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(Alliance News) - Stocks in Europe largely overcame some early afternoon weakness to end higher on Thursday, after the European Central Bank enacted a historic interest rate hike.
The ECB raised its key interest rates by 75 basis points, as it "frontloads" its fight against surging inflation and soaring energy bills.
It is the Frankfurt-based central bank's second rate hike since 2011, with the first coming back in July.
It takes the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility to 1.25%, 1.50% and 0.75% respectively.
The FTSE 100 index closed up 24.23 points, or 0.3%, at 7,262.06 on Thursday. The mid-cap FTSE 250 index added 66.81 points, 0.4%, at 18,878.29. The AIM All-Share index ended up 3.39 points, or 0.4%, at 869.36.
The Cboe UK 100 index ended 0.2% higher at 725.64. The Cboe 250 closed up 0.2% at 16,254.77, and the Cboe Small Companies lost 0.3% at 13,604.99.
In mainland Europe, the CAC 40 in Paris closed up 0.3%, while the DAX 40 in Frankfurt ended down 0.1%, though it was down 1.7% in afternoon dealings.
European equities had a largely decent morning but fell after the ECB unveiled its largest ever interest rate rise. Stocks regained some poise in late trade to end higher.
"It's been another choppy session for European markets, dropping to their lows of the day in the aftermath of the ECB's decision to hike rates by 75bps, and hawkish comments from Fed chair Jay Powell. While ECB President Christine Lagarde tried to walk narrow path from being too hawkish or too dovish, it was comments from the other side of the Atlantic that upended markets during the afternoon session," CMC Markets analyst Michael Hewson commented.
The euro traded at USD0.9961 late Thursday, higher than USD0.9945 late Wednesday. The euro had traded at either side of parity after the ECB hike.
ECB President Christine Lagarde was quick to cool expectations that today's rate rise will not become normal.
On top of the current 75 basis point rise, the bank also announced is intention to raise interest rates further "over the next several meetings" in an attempt to "dampen demand and guard against the risk of a persistent upward shift in inflation expectations".
In her press conference following the release of the decision, Lagarde confirmed that the decision was unanimous. She also noted the historic rise delivered is "not normal" and any future rises will be data-dependent, but it was "not an isolated decision".
"The ECB offered no clear guidance as to how far it may raise rates. But the tone of the ECB's statement and Lagarde's reference to further rate increases at 'several meetings' could point to at least two but probably not five more rate increases to come," Berenberg analyst Holger Schmieding commented.
Elsewhere in the central banking space, the US Federal Reserve was also in focus.
The Fed must continue to act "strongly" to cool demand and contain price pressures to avoid a repeat of the inflation surge the US economy suffered in the 1970s and 1980s, Fed Chair Jerome Powell said Thursday.
With soaring prices in recent months pushing US annual inflation to the fastest in four decades, Powell's Fed has raised the benchmark lending rate four times this year, with a third massive, three-quarter point hike possible later this month.
Against the yen, the dollar was quoted at JPY143.91 at the time of the London equities close on Thursday, down from JPY144.45 on Wednesday.
Equities in New York were higher at the time of the closing bell in London. The Dow Jones Industrial Average was up 0.5%, the S&P 500 was 0.6% higher, while the Nasdaq Composite added 0.7%.
Sterling was quoted at USD1.1495 late Thursday, up from USD1.1469 at the London equities close on Wednesday.
Energy bills for the average UK household will be frozen at no more than GBP2,500 per year, and businesses will be spared crippling increases, as Prime Minister Liz Truss took action to shield Britons from the global gas crisis.
The prime minister's two-year plan paid for by tens of billions of pounds of borrowing will save the typical household around GBP1,000 from October and protect bill payers from further expected rises over the coming months.
For businesses and other non-domestic users such as schools and hospitals, which have not been covered by the existing price cap, a six-month scheme will offer equivalent support.
Moneysupermarket fell 2.7%, amid fears that the measures will hit energy switching numbers. The company operates a price comparison site allowing consumers to hunt for the most suitable energy provider.
Associated British Foods slumped 7.5% after warning of a potential profit drop in the coming financial year, owing to a hike in costs for retail unit Primark.
"Primark has already been managing the challenges of supply chain disruption, inflation in raw material and energy costs, and in labour rates, alongside the higher purchasing costs which have resulted from the strengthening of the US dollar over this financial year against sterling and the euro," AB Foods explained.
It was a largely poor day for London-listed retailers, with Next falling 3.8%, Marks & Spencer shedding 4.2% and Asos ending down 2.4%. JD Sports was an exception, rising 0.3%.
Darktrace plunged 34% on news that a takeover bid from private equity firm Thoma Bravo will not be forthcoming.
The announcement damped a strong batch of annual results for the cybersecurity firm.
In the financial year that ended on June 30, the Cambridge-based company swung to a pretax profit of USD5.3 million from a loss of USD143.9 million the previous year. Revenue jumped by 46% to USD415.5 million.
SIG rose 8.5%. The Sheffield-based insulation, roofing, and construction products supplier named Grafton Group's Gavin Slark as its new chief executive.
Current CEO Steve Francis plans to step down after three years but will remain in the role until Slark takes over on February 1.
Slark has been CEO of Dublin-based building materials firm Grafton for 11 years. He will step down from his role there on December 31.
AssetCo added 9.2%, after it confirmed it is in talks to sell some or all of its stake in Parmenion Capital Partners.
On Wednesday, Sky News reported part of one-time abrdn unit Parmenion may be sold in a deal which values it a significant premium to what the asset manager sold it for last year.
Sky News said Parmenion shareholders are mulling selling a "significant" stake in a deal which values the investment manager at up to GBP400 million, so roughly four times what abrdn sold it for.
On Thursday, AssetCo noted the press speculation and confirmed discussions may be taking place.
AssetCo holds about a 30% stake in Parmenion.
It would be a slight ignominy for abrdn, made worse by the fact AssetCo is chaired by Martin Gilbert, a former chief executive of abrdn, back when it was named Standard Life Aberdeen.
abrdn shares closed 2.5% lower. It was booted out of the FTSE 100 last month, in a series of index changes which take effect on Monday.
Brent oil was trading at USD88.99 a barrel late Thursday, down from USD89.34 late Wednesday. Gold was quoted at USD1,707.70 an ounce, down against USD1,711.32.
Friday's economic calendar has inflation figures from China reported overnight.
The local corporate calendar has interim results from computer services company Computacenter.
Focus in the UK will be on the health of Queen Elizabeth II. She is under medical supervision at Balmoral – with the royal family rushing to be by her side amid serious health fears for the nation's longest-reigning monarch.
Buckingham Palace issued a statement at 1232 BST on Thursday, saying doctors are concerned for the Queen's health.
They said the head of state is comfortable and royal physicians have recommended she stays under medical supervision as the future king, the Prince of Wales, and second in line to the throne, the Duke of Cambridge, cleared their diaries to dash to the Queen's Scottish Highlands home.
By Eric Cunha; ericcunha@alliancenews.com
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