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London open: FTSE surges after Fed signals rate cuts next year
London stocks surged in early trade on Thursday after the Federal Reserve signalled interest rate cuts were on the way next year, with the Bank of England and the European Central Bank due to make their final policy announcements of 2023 later.
At 0825 GMT, the FTSE 100 was 1.5% higher at 7,659.51.
Craig Erlam, senior market analyst at Oanda, said: “The most hotly anticipated central bank meeting of the year did not disappoint on Wednesday, with the Fed potentially delivering this year’s Santa rally.
“I don’t think many will have expected the Fed to go as far as it did in forecasting three rate cuts next year only three months after suggesting the tightening cycle is not over. But clearly, it’s not just investors that have been impressed with the data we’ve seen so far in the fourth quarter and now they’re getting more carried away than before.
“There’s been a lot of debate in recent weeks about whether investors are getting ahead of themselves, too optimistic about how quickly the Fed will cut rates but the message from the central bank is that is not the case. And in typical fashion, investors have now gone further, pricing in six rate cuts next year starting in March.
“That’s also forced investors to reassess whether they’re in fact too pessimistic with other central banks too, with the ECB now expected to cut rates by 150 basis points over the next 12 months and the BoE between 100 and 125 basis points.”
The BoE rate announcement is due at midday, while the ECB will make its statement at 1315 GMT, with both expected to keep rates on hold.
In equity markets, electrical retailer Currys surged after it held annual guidance as interim losses narrowed and its Nordics unit reported an improvement in gross margins. The company posted a loss before tax of £46m, compared with a loss of £548m a year earlier. UK like-for-like revenue fell 3% to £2.2bn.
Bunzl gained after saying it expects operating profit for the year to the end of December to be “slightly ahead” of prior guidance, helped along by acquisitions.
Serco advanced as it said its full-year performance would be better than initially expected, while Transact owner IntegraFin rose after final results.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ashtead Group Plc | +6.79% | +338.00 | 5,318.00 |
| 2 |  |
Ocado Group Plc | +6.77% | +43.60 | 687.40 |
| 3 |  |
Segro Plc | +6.73% | +56.80 | 901.20 |
| 4 |  |
Fresnillo Plc | +6.65% | +37.80 | 606.40 |
| 5 |  |
Anglo American Plc | +6.41% | +107.00 | 1,777.20 |
| 6 |  |
British Land Company Plc | +5.80% | +22.50 | 410.20 |
| 7 |  |
Persimmon Plc | +5.76% | +74.00 | 1,359.50 |
| 8 |  |
Land Securities Group Plc | +5.31% | +35.20 | 698.40 |
| 9 |  |
Antofagasta Plc | +5.18% | +81.00 | 1,645.50 |
| 10 |  |
Kingfisher Plc | +5.14% | +11.70 | 239.50 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Bae Systems Plc | -2.25% | -24.00 | 1,042.00 |
| 2 |  |
Associated British Foods Plc | -1.19% | -29.00 | 2,412.00 |
| 3 |  |
Crh Plc | -0.69% | -36.00 | 5,206.00 |
| 4 |  |
Centrica Plc | -0.07% | -0.10 | 146.20 |
| 5 |  |
Relx Plc | -0.06% | -2.00 | 3,167.00 |
| 6 |  |
Just Eat Plc | -0.00% | -0.00 | 861.00 |
| 7 |  |
Nmc Health Plc | -0.00% | -0.00 | 938.40 |
| 8 |  |
Pearson Plc | -0.00% | -0.00 | 956.00 |
| 9 |  |
Shell Plc | -0.00% | -0.00 | 1,894.60 |
| 10 |  |
Royal Bank Of Scotland Group Plc | +0.00% | +0.00 | 120.90 |
US close: Stocks surge, Dow hits record on rate-cut hopes
US stocks surged on Wednesday after the Federal Reserve opened the door to three interest-rate cuts in 2024, with the Dow Jones Industrial Average finishing at its highest closing level in history.
After a tentative start, with markets mostly flat for most of the session, Wall Street’s three main indices surged ahead at 1400 ET after the conclusion of the Federal Open Market Committee’s two-day meeting in Washington.
The Dow, S&P 500 and Nasdaq all finished 1.4% higher, with the Dow closing at 37,090.24, topping the 37,000 mark for the first time ever, with just two stocks on the index in the red.
The Fed chose to keep the federal funds rate at the 5.25-5.5% level, as widely expected by markets. But the committee noted that economic activity had “slowed” in the fourth quarter, with job gains moderating and the rate of inflation easing.
