LONDON MARKET CLOSE: FTSE 100 jumps on US rate cut euphoria

(Alliance News) - London's FTSE 100 surged on Thursday, turbocharged by a US Federal Reserve pivot, though the Bank of England and European Central Bank struck a more cautious tone.

Between them, the trio have enacted around 1,500 basis points worth of hikes in the current cycle, but it is seemingly the Fed that will cut faster, according to its dot-plot.

The BoE's vote split suggests investors will need to wait a little longer for Threadneedle Street's first cut, however.

"It's two years since the Bank of England first started raising rates from the historically low rate of 0.1%, and when you look back at how far we've come it's hard not to feel a dizzying sense of vertigo. Markets are now thinking what goes up must come down, and are pricing in a slew of interest rate cuts next year. That looks premature and probably reflective of the current sentiment in markets, driven especially by the US Fed's latest more dovish stance on interest rate policy," AJ Bell analyst Laith Khalaf commented.

The FTSE 100 index jumped 100.54 points, 1.3%, at 7,648.98. The FTSE 250 shot up 561.20 points, 3.0%, at 19,256.96, and the AIM All-Share surged 13.74 points, 1.9%, at 737.84.

The Cboe UK 100 ended up 1.3% at 763.73, the Cboe UK 250 surged 3.3% at 16,724.44, and the Cboe Small Companies rose 0.1% to 14,131.63.

The CAC 40 in Paris added 0.6%, while the DAX 40 in Frankfurt fell 0.1%. The DAX reached a record high earlier on Thursday, however.

The Bank of England maintained UK interest rates at a 15-year high on Thursday, but the decision remained split between policymakers.

The BoE kept its bank rate at 5.25%. It is the third successive hold, following one in September, which ended a streak of 14 consecutive hikes since December 2021, and one in November. The BoE had rapidly increased bank rate from a Covid-19-induced low of 0.10%.

It was a split outcome, with six Monetary Policy Committee members, Governor Andrew Bailey included, favouring the hold. Three would have preferred rates to have been lifted by 25 basis points, they were Megan Greene, Jonathan Haskel and Catherine Mann.

The ECB, meanwhile, left interest rates unchanged and revised its projections for inflation and economic growth downwards.

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.

The ECB predicts headline inflation will average 5.4% in 2023, 2.7% in 2024, 2.1% in 2025 and 1.9% in 2026. This represents a downward revision from its September projections of 5.6% for 2023 and 3.2% for 2024.

The decisions followed the Fed leaving its benchmark interest rate unchanged, as expected on Wednesday, but signalled rate cuts of as much as 75 basis points in the coming year.

The decision from the Federal Open Market Committee extends a pause in monetary policy that has been in place since July, leaving the federal funds rate at a 22-year high of 5.25% to 5.5%.

But the latest quarterly dot plot showed that most officials expect rates to be in the range of 4.4% to 4.9% by the end of 2024.

A small majority of the Federal Open Market Committee anticipate at least three quarter-point cuts from current levels.

In New York, stocks were higher, with the Dow Jones Industrial Average up 0.2%. The S&P 500 added 0.3% while the Nasdaq Composite climbed 0.2%.

While the Fed decision boosted equities, it hurt the dollar.

Sterling was quoted at USD1.2762 late Thursday, jumping from USD1.2525 at the London equities close on Wednesday. The euro stood at USD1.0994, higher against USD1.0792 at London market close on Wednesday. Against the yen, the dollar was trading at JPY141.60, down sharply compared to JPY145.11.

In London, interest rate sensitive stocks were among the better performers. Property investor Land Securities rose 6.8%, housebuilder Taylor Wimpey added 3.6% - despite the BoE's more hawkish tone - and private equity investor Bridgepoint surged 7.9%.

Gold miner Endeavour Mining shot up 6.6%, tracking spot prices higher. Gold was quoted at USD2,039.11 an ounce late Thursday, supported by the weaker dollar, up against USD1,983.30 late Wednesday. Brent oil was quoted at USD76.70 a barrel, up from USD73.80 late Wednesday.

Back in London, Currys shares surged 10%. It hailed a "solid" performance in the half year ended October 28.

The London-based consumer electronics retailer said revenue fell 6.9% to GBP4.16 billion from GBP4.47 billion the year before, and was down by 4% on a like-for-like basis. This was driven by a decline in sales across all product categories except small domestic appliances, Currys explained.

Pretax loss narrowed to GBP46 million from GBP568 million the year before, as there was no longer a goodwill impairment, compared to the GBP511 million impairment reported in the corresponding six-month period a year ago.

"It was a good day to release positive news with the market in such a buoyant mood and today's announcement from Currys, while not unblemished, certainly represented progress from the electronics retailer," said AJ Bell analyst Russ Mould.

"For more than a year Currys has been a tale of Nordic noir as its previously reliable Scandinavian business has been beset by competitive pressures. Margins for this region being back at their level from two years ago will reassure shareholders that Currys is starting to put its problems behind it."

Currys on Thursday said gross margin in the Nordics improved by 1.9 percentage points in the first half from a year before, amid cost cutting, and now is only 0.2 point down on two years ago.

Elsewhere, musicMagpie jumped 22% after it said a record Black Friday helped offset a soft first half of its financial year, but it still expects annual revenue to be down.

The Stockport-based used-technology reseller said it expects revenue to fall 4.7% to GBP136.6 million in the financial year that ended November 30 from GBP143.3 million the year before.

But it was keen to stress that business had picked up in the second half.

Consumer technology revenue for the second half was up 7.5% from a year earlier, leaving full-year revenue down 1.2% to GBP95.4 million from GBP96.6 million in financial 2022.

Looking ahead, musicMagpie said it is encouraged by its second half-performance, despite a challenging consumer environment and continuing inflationary pressures. It said remains confident in the group's strategy and in its medium-term prospects.

Friday's economic calendar has a slew of flash purchasing managers' index readings, including the eurozone at 0900 GMT, the UK at 0930 GMT and the US at 1445 GMT.

The local corporate calendar has half-year results from online wine seller Naked Wines.

By Eric Cunha, Alliance News news editor

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