(Alliance News) - Stock prices in London closed down on Thursday as investors reacted negatively to the European Central Bank's warning that it would be "totally premature" to discuss interest rate cuts.
This was after the central bank opted to keep its key interest rates unchanged on Thursday, as widely expected.
The FTSE 100 index closed down 59.77 points, 0.8%, at 7,354.57. The FTSE 250 ended down 87.62 points, 0.5%, at 16,783.09, and the AIM All-Share closed down 3.98 points, 0.6%, at 669.84.
The Cboe UK 100 ended down 0.9% at 733.75, the Cboe UK 250 closed down 0.5% at 14,522.00, and the Cboe Small Companies ended down 0.9% at 12,547.24.
In European equities on Thursday, the CAC 40 in Paris ended down 0.4%, while the DAX 40 in Frankfurt ended down 1.0%.
The ECB left its key interest rates unchanged on Thursday, as widely expected, but President Christine Lagarde warned that it would be "totally premature" to discuss interest rate cuts.
The Frankfurt-based official lender left the interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility at 4.50%, 4.75% and 4.00% respectively on Thursday.
"At this point in our fight against inflation and after ten successive hikes, now is not the time for forward guidance. Now is the time to really stick to our data-dependency, and we shall do so," Lagarde told a press conference in Athens.
The central bank chief added that members of the Governing Council did not discuss rate cuts in its most recent meeting, saying that the debate would be "absolutely premature."
"Even having a discussion on cuts is totally, totally premature," she said. "At the moment we have to be steady, we have to hold."
The ECB has speedily enacted 450 basis points of interest hikes in total over the past year or so. Its first in the current cycle was in July of last year. Prior to this, rates had been unchanged since 2019.
"There remain several risks that may keep inflation stubbornly high, including increasing wage growth and the uncertainty in the Middle East which is pushing up energy prices. Going forward, like other central banks, it will say the market needs to expect higher interest rates for longer, with the door being left open should we see inflation spike again," said Quilter analyst Marcus Brookes.
"However, given the stagnating economy and the fact other central banks have moved into a holding pattern, something very unexpected would need to happen for rates to be raised again. The pressure will quickly shift to cutting rates given the lack of economic growth."
The pound was quoted at USD1.2105 on Thursday at the London equities close, down compared to USD1.2143 on Wednesday. The euro stood at USD1.0527, lower against USD1.0590. Against the yen, the dollar was trading at JPY150.48, higher compared to JPY149.93.
US economic growth picked up markedly in the third-quarter, logging the sharpest growth in almost two years.
According to the Bureau of Economic Analysis, quarter-on-quarter gross domestic product in the US grew 4.9% on an annualised basis in the three months to September 30. In the second-quarter, GDP had risen 2.1%.
The latest reading topped a market estimate, with growth of only 4.2% expected in the third-quarter, according to consensus cited by FXStreet.
It was the chunkiest quarter-on-quarter GDP rise since a 7.0% increase in the fourth-quarter of 2021.
"The GDP data serve as a reminder of the underlying strength of the US economy and support the expectation that interest rates will remain elevated for an extended period," said SPI Asset Management analyst Stephen Innes.
Stocks in New York were lower at the London equities close, with the DJIA down 0.3%, the S&P 500 index down 0.7%, and the Nasdaq Composite down 1.3%.
In London's FTSE 100, StanChart was the worst performing stock, losing 12%.
The Asia-focused lender said operating income rose 4.5% to USD4.52 billion from USD4.33 billion a year before. However, pretax profit dropped 54% to USD633 million from USD1.39 billion, well below company-compiled consensus of USD1.41 billion.
The bottom-line hit came as credit impairments increased to USD292 million from USD227 million, which included further charges related to the Chinese commercial real estate sector.
This was alongside an impairment of around USD700 million related to the reduction in the carrying value of its holding in China Bohai Bank.
Unilever shed 2.8%. It announced a series of changes to its division leadership, partly triggered by the internal promotion of a new finance chief, as it also reported a small decline in third-quarter revenue and revealed an "action plan" to boost growth.
Fernando Fernandez will step up to chief financial officer from president of the Beauty & Wellbeing business group. Previously, he led Unilever's business in Brazil and then all of Latin America.
Turnover in the third quarter was EUR15.24 billion, down 3.8% from a year before, though underlying sales growth was positive 5.2%. For the first nine months of the year, turnover was EUR45.78 billion, up 0.4% on year, with 7.7% underlying sales growth.
Unilever said its 2023 outlook remains unchanged, calling for underlying sales growth above 5% and a "modest" improvement to underlying operating margin.
In the FTSE 250, Hunting was the worst performing stock, losing 8.1%.
The maker of parts and technology systems for the oil and gas sector said earnings before interest, tax, depreciation and amortisation was around USD75 million in the year-to-date, doubling year-on-year.
It left its full-year Ebitda outlook unmoved at USD96 to USD100 million, which at best would be a 92% rise from USD52.0 million.
Hunting said its order book shrunk in its third-quarter, but has since picked up. It also said it has seen some "softness" in the North America onshore space.
Its order book at the end of September stood at USD511 million, down from USD529.7 million at the end of June. A new pact has lifted Hunting's order book from the September level, however.
Amongst London's small-caps, Restaurant Group rose 2.4% amid a possible twist in its takeover saga.
On Wednesday, Sky News reported that the Pizza Express owner Wheel Topco is at the preliminary stages of evaluating whether to make a rival offer for Restaurant Group, which this month agreed to be bought by Apollo Global Management for just over GBP500 million.
On Thursday, Restaurant Group confirmed that it has received a diligence request from the Wheel Topco.
On AIM, Safestyle UK plummeted 80%.
The retailer and manufacturer of PVCu replacement windows and doors said that it does not expect to receive a capital injection or new financing.
Earlier this month, Safestyle said it was considering a number of options, which could include the sale of some subsidiary businesses.
Brent oil was quoted at USD87.74 a barrel at the London equities close on Thursday, inched up from USD87.71 late Wednesday. Gold was quoted at USD1,978.13 an ounce, down against USD1,982.33.
In Friday's UK corporate calendar, IAG and NatWest release their third quarter results.
By Greg Rosenvinge, Alliance News reporter
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