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London open: Stocks rise ahead of BoE rate announcement
London stocks rose in early trade on Thursday after the US Federal Reserve stood pat on interest rates, with the Bank of England widely expected to do the same at midday.
At 0820 GMT, the FTSE 100 was up 0.7% at 7,395.27.
Overnight, the Fed left interest rates unchanged for the second straight meeting, as expected, with chair Jerome Powell saying that policymakers would be patient before making any further moves.
The Federal Open Market Committee concluded its two-day meeting in Washington by leaving the federal funds rate at a range between 5.25% and 5.5%.
“Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks,” the FOMC said in a statement.
In a press conference, Powell said the FOMC would continue to “proceed carefully” and assess economic data as it comes through.
However, he indicated that they would wait for rate hikes and tighter financial conditions – given the recent run-up in bond yields to a 16-year high – to feed through to the economy.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “There has been a wave of relief that the Fed didn’t rock the boat and stuck to the expected course by keeping interest rates on hold. This has reassured investors lifting stocks on Wall Street, buoying trading in Asia and filtering through to expectations of an upbeat early session for the FTSE 100, pending the Bank of England decision.”
She said expectations are high that the BoE will also keep rates on hold too, “particularly given the more fragile state of growth”.
“Interest rates are at a 15-year high, and policymakers are expected to stay in their ‘wait and see’ stance, as demand already appears to be seeping out of the economy. A jump in company insolvency rates and a housing market in the deep freeze are signals that the sharp hike in rates is already being keenly felt, and that’s even before the full effects come through,” she said.
In equity markets, Sainsbury’s rallied as the supermarket chain boosted its full-year outlook after strong grocery sales throughout the first half.
Smith & Nephew also racked up strong gains as it said that sales growth is now expected to be at the top end of guidance after a strong third quarter, though it warned that margins would likely not grow as much as hoped.
BT advanced as it reaffirmed its full-year guidance, reporting flat revenue and a 6% increase in half-year adjusted EBITDA.
Oil giant Shell gained as it posted third-quarter adjusted earnings of $6.2bn and announced a $3.5bn share buyback over the next three months. Earnings were up from $5.1bn in the previous three months, but down from $9.5bn in the same period a year earlier, and only slightly behind expectations of $6.48bn.
Shell said the results reflected a “robust” operational performance, and higher oil prices and refining margins.
Trainline surged as the rail and coach booking platform said it saw double-digit growth across the board in its first half, and narrowed its full-year guidance towards the upper end of the forecast range.
Ladbrokes owner Entain slumped as it said in a statement that during October, customer-friendly results had seen sports margins impact EBITDA by around £45m.
Kitchen supplier Howden Joinery lost ground as it cautioned that full-year results were set to be towards the lower end of market expectations, pointing to a “more uncertain macroeconomic outlook”.
Ashmore and Hilton Food Group were weaker as they traded without entitlement to the dividend.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | +8.55% | +40.70 | 516.60 |
| 2 |  |
Bt Group Plc | +6.26% | +6.95 | 118.05 |
| 3 |  |
Tui Ag | +5.81% | +24.00 | 437.20 |
| 4 |  |
British Land Company Plc | +5.48% | +16.30 | 313.70 |
| 5 |  |
Sainsbury (j) Plc | +5.42% | +14.20 | 276.00 |
| 6 |  |
Segro Plc | +4.68% | +33.20 | 742.60 |
| 7 |  |
Persimmon Plc | +3.88% | +40.00 | 1,072.00 |
| 8 |  |
Land Securities Group Plc | +3.63% | +20.80 | 594.40 |
| 9 |  |
Carnival Plc | +3.58% | +30.00 | 868.00 |
| 10 |  |
Smith & Nephew Plc | +3.57% | +33.00 | 956.40 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Hikma Pharmaceuticals Plc | -3.28% | -63.00 | 1,857.00 |
| 2 |  |
Gsk Plc | -2.26% | -32.20 | 1,390.80 |
| 3 |  |
Centrica Plc | -1.36% | -2.20 | 160.10 |
| 4 |  |
Bp Plc | -0.61% | -3.00 | 491.40 |
| 5 |  |
Bae Systems Plc | -0.18% | -2.00 | 1,115.50 |
| 6 |  |
Shell Plc | -0.00% | -0.00 | 1,894.60 |
| 7 |  |
Just Eat Plc | -0.00% | -0.00 | 861.00 |
| 8 |  |
Nmc Health Plc | -0.00% | -0.00 | 938.40 |
| 9 |  |
Royal Bank Of Scotland Group Plc | +0.00% | +0.00 | 120.90 |
| 10 |  |
Rsa Insurance Group Ld | +0.00% | +0.00 | 684.20 |
US close: Stocks extend gains as Fed keeps rates unchanged
US stocks raced ahead on Wednesday afternoon after the Federal Reserve kept interest rates unchanged, while weaker-than-expected economic data eased concerns of an overheating economy.
