The Federal Reserve’s latest meeting minutes struck a hawkish tone overnight, though London’s FTSE 100 was unperturbed on Thursday morning.
The blue-chip benchmark was on the up after a pair of promising updates from the retail sector. Elsewhere, Greggs also rose, as the baker’s sausage rolls, festive bakes and sweet treats proved popular over the Christmas period.
The FTSE 100 index opened up 16.87 points, or 0.2%, at 7,602.06. The FTSE 250 was up 45.66 points, or 0.2% at 19,436.73, and the AIM All-Share was up 1.07 points, or 0.1% at 845.00.
The Cboe UK 100 was up 0.3% at 760.50, the Cboe UK 250 was up 0.6% at 16,916.97, and the Cboe Small Companies up 0.3% at 13,342.40.
‘Almost exactly a year after the 2021 December Fed meeting minutes that marked the hawkish turn in Fed policy, yesterday saw Fed officials reaffirm their conviction to keeping interest rates restrictive as long as it takes to quell inflation. The committee is clearly concerned with financial conditions easing as a response to the Fed slowing interest rate hikes,’ analysts at Deutsche Bank commented.
The Federal Open Market Committee’s December meeting minutes indicated that further rate hikes would be ‘appropriate’ for the Fed to contain ‘unacceptably high’ inflation which remains ‘well above’ the committee’s target of 2%.
At its December meeting, the FOMC lifted the target range for the federal funds rate by 50 basis points to 4.25% to 4.50% - the highest since 2007 - from a previous range of 3.75% to 4.00%.
A slowing of rate hikes should not be seen as a ‘weakening of resolve’ in the fight against inflation, the central bank cautioned.
‘Participants observed that a slowing in the pace of rate increases at this meeting would better allow the committee to assess the economy’s progress toward the committee’s goals of maximum employment and price stability,’ the minutes said.
However, the policymakers continued to expect that further rate hikes would be ‘appropriate’ to achieve these aims.
In the US on Wednesday, Wall Street ended lower, with the Dow Jones Industrial Average ending down 0.4%, the S&P 500 down 0.8% and the Nasdaq Composite down 0.7%.
In London, Next was the best blue-chip performer in early morning trade, adding 7.5% after it lifted its full-year profit outlook and said its Christmas sales topped expectations.
The clothing and homeware retailer increased its pretax profit guidance for the year ending in January 2023 to £860 million, from £840 million. The guidance would represent growth of 4.5% against the year prior, if achieved.
Next said in the six months to December 30, full price sales were up 2.2% against the previous year. In the three months to December 30, full price sales were up 4.7% against the year prior.
‘Sales in the Christmas period have been better than we anticipated,’ the company explained.
B&M European Retail climbed 2.0% as it reported strong momentum across its ‘golden’ third quarter, despite a challenging macroeconomic environment.
In the 13-week period from September 25, the retailer’s revenue grew by 12% year-on-year to £1.57 billion, noting a very good performance across all B&M UK categories as well as solid momentum in B&M France and Heron Foods.
As a result, full-year earnings before interest, tax, depreciation and amortisation are now expected between £560 million to £580 million, coming above current analyst outlook consensus of £557 million. This guidance comes below last year’s adjusted Ebitda figure of £619 million, however.
The good news for retail on Thursday did not end there.
Christmas shoppers provided UK retail and hospitality with a crucial boost despite the cost-of-living crisis and rail strikes, figures showed.
Shopper footfall in December was up 5.8% on the month before and 9.9% higher than a year before, while the all-important gap between pre-pandemic 2019 also narrowed to 10.9% from 11.4% in November, according to retail consultants Springboard.
December footfall on high streets was 12.7% higher than in 2021, while shopping centres saw a 10.3% uplift and retail parks also enjoyed 3.6% more visitors.
However, in the penultimate week before Christmas, marred by four days of rail strikes, footfall was 20.1% lower than 2019, more than doubling from 9.6% the week before.
Back in London, Prudential dropped 2.1%. Exane BNP cut the insurance firm to ’underperform’ from ’neutral’.
In the FTSE 250, Greggs was up 0.5%. The bakery chain noted strong double-digit growth in fourth quarter sales, despite the impact of adverse weather and strikes at the end of 2022.
Like-for-like sales in company-managed shops grew by 18% as a result of a favourable trading pattern leading into the Christmas period and softer trading conditions in the comparable quarter of 2021 due to disruption caused by the Omicron variant of Covid.
In 2022, sales totalled £1.51 billion, up 23% from £1.23 billion the previous year.
‘While market conditions in 2023 will remain challenging, our value-for-money offer of freshly-prepared food and drink is highly relevant as consumers look to manage their budgets without compromising on quality and taste,’ the chain said.
Elsewhere in London, Glenveagh Properties fell 4.6% despite posting a strong revenue performance in 2022, driven by its Suburban business segment.
The housebuilder posted revenue of €649 million, up 36% against the previous year, while operating profit improved to around €70 million from €50.6 million.
Glenveagh said it was also beginning a buyback programme to repurchase up to 10% of the firm’s shares.
In European equities on Thursday, the CAC 40 in Paris was down 0.5%, while the DAX 40 in Frankfurt was down 0.4%.
The euro stood at $1.0619 early on Thursday, higher against $1.0598 at the close on Wednesday. Against the yen, the dollar was trading at JP¥132.75, higher compared to JP¥131.87.
The pound was quoted at $1.2019, down from $1.2054.
UK Prime Minister Rishi Sunak vowed that a recession-bound Britain will emerge from its winter of discontent with economic growth, lower inflation and shorter hospital waiting lists.
Sunak issued a five-point list of promises for 2023, vowing to bring down the national debt, and pass new legislation to stop boatloads of migrants crossing the Channel from France.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 0.4%. The S&P/ASX 200 in Sydney closed up 0.1%.
In China, the Shanghai Composite closed 1.0% higher, while the Hang Seng index in Hong Kong finished up 1.3%.
China said it would begin to normalise travel between the mainland and Hong Kong from Sunday. All but three of Hong Kong’s 12 crossings with the mainland have been closed since the start of the coronavirus pandemic in early 2020.
Data also revealed that the nation’s service sector remained in a downturn, though the rate of the decline was only modest overall. The latest Caixin business activity index rose to 48.0 points in December, from a six-month low of 46.7 in November.
Brent oil was quoted at $78.34 a barrel at early in London on Thursday, up from $78.07 late Wednesday. Gold was quoted at $1,848.49 an ounce, lower against $1,857.48.
The North Sea benchmark continued to be weighed down by worries about weak demand due to the state of the global economy and China’s rising Covid-19 cases. The price is well below those seen at the end of 2022, when it traded as high as $86.
Still to come on Thursday’s economic calendar, there’s a PPI print for the EU at 1000 GMT, after a reading for the UK service sector at 0930 GMT.
The US will also publish its own services PMI data later in the day as well as its weekly unemployment insurance claims report.
By Heather Rydings, Alliance News senior economics reporter
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