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(Alliance News) - Stock prices in London opened higher, as the second of two big days for interest rate decisions kicked off.
On Wednesday, the US Federal Reserve raise US interest rates by 25 basis points, as expected. The Federal Open Market Committee lifted the target range for the federal funds rate to 4.50% to 4.75% from a previous range of 4.25% to 4.50%. All twelve members of the committee voted for the rise.
Next up are the Bank of England and European Central Bank. The BoE will unveil its interest rate decision at 1200 GMT on Thursday, followed by the ECB at 1300 GMT, with markets expecting a 50 basis point hike from both.
The FTSE 100 index opened up 50.40 points, 0.7%, at 7,811.51. The FTSE 250 was up 206.42 points, 1.0%, at 20,104.96, and the AIM All-Share was up 4.90 points, 0.6%, at 878.12.
The Cboe UK 100 was up 0.6% at 780.82, the Cboe UK 250 was up 1.0% at 17,547.82, and the Cboe Small Companies was up 0.1% at 14,075.89.
New York rallied on the back of the Fed's decision on Wednesday. In New York on Wednesday, the Dow Jones Industrial Average ended marginally higher, the S&P 500 up 1.1% and the Nasdaq Composite up 2.0%.
The dollar was lower after the Fed decision.
The pound was quoted at USD1.2373 at early on Thursday in London, up compared to USD1.2315 at the equities close on Wednesday. The euro stood at USD1.1003, higher against USD1.0919. Against the yen, the dollar was trading at JPY128.82, down compared to JPY129.28.
In a press conference following the Fed's decision, Chair Jerome Powell said the central bank will need "substantially more evidence" to be confident that inflation is on a sustained downward path in the US, despite "encouraging" recent developments.
Looking ahead, the Fed said it anticipates that ongoing increases in the target range "will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time".
Markets are expecting a more aggressive half-point hike by the ECB on Thursday, as it plays catch-up to its US counterpart.
"The European Central Bank is expected to raise the interest rates by 50 [basis points] today - that's almost a certainty, as the ECB Chief Christine Lagarde promised a series of 50bp hikes to fight inflation at her latest press conference. But since then, inflation in Europe fell to 8.5%, and growth prospects improved," said Swissquote Bank senior analyst Ipek Ozkardeskaya.
"So, what will the ECB do? Will the Europeans also suggest that the 'disinflationary process' has begun, or will they be more cautious than their American peers? There are two options. Lagarde will either keep the euro rally going, staying firm on her promise to deliver a couple of more 50bp hikes in the coming meetings, or she will soften her tone, as well. I think that she will stay firm and prudent."
Eurozone consumer price inflation slowed in January, according to a flash estimate from Eurostat, released on Wednesday. The eurozone annual inflation was estimated at 8.5% last month, down from 9.2% in December. A year earlier, the inflation rate for January was 5.1%.
On a monthly basis, consumer prices in the eurozone fell by 0.4% in January.
Across the channel, the same 50-point hike is expected from the BoE. A half-point lift on Thursday would take the UK benchmark bank rate to 4.00%. It would be the BoE's ninth-successive rate hike as it bids to keep a lid on rampant inflation.
Ozkardeskaya said: "If BoE hikes by 50bp, it will be a dovish 50bp."
The UK's consumer price inflation rate stands at 10.5%, data for December showed, well ahead of the BoE's 2% target. The inflation rate eased slightly from 10.7% in November.
"On one hand, the double-digit inflation continues taking a toll on the UK economy and on people's lives," the Swissquote analyst said. "On the other hand, the rising rates take a toll on the British housing market. Home prices have never fallen this long since the 2008 subprime crisis. Then, we have had hundreds of thousands of people going on strike for better pay, since weeks. But better pay means more pressure on inflation, and worsening cost-of-living crisis."
Rail passengers in the UK have been warned to expect continued disruption to their journeys in the aftermath of Wednesday's strike action and ahead of Friday's walkouts. Commuters have been warned by operators to expect "significantly reduced train services" across all three days and advised to check ahead of taking a journey.
Train driver members of Aslef and the Rail, Maritime & Transport union staged industrial action on Wednesday and will take to picket lines again on Friday in a long-running dispute over pay, jobs and conditions.
In European equities early Thursday, the CAC 40 in Paris was up 0.6%, and the DAX 40 in Frankfurt was up 0.8%.
In London, FTSE 100 heavyweight Shell gained 0.9% in early trade, after it announced a multi-billion-dollar share buyback.
Oil major Shell announced a USD4 billion share buyback, as it reported that revenue in the fourth quarter of 2022 rose to USD101.30 billion from USD85.28 billion a year earlier. Pretax profit increased to USD16.44 billion in the quarter up from USD16.27 billion.
Full-year revenue climbed to USD386.20 billion, up from USD272.66 billion, whilst pretax profit more than doubled to USD64.81 billion from USD29.83 billion.
The company declared a dividend of USD0.29 for its fourth quarter, up from USD0.24 a year earlier; this brings the full-year dividend to USD1.04 up from USD0.89.
Shell said the share buyback will be completed by the time of its first quarter results announcement.
BT shed 1.1%. The telecommunications operator reported a drop in revenue and profit, following the removal of BT Sports revenue to a new joint venture.
BT reported revenue of GBP15.59 billion in the nine months to December 31, down 1% from GBP15.68 billion a year ago. Pretax profit fell by 15% to GBP1.31 billion from GBP1.54 billion.
BT explained that revenue was helped by price increases and improved trading seen in its Openreach and Consumer divisions. However, this was offset by disposals and the removal of BT Sports revenue due to its new joint venture. Adjusting for that, revenue was up by GBP65 million, it said.
Looking ahead, BT confirmed its financial outlook, saying normalised free cash flow will be heavily weighted to the fourth quarter.
In the FTSE 250, the worst performer in early trade was NCC, which shed 14%.
The cybersecurity firm reported that revenue in the six months to November 30 increased to GBP176.6 million from GBP150.1 million a year ago. Pretax profit jumped to GBP10.3 million from GBP8.4 million.
It also declared an interim dividend of 1.50 pence, unchanged year-on-year.
However, NCC said that since the beginning on the second half of its financial year it has experienced a lengthening of the sales cycle, which is leading to delays in buying decisions, work commencement and therefore revenue recognition, particularly in North America and the UK. Based on this, the company now expects only a single-digit revenue increase on a constant currency basis for all of financial 2023. In financial 2022, NCC reported GBP314.8 million of revenue.
In Asia, the Nikkei 225 index in Tokyo closed up 0.2%. The Shanghai Composite closed flat, whilst the Hang Seng index in Hong Kong was down 0.5%. The S&P/ASX 200 in Sydney closed up 0.1%.
Gold was on the rise, amid the lower dollar, quoted at USD1,956.32 an ounce early Thursday against USD1,928.82 late on Wednesday.
Brent oil was quoted at USD83.30 a barrel at early in London on Thursday, down from USD84.42 late Wednesday.
In the economic calendar on Thursday, alongside the ECB and BoE's interest rate decisions, there also is the weekly unemployment insurance claims report from the US at 1330 GMT.
By Sophie Rose, Alliance News reporter
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