Accordingly, the so-called dotplot graph – which shows individual policymakers’ expectations each quarter of where they think interest rates will be over the coming few years – shows rates ending 2024 at the 4.625% median average level. This implies three separate 25 basis-point cuts before the end of next year, compared to just two cuts in September’s dotplot.
In the news conference that followed the decision, Fed chair Jerome Powell said: “No one is declaring victory [on inflation]. That would be premature.” However, he acknowledged that rate cuts were “clearly […] a topic of discussion”.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the FOMC’s acknowledgement of an economic slowdown and easing inflation “effectively drops the tightening bias, though without specifically saying ‘we’re done’.” He said: “The Fed is catching up with the reality that the credibility of its threats to hike again has been near-zero in markets for some time now.”
In other news, US mortgage applications surged by 7.4% in the week ending 8 December, according to the Mortgage Bankers Association of America, marking a sixth consecutive increase and pushing applications to their highest level in more than four months, mostly due to a continuous decline in interest rates.
Meanwhile, wholesale prices were held in check last month by a drop in energy costs, with producer prices coming in flat month-on-month in November, according to the Labor Department. In annual terms, however, so-called final demand price growth slowed from 1.2% in October to 0.9%. On the goods side of the equation, prices were unchanged on the month, with a 1.2% drop in energy prices offsetting a 0.6% rise in food costs.
Pfizer slumps as annual outlook cut
Shares in Pfizer slumped 7% on Wednesday as the US drugs giant said annual revenue and profit would come in below expectations. Earnings have been boosted in the last two years by sales the Covid-19 vaccine Pfizer makes in partnership with Germany’s BioNTech and its own Paxlovid treatment for the virus, but falling vaccination rates have forced Pfizer to cut jobs and costs in an attempt to save at least $4bn a year.
Annual revenue is now expected be in the range of $58.5bn to $61.5bn compared with the analysts’ average estimate of $63.17bn. The company also forecast adjusted profit in the range of $2.05 to $2.25 per share, lower than analysts’ expectation of $3.16.
Elsewhere in the sector, however, stocks were joining in with the wider market optimism, such as Johnson & Johnson, AbbVie, Eli Lilly and Merck. Vertex Pharmaceuticals shot up 13% after hailing “blockbuster potential” for a pain treatment drug.
Economic bellwether stocks like banks were also performing well, including Goldman Sachs, Citigroup, Wells Fargo and Bank of America, along with Home Depot and Walgreens Boots Alliance. Apple meanwhile gained 2% to hit a record high.
Thursday newspaper round-up: Etsy, gas boilers, BP, Axel Springer
Tighter rules are needed to ensure that the imported “used” cooking oil that airlines hope will power cleaner flights is not in fact virgin palm oil, campaigners have warned. About 80% of waste oil is imported to create biofuels that are mostly still used in cars, vans and lorries despite growing demand from aviation. About 60% of those imports come from China. – Guardian
Etsy is laying off 225 employees in a bid to cut costs as it grapples with “very challenging” economic headwinds. The online retail company will reduce its headcount by about 11% after deciding that a “leaner, more agile” workforce would help shore up growth. – Guardian
The phaseout of gas boilers will push up household energy bills from as early as 2026 under plans to reach net zero, Ofgem has warned. The energy watchdog on Wednesday said consumers face paying at least £43 extra per year through network charges on their gas bill from 2026, under proposals to manage the shift away from gas heating. – Telegraph
The former boss of BP will lose up to £32m in pay after the oil giant’s board found he knowingly misled them about a string of romantic affairs he had with colleagues. Bernard Looney resigned in September after admitting he had not been “fully transparent” about his past relationships when previously quizzed about the matter. – Telegraph
One of Britain’s leading captains of industry over the past decade and a sometime adviser to Conservative prime ministers has been appointed by the Labour Party to lead a rethink of railinfrastructure before the next general election. Jurgen Maier is a former UK head of Siemens, the German multinational, which employs thousands of people in Britain and is a leading player in the railway supply chain as a signalling and communications expert. – The Times
One of Europe’s most powerful media houses has said it is going to use chatbots to promote its content. Axel Springer, the Berlin-based publisher, said it is partnering with OpenAI, the company behind ChatGPT, to deliver summaries of its output to people engaging with the chatbot. It is said to be a first deal of its kind by a mainstream publisher. – The Times
