LONDON MARKET MIDDAY: Europe takes hit on nerves ahead of ECB decision

Thu, 11th Apr 2024 11:50

(Alliance News) - European equities sunk lower at midday on Thursday, with sentiment hurt by hotter-than-expected inflation from the US crushing hopes of interest rate cuts.

Investors are also eyeing the latest interest rate decision from the European Central Bank and hopes for some clues about the trajectory of rates in a press conference which will follow.

The FTSE 100 index was down 18.46 points, 0.2%, at 7,942.75. The FTSE 250 was down 77.89 points, 0.4%, at 19,723.86, and the AIM All-Share was up 1.77 points, 0.2%, at 756.96.

The Cboe UK 100 was down 0.2% at 793.70, the Cboe UK 250 was down 0.3% at 17,153.31, and the Cboe Small Companies was down 0.4% at 14,689.46.

In European equities on Thursday, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was down 0.5%.

"After yesterday's US inflation figures knocked the market for six, it's no wonder that equities struggled for direction on Thursday," says Russ Mould, investment director at AJ Bell.

"Hotter than expected inflation data has given the Federal Reserve yet another reason to sit on its hands and kick the prospect of a rate cut further down the road. The signs have been clear to see for a while and investors are now having to readjust their expectations for when we will finally see the much desired 'pivot' in monetary policy."

Hopes for a June interest rate cut were almost crushed on Wednesday, after some hotter-than-expected data paired with the latest US Federal Reserve minutes.

According to the Bureau of Labor Statistics, the year-on-year rate of US consumer price inflation picked up to 3.5% last month, from 3.2% in February, taking it further above the Fed's 2% inflation target.

The rate of consumer price inflation had been expected to pick up to just 3.4%, according to FXStreet cited consensus.

Meanwhile, Federal Reserve officials said they required more confidence that inflation was moving towards its 2% target before cuts to interest rates could be considered, minutes from the March Federal Open Market Committee meeting showed.

Still to come on Thursday, there is a producer price reading from the US. It is expected to deliver more data which will dampen hopes of interest rate cuts.

Stocks in New York were called lower. The Dow Jones Industrial Average and the S&P 500 index are both called down 0.3%, and the Nasdaq Composite down 0.2%.

With Wednesday's data, markets are expecting the European Central Bank to sit on its hands later on Thursday. It will announce its interest rate decision at 1315 BST.

Focus instead will be on the press conference which follows, with hopes of some signals about when the bank may cut rates.

"Equity bulls will hope that the ECB can turn the tide on market sentiment today, with Christine Lagarde expected to take on a notably more dovish tone that could set us up for a rate hike in June. Eurozone rates are significantly lower than many of their global counterparts, but that looks unlikely to stifle any calls to further wide gap between US and eurozone rates. The relative importance of the beleaguered manufacturing sector has been one of the major hurdles faced by the eurozone, and investors will be keenly watching for signs that the ECB will finally shift their focus from inflation to growth," said Joshua Mahony at Scope Markets.

The pound was quoted at USD1.2535 at midday on Thursday in London, down compared to USD1.2546 at the equities close on Wednesday. The euro stood at USD1.0729, lower against USD1.0743. Against the yen, the dollar was trading at JPY153.13, up compared to JPY152.88.

In the FTSE 100, Centrica rose 4.3% to the top of the index.

STMicroelectronics said it has signed a long-term agreement with Centrica for the supply of electricity produced from renewable sources in Italy. The deal starts in January 2025 and lasts for ten years.

AstraZeneca rose 1.7%.

AstraZeneca said it plans to increase its dividend by 7% in 2024, having left the payout flat last year, making the promise ahead of a key vote on its chief executive's pay. Pascal Soriot has been CEO of the firm since October 2012.

"It's no coincidence that AstraZeneca has delivered shareholders some good news on the same day they are being asked to vote on a GBP1.8 million pay rise for Chief Executive Pascal Soriot," said AJ Bell's Russ Mould.

Astra holds its annual general meeting in London on Thursday afternoon with the remuneration policy one of the items on the agenda.

The bottom of the index was dragged down by stocks which went ex-dividend. Phoenix Group, Aviva, and Lloyds lost 6.1%, 5.6% and 4.1%, respectively.

In the FTSE 250, Darktrace rose 6.0%.

The Cambridge, England-based cybersecurity company said at constant currency rates, annualised recurring revenue at March 31 was USD731.1 million, representing growth of 24% from USD583.6 million a year ago. Revenue in its third quarter jumped 24% to USD176.1 million from USD139.2 million a year prior.

Looking ahead, Darktrace narrowed its guidance range for constant currency ARR, and now expects growth of between 22.3% and 23.0%, from 21.5% to 23.0% previously.

The firm also raised its expectations for year-on-revenue growth and adjusted Ebitda margin, and now expects revenue growth of at least 25.5%, up from its previous 23.5% and 25.0% range.

On London's AIM, Revolution Bars shot up 48%, after its shares were restored to trading.

On Wednesday, Revolution published its interim results for the 26 weeks that ended December 30. It reported a pretax profit of GBP3.1 million, swinging from a pretax loss of GBP91,000 the year prior.

Brent oil was quoted at USD89.99 a barrel at midday in London on Thursday, up from USD89.31 late Wednesday. Gold was quoted at USD2,335.44 an ounce, up against USD2,334.91.

By Sophie Rose, Alliance News senior reporter

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