Stocks in London closed broadly higher on Thursday, as investors take a ‘wait and see’ approach as a slew of central bank decisions loom next week.
The US Federal Reserve will unveil its latest interest rate decision on Wednesday next week, before the Bank of England reveals its own interest rate decision the next day.
‘The US central bank has already pushed through four rate hikes in 2022 and in doing so taken the Fed Funds rate from its record low of 0.25% to 2.50%, the highest level since July 2019. Moreover, the Fed has accelerated the pace as inflation has gone up higher than it expected and done so more quickly - the first rise was a quarter point, the second a half and the last two were three-quarter point hikes,’ said analysts of AJ Bell.
‘This time around the market is currently putting a 0% chance on a half-percentage-point increase to 3.0%, a 72% chance on a three-quarter point hike to 3.25% and a 28% chance on a full one-percentage-point rise to 3.50%. Either move would take the Fed Funds rate to its highest mark since the first quarter of 2008, when the US central bank was frantically slashing borrowing costs in an attempt to stave off the Great Financial Crisis,’ AJ Bell added.
The EU inflation print comes in at 1000 BST on Friday.
The FTSE 100 index closed up 4.77 points, or 0.1% at 7,282.07 on Thursday. The FTSE 250 ended up 37.12 points, or 0.2%, at 18,886.32. The AIM All-Share closed down 0.96 points, or 0.1%, at 867.38.
The Cboe UK 100 ended up 0.1% at 728.12, the Cboe UK 250 closed down 0.1% at 16,258.97, and the Cboe Small Companies ended up 0.1% at 12,782.79.
Confidence among UK consumers has fallen into negative territory for the first time since June 2020, according to a survey.
The Consumer Confidence Index from YouGov and the Centre for Economics & Business Research fell by 4.2 points in August to 98.8 from 103.0, the largest decline since the early stages of the pandemic.
It comes as inflation, largely driven by energy price rises, piles pressure on consumers ahead of winter.
The survey was taken between August 1 and 31, before Prime Minister Liz Truss announced her plan to freeze energy bills at £2,500 a year for a typical household.
‘This latest dip in consumer confidence exemplifies a longer trend of sustained decline,’ said Emma McInnes, global head of financial services at YouGov.
The pound was quoted at $1.1494 at the London equities close Thursday, down from $1.1588 at the close on Wednesday.
In the FTSE 100, Melrose Industries closed down 3.6% as the stock went ex-dividend, meaning new buyers no longer qualify for the latest payout.
Shares in Ocado rebounded after a disappointing few sessions. The stock closed up 3.5%.
In the FTSE 250, Hilton Food plummeted 29% after it said it expects annual profit to be below expectations due to cost pressures on consumers, as well as a hit from start-up costs and rising interest rates.
In the 28 weeks to July 17, the food packaging business said pretax profit declined by 9.7% year-on-year to £19.6 million from £21.7 million a year earlier.
Hilton Food's operating margin weakened to 2.0% from 2.3% due to raw material price inflation, while its total administrative expenses rose by 11% to £139.0 million from £123.4 million.
Chief Executive Philip Heffer admitted the company had ‘not been immune’ from the impact of heightened inflation but nonetheless looked to the future with confidence.
‘While we remain watchful of any near-term changes in consumer sentiment, we believe that our international scale, strong customer relationships, and diversified protein offer leaves us well-placed within a growing global market,’ Heffer said.
Redrow finished 3.7% higher. On Wednesday, the housebuilder raised its dividend but saw annual profit decline as it booked one-off costs related to a UK government pledge surrounding fire safety measures.
Elsewhere in London, Wickes was up 9.5%. The home improvement retailer backed its full-year guidance on solid interim revenue growth, due to a recovery in 'do-it-for-me' sales.
It reported a pretax profit of £33.5 million for the six months that ended July 2, down 6.2% from £35.7 million a year before, mainly due to IT separation costs, it said.
More positively, revenue grew 1.3% to £822.3 million from £812.0 million thanks to a strong recovery in delivered do-it-for-me service sales.
‘While the macroeconomic environment remains uncertain, we are confident that we have the right model to continue outperforming the market,’ Wickes stated.
The company backed its full-year guidance of an adjusted pretax profit in the range of £72 million to £82 million. In financial 2021, it generated an adjusted pretax profit of £85 million.
On AIM, Tertiary Minerals soared 65% on the signing of a technical cooperation agreement with First Quantum Minerals to ‘turbo-charge’ two of its copper exploration projects in Zambia.
Together, Tertiary and First Quantum will set up a technical committee with the objective to work collaboratively to advance and develop its two projects, Mukai and Mushima North.
In European equities on Thursday, the CAC 40 in Paris ended down 1.0%, while the DAX 40 in Frankfurt ended down 0.6%.
The euro stood at €0.9996 at the European equities close Thursday, down against €0.9997 at the same time on Wednesday.
Stocks in New York were in the red at the London equities close, with the Dow Jones Industrial Average down 0.2%, the S&P 500 index down 0.6%, and the Nasdaq Composite down 1.0%.
US retail sales notched some unexpected growth in August, data from the Census Bureau showed on Thursday, though largely due to car sales.
Separately, figures from the Department of Labor showed initial jobless claims totalled 213,000 in the week to September 10, down from 222,000 the week before. Continuing claims for the week to September 3 were broadly flat at 1.4 million.
US industrial production unexpectedly fell in August. Output was down 0.2% month-on-month, swinging from growth of 0.5% in July. Consensus, according to FXStreet, was for a rise of 0.1%.
Against the yen, the dollar was trading at JP¥143.36 late Thursday, up compared to JP¥142.70 late Wednesday.
The rising costs of energy imports combined with a weak yen have brought Japan's trade balance deep into the red, with the country's trade deficit in August reaching a record JP¥2.8 trillion, about $19 billion, the Finance Ministry said on Thursday.
The August figures mean that the resource-poor country, despite being the world's third largest economy, has now been in the red for 13 months in a row.
Brent oil was quoted at $90.04 a barrel at the London equities close Thursday, down from $95.38 late Wednesday.
Gold was quoted at $1,667.03 an ounce at the London equities close Thursday, down sharply against $1,705.20 at the close on Wednesday.
In Friday's UK corporate calendar, there are half-year results from Dunedin Enterprise Investment Trust and full-year result from Pacific Horizon Investment Trust.
In the economic calendar, there is CPI data from the EU at 1000 BST after UK retail sales at 0700 BST.
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