The Dow Jones Industrial Average rose 0.7%, the S&P 500 gained 1.1% while the Nasdaq surged 1.6%, with markets extending gains after the Federal Open Market Committee decision.
The FOMC concluded its two-day meeting in Washington by leaving the federal funds rate at a range between 5.25% and 5.5%.
In a press conference, Powell said policymakers would continue to “proceed carefully” and assess economic data as it comes through, but indicated the central bank would be patient to wait for rate hikes and tighter financial conditions to feed through to the economy.
“Given our expectations for a moderation in macro variables over Q4, we continue to expect the Committee to keep the Fed funds rate unchanged at current levels despite its slightly hawkish policy bias,” said analysts at TD Securities. “That said, given recent robust economic activity and persistent labor market strength, we can’t fully rule out the possibility of tighter rates in the near future.”
The yield on a 10-year US Treasury was down 20 basis points at 4.734% by the close.
Economic data comes in mixed
Earlier in the session, the ADP Employment Report revealed that private employers added a net 113,000 jobs last month, up from 89,000 in September, but well below the consensus estimate of 150,000. Meanwhile, ADP said that annual pay for people in the same job was up just 5.7% year-on-year – the slowest pace of growth since October 2021.
The ADP report is seen as a less reliable barometer of labour-market activity than the official non-farm payrolls report due out on Friday, which is expected to show a figure closer to 180,000 for October.
The ISM manufacturing PMI unexpectedly fell to 46.7 in October, despite forecasts for September 49.0 reading to remain unchanged. The new orders index and employment index both worsened while there was some increase in the prices paid index – though all three remained firmly in negative territory.
Meanwhile, the JOLTS survey showed that job openings were more or less steady at 9.553m in September after a revised 9.497m in August, slightly ahead of the 9.250m forecast.
In other news, the Treasury Department announced details of its bond auctions, saying it would increase the size of its sales to handle its growing debt load given the recent rise in yields. It plans to sell $112bn in notes and bonds next week, up from $103bn last quarter, and refund $102bn of notes maturing on 15 November to raise $9bn in extra funds.
WeWork hits record low
WeWork shares were at a record low, down nearly 50% on the day, on rumours that the company is to file for bankruptcy. The Wall Street Journal reported on Tuesday that the company might file for Chapter 11 protection in New Jersey.
Advanced Micro Devices jumped 10% after beating forecasts with third-quarter revenues and profits, though it did disappoint with its fourth-quarter revenue guidance.
Cosmetics company Estée Lauder tanked 19% after cutting its outlook for fiscal 2024. The company pointed to incremental external headwinds, namely from the slower growth in overall prestige beauty in Asia travel retail and in mainland China.
Pharmacy operator CVS was slightly lower despite its third-quarter results beating expectations, partly due to a strong performance from the health services division.
Thursday newspaper round-up: Borrowing costs, earnings, Walt Disney
Labour has warned that more than half a million homeowners face a surge in mortgage costs before the local elections in England in May, as ministers battle to contain the damage from what is expected to be a long period of high interest rates. With the Bank of England widely expected to hold its key base rate at 5.25% on Thursday, the party released analysis that showed 630,000 more homeowners would be hit by higher borrowing costs before local elections next year. – Guardian
Denmark’s Ørsted has cancelled two big offshore windfarm projects in the US at a cost of more than £3bn amid surging costs facing the global wind industry. Shares in the world’s biggest wind power company fell 25% on Wednesday after it told investors it had no choice but to take a 28.4bn Danish kroner (£3.3bn) impairment charge and stop the developments off the New Jersey coast. – Guardian
One of Europe’s biggest private equity firms has postponed plans for a blockbuster listing in Amsterdam amid tumultuous market conditions. CVC Capital Partners, which was preparing to float this month, is said to have put its plans on ice for a second time. The buyout firm previously attempted to float last year but pushed plans back. – Telegraph
Workers have suffered a drop in their real earnings over the past year as high inflation erodes the value of rising pay packets, according to official figures. The Office for National Statistics said real earnings for full-time workers had dropped by 1.5 per cent between April 2022 and April 2023, when including the impact of inflation. – The Times
Walt Disney has formally begun the process of buying Comcast’s one-third stake in Hulu — a deal that will give the entertainment giant full ownership of the streaming service and freedom to incorporate it into its Disney+ streaming service. Disney said it expected to pay Comcast, the parent company of NBCUniversal, about $8.61 billion by December 1. This represents NBCU’s percentage of the $27.5 billion guaranteed floor value for Hulu when it agreed to sell its stake to Disney in 2019, minus the anticipated outstanding capital call contributions payable by NBCU to Disney. – The Times
