounce, lower against $1,914.73.
Thursday’s economic calendar has a US gross domestic product reading and the latest jobless claims data at 1330 BST. There is a German inflation reading at 1300 BST.
The local corporate calendar has a trading statement from B&M European Value Retail and annual results from greeting cards seller and gifting firm Moonpig Group.
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