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London open: Stocks rally after Wall St gains; BoE in focus
London stocks rallied in early trade on Thursday, taking their cue from strong gains on Wall Street after the Federal Reserve stood pat on interest rates and chair Jerome Powell struck a dovish note.
At 0830 GMT, the FTSE 100 was up 1.1% at 7,822.48, as investors eyed a policy announcement from the Bank of England, which is widely expected to keep rates on hold at 5.25%.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The Federal Reserve stayed steadfast to its repeated mantra that more data is needed before cuts can come but welcomed the march down in prices. The status quo has reassured investors that cuts will arrive in the summer, although more patience is needed. It’s helped stocks surge on another wave of enthusiasm and the feel-good factor is set to keep reverberating through early trading today.
“Bank of England policymakers are highly unlikely to waver from their stance and are likely to continue to stress that vigilance is still needed while they spy the prospect for rate cuts on the horizon.
“With February’s inflation snapshot coming in slightly lower than expected, it’ll give the monetary policy committee a little more confidence that their action is doing the trick in bringing down demand in the economy, but a majority vote for rates to be held is still expected. However, there may well be more dissenters around the table, arguing for earlier cuts, given the super-stagnant nature of the economy and the worry that inflation may end up undershooting the target not just briefly but for a more sustained period.”
Market participants were also mulling the latest data from the Office for National Statistics, which showed the government borrowed more than expected in February.
Public sector borrowing excluding banks came in at £8.4bn last month, above expectations for £6bn. However, it was still down by £3.4bn on February last year.
Senior ONS statistician Jessica Barnaby said: “This was the fourth consecutive month in which borrowing was lower than in the same month a year ago, with growth in tax receipts exceeding growth in spending.
“Across the financial year to date, borrowing was the lowest it has been for four years.
“Relative to the size of our economy, debt remains at levels last seen in the early 1960s.”
In equity markets, savings and investments firm M&G gained as it beat analysts’ forecasts with its 2023 results, with net client flows, adjusted profits and operating capital generation all up materially on the previous year.
Adjusted operating profit before tax totalled £797m, up from £625m in 2022, which the firm put down to a resilient performance in Asset Management, and improved contributions from Life, Wealth and Corporate Centre. This was well ahead of the consensus forecast of £750m, according to UBS.
UK fashion retailer Next was also in the black as it held guidance for 2024 after posting a better-than-expected 5% rise in annual profits to £918m.
Direct Line nudged up as it reported a widening of its full-year losses but announced a new £100m cost-savings plan and reinstated its dividend.
Virgin Money advanced as it formally agreed to be taken over by Nationwide in a £2.9bn deal. The news confirmed a preliminary agreement announced on 7 March.
BA and Iberia owner IAG flew higher after an upgrade to ‘outperform’ at RBC Capital Markets, which said it sees upside to consensus expectations in 2024.
On the downside, Schroders, British American Tobacco, Crest Nicholson, Hikma, Pearson and Beazley all fell as they traded without entitlement to the dividend.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Fresnillo Plc | +4.75% | +20.90 | 461.20 |
| 2 |  |
Next Plc | +4.51% | +384.00 | 8,894.00 |
| 3 |  |
Ocado Group Plc | +4.29% | +20.00 | 486.70 |
| 4 |  |
Anglo American Plc | +4.00% | +73.60 | 1,912.20 |
| 5 |  |
3i Group Plc | +3.68% | +93.00 | 2,621.00 |
| 6 |  |
Glencore Plc | +3.34% | +13.90 | 430.10 |
| 7 |  |
British Land Company Plc | +3.21% | +12.00 | 386.00 |
| 8 |  |
Whitbread Plc | +3.07% | +98.00 | 3,291.00 |
| 9 |  |
Tui Ag | +3.05% | +17.50 | 590.50 |
| 10 |  |
Marks And Spencer Group Plc | +2.87% | +6.90 | 247.70 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Hikma Pharmaceuticals Plc | -5.75% | -112.00 | 1,836.00 |
| 2 |  |
Schroders Plc | -1.87% | -7.10 | 372.40 |
| 3 |  |
British American Tobacco Plc | -1.86% | -44.50 | 2,350.00 |
| 4 |  |
Smith & Nephew Plc | -0.73% | -7.50 | 1,025.50 |
| 5 |  |
Dcc Plc | -0.67% | -38.00 | 5,628.00 |
| 6 |  |
Ferguson Plc | -0.50% | -85.00 | 16,920.00 |
| 7 |  |
Gsk Plc | -0.28% | -4.60 | 1,642.20 |
| 8 |  |
Admiral Group Plc | -0.21% | -6.00 | 2,803.00 |
| 9 |  |
Severn Trent Plc | -0.20% | -5.00 | 2,556.00 |
| 10 |  |
United Utilities Group Plc | -0.14% | -1.50 | 1,047.50 |
US close: Stocks rise as Fed holds interest rates
Wall Street stocks finished Wednesday’s trading session on a positive note following the Federal Reserve’s decision to maintain interest rates, aligning with market expectations.
The Dow Jones Industrial Average rose 1.03% to 39,512.13 points, while the S&P 500 climbed 0.89% to 5,224.62, and the Nasdaq Composite saw gains of 1.25% to settle at 16,369.41.
In currency markets, the dollar was last down 0.06% on sterling to trade at 78.16p, while it decreased 0.13% against the euro to 91.44 euro cents.
