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(Alliance News) - Share prices in London opened strongly on Thursday, after the head of the US central bank said it could slow the pace of interest rate hikes "as soon as" December.
"Unusually dovish comments from the Federal Reserve Chair Jerome Powell were seized upon by investors, sending markets sharply higher on hopes that the pace of aggressive rate hikes has peaked," said interactive investor's Richard Hunter.
The FTSE 100 index opened up 5.50 points, or 0.1%, at 7,578.51. The FTSE 250 was up 149.49 points, or 0.8%, at 19,311.71. The AIM All-Share was up 1.84 points, or 0.2%, at 850.43.
The Cboe UK 100 was down 0.1% at 757.76, the Cboe UK 250 was up 0.7% at 16,704.33, and the Cboe Small Companies was flat at 13,279.63.
"The time for moderating the pace of rate increases may come as soon as the December meeting" of Fed policymakers, Powell said in a speech at the Brookings Institution think tank on Wednesday.
The full effects of the bank's recent rate hikes are yet to be felt, Powell said, but he warned that policy will likely have to remain tight "for some time" to restore price stability.
The central bank has raised the benchmark lending rate by 0.75 percentage point four consecutive times in recent months, out of six rate hikes this year in an aggressive effort to rein in prices.
"While it could be argued that Jerome Powell's comments on Wednesday were relatively balanced - slower tightening now but rates high for longer - the last year has proven that anticipating the path of inflation even a short period ahead is incredibly difficult. Knowing what the Fed intends to do next is far more valuable than what it thinks it may do 6-12 months down the line," said Craig Erlam at Oanda.
In recent days, there has been a growing chorus of voices, including some Fed officials, advocating smaller steps in coming months.
In separate remarks on Wednesday, Federal Reserve Governor Lisa Cook said "it would be prudent to move in smaller steps" going forward, as the Fed tries to bring inflation back to its longer-term target of two percent.
The dollar was weaker across the board following the less-hawkish words from the Fed chair.
The euro stood at USD1.0425 shortly after the European equities open on Thursday morning, sharply higher against USD1.0295 late Wednesday. Against the yen, the dollar was trading at JPY136.31, down notably from JPY139.54.
"We are tempted to say that looks an overreaction in that while Chair Powell did acknowledge the slowing in the pace of hikes, his core message was one of stubbornly high core inflation," said Chris Turner at ING.
The pound was quoted at USD1.2112 early Thursday in London, significantly higher than USD1.1907 at the London equities close on Wednesday.
"Both the Bank of England and the European Central Bank should be hiking by 50 [basis points] in December. But we are taking the view that risk assets will come under more pressure over coming months – which will lead to renewed – if mild – sterling underperformance," said ING's Chris Turner continued.
In London, Spirax-Sarco was up 2.5% after it confirmed the completion of its acquisition of Durex International, a US-based specialist in custom electric thermal solutions for ultra-high criticality equipment.
The thermal energy management and pumping company bought Durex for a total of USD342.2 million on a cash and debt free basis. Durex is now part of Spirax-Sarco's Electric Thermal Solutions business.
Anglo American dropped 1.0% as RBC cut the miner to 'sector perform' from 'outperform', with a price target of 2,800 pence.
In the FTSE 250, Auction Technology dropped 8.8% despite swinging to an annual profit in the financial year that ended September 30.
The online auction operator swung to a profit of GBP9.3 million from a loss of GBP25.0 million, while revenue surged 71% to GBP119.8 million from GBP70.1 million thanks to growth in gross merchandise value and an additional boost from value-add services.
Auction Technology explained that in the previous year it booked one-off costs relating to its IPO and an acquisition.
AJ Bell was up 2.5%. The investment platform reported a "strong" financial performance in the financial year that ended September 30.
Revenue was up 12% to GBP163.8 million against the previous year's GBP145.8 million, while pretax profit climbed to GBP58.4 million from GBP55.1 million, year-on-year.
Looking forward, AJ Bell acknowledged short-term headwinds but said the long-term growth potential of the platform market is "significant".
Elsewhere in London, Foresight Group surged 12% as the infrastructure and private equity investment manager reported a sharp rise in interim profit and revenue amid
In the six months ended September 30, Foresight reported pretax profit of GBP25.4 million, up from GBP13.1 million the previous year. Revenue jumped to GBP50.7 million from GBP39.7 million.
This came as the firm upped its assets under management to GBP12.5 billion at September 30 from GBP8.8 billion at the same time a year prior.
It explained this was driven by the significant acquisition of Australia-based Infrastructure Capital Group, which added around GBP3.0 billion to the firm's AuM.
In Europe on Thursday morning, the CAC 40 index in Paris was up 0.1%, while the DAX 40 in Frankfurt was up 0.5%.
Stocks in Asia closed higher on Thursday. The Shanghai Composite closed up 0.5%, and the Hang Seng in Hong Kong closed up 0.8%. The Nikkei 225 in Tokyo ended up 0.9% and the S&P/ASX 200 in Sydney closed up 1.0%.
China's manufacturing sector saw a decline in November for the fourth consecutive month, new data from S&P Global showed, as the country's strict Covid control policies held back activity.
However, investors remained optimistic about the prospect of the world's second largest economy relaxing its strict zero-tolerance approach to the virus.
Speaking at the National Health Commission Wednesday, Vice Premier Sun Chunlan said the Omicron variant was weakening and vaccination rates were improving, according to the state-run Xinhua news agency.
Sun – a central figure behind Beijing's pandemic response – said this "new situation" required "new tasks".
She made no mention of the zero-Covid policy in her latest remarks, suggesting an approach that has disrupted the economy and daily life might soon be relaxed.
Brent oil was quoted at USD87.02 a barrel early Thursday, higher against USD85.44 late Wednesday. Gold was priced at USD1,778.57 an ounce, significantly higher than USD1,753.29.
By Heather Rydings; heatherrydings@alliancenews.com
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