Against the Japanese yen, the greenback depreciated 0.4% to change hands at JPY 150.66.
“In milestone-setting fashion, the S&P 500 surged past the 5,200 mark on speculation that the conclusion of the most aggressive Federal Reserve hiking cycle in a generation will continue to bolster corporate America’s profit margin,” said SPI Asset Management managing partner Stephen Innes.
“Notably, the gains were widespread, with laggards in catch-up mode as traders now perceive higher chances of an initial rate cut occurring in June.
“Despite the recent uptick in inflation, Fed officials maintained their projection for three rate cuts this year and indicated a shift towards slowing the pace of reducing their bond holdings.”
Innes said that suggested officials interpreted seasonal factors as driving this year’s inflationary pressures.
“While Jerome Powell reiterated the Fed’s desire to see more evidence of price decreases, he also noted that it would be appropriate to begin easing policy ‘at some point this year’.
“While the economic projections released after the meeting appeared slightly more hawkish than those from December, the adjustments were not overly alarming as both investors and the Fed still generally agreed on the “right” amount of marginal easing for this year.”
Fed holds interest rates, adjusts economic forecasts
At the top of the economic agenda was the Federal Reserve, after it opted to maintain interest rates at current levels while slightly adjusting its forecasts for economic growth and interest rates in 2025 and 2026.
In a statement from the Federal Open Market Committee (FOMC), the central bank emphasised the importance of gaining greater confidence in inflation moving towards the targeted 2% before considering any adjustments to the interest rate.
According to the Summary of Economic Projections (SEP), top Fed officials revised their forecast for US gross domestic product (GDP) growth to 2.1% for 2024, a faster pace compared to the previously anticipated 1.4%.
Furthermore, projections indicated that inflation, as measured by the core price deflator for personal consumption expenditures (PCE), was expected to gradually return to the 2% target, with a forecast of 2.6% for the current year.
That adjustment came after a December projection of 2.4% for core PCE prices.
The median projection for the Fed funds rate at the end of 2024 remained unchanged at 4.6%, but it was now anticipated to decline to 3.9% by the end of 2025 and to 3.1% by the end of 2026, differing from previous estimates of 3.6% and 2.9% for those respective years.
Elsewhere, the UK saw a slight easing of inflation in February, according to data from the Office for National Statistics.
The consumer price index (CPI) dropped to 3.4% from January’s 4%, slightly lower than the expected 3.5%, edging closer to the Bank of England’s 2% target.
That marked the lowest level of inflation since September 2021, with significant contributions from decreases in food, restaurants, and cafes, partially offset by increases in housing, household services, and motor fuels.
Chip companies in the green, Signet Jewelers tumbles
In equity markets, chipmakers were in focus, with Micron Technology jumping 2.39% following an unexpected shift to profitability.
The company’s outlook also far exceeded consensus views.
Intel managed gains of 0.36%, fuelled by news of its expected receipt of billions of dollars in federal funding through the bipartisan Chips and Science Act.
Chewy leapt 6.35% after a surprise profit announcement for the quarter, although the pet products retailer expressed caution about its prospects for the year ahead.
On the downside, Signet Jewelers tumbled 12.08% on the back of a surprise drop in same-store sales for the current quarter, driven by a decrease in marriage engagements at the start of the year.
Thursday newspaper round-up: Reddit, Daily Mail, zero hour contracts
The disgraced former owner of Norton Motorcycles should have served jail time for his role in the multi-million-pound pension fraud, the chair of the Pensions Ombudsman service has told a parliamentary inquiry into the scandal. The comments by Anthony Arter will be viewed by victims as a thinly veiled criticism of a prosecution run by the Pensions Regulator against former Norton boss, Stuart Garner, who was convicted of three pensions offences in 2022 but avoided prison because the regulator did not allege dishonesty. – Guardian
Reddit will enter a new era as a publicly traded company with a market value of $6.4bn after the social media platform’s initial public offering was priced at $34 per share. The price, announced late on Wednesday, came in at the top of the target range set by Reddit’s investment bankers as they spent the past few weeks gauging investor demand for the stock. It sets the stage for Reddit’s shares to begin trading Thursday on the New York stock exchange under the ticker symbol RDDT in the largest initial public offering by a social media company in years. – Guardian
Joe Biden has announced new rules that will see as many as half of all cars sold in America run on electricity by 2030. The US President on Wednesday moved to adopt strict European-style tailpipe emission rules. The finalised regulations will require manufacturers to drastically cut the amount of carbon dioxide (CO2) emitted from cars and trucks from 2027 through to 2032. – Telegraph
Journalists at the Daily Mail are braced for job cuts after bosses warned of changes to working patterns as the newspaper group races to adapt to the digital age. In a note to staff, Ted Verity, editor of Mail Newspapers, said the publisher was taking further steps to merge its titles to put digital “at the heart of everything we do”. He said: “Inevitably, this will mean changes to the way some reporters and news desk executives work. Some staff will see a change to their working pattern, job title, line manager or duties.” – Telegraph
A record 1.1 million Britons are working on zero-hour contracts, with most lacking regular pay and employee protection. Research from the Work Foundation think tank found that 136,000 extra zero-hour contracts were given out in 2023 compared with the previous year, with 88,000 for younger workers aged 16-24. – The Times
