London open: FTSE gains on US rate cut hopes

London stocks rose in early trade on Wednesday, taking their cue from a positive close on Wall Street amid US rate cut hopes.

At 0820 BST, the FTSE 100 was up 0.6% at 8,167.25.

Stocks in the US closed up after Federal Reserve chair Jerome Powell said at an event in Sintra, Portugal, that the Fed had made "quite a bit of progress" in bringing inflation back down to the central bank’s target, "while the labour market has remained strong and growth has continued".

"The last [inflation] reading and the one before it to a lesser extent, suggest that we are getting back on the disinflationary path," he said. However, he also said the Fed wants to be "more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy".

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The FTSE 100 has opened higher, riding on the coattails of the fresh enthusiasm which swept over Wall Street, with any political uncertainty pushed into the background. Stocks have largely been driven upwards by hopes that interest rate cuts are on the horizon and a soft landing is in sight, thanks to encouraging comments from the chair of the Federal Reserve.

"Jerome Powell said that the US is back on a disinflationary path due to recent weaker inflation readings. He stressed that policymakers are wary of keeping monetary policy ‘too tight for too long’ and losing expansion in the economy. His comments helped lift the S&P 500 to another record high at 5,509, its first-ever close above 5,500."

On home shores, investors were eyeing the election on Thursday amid expectations the Labour party will be voted into power for the first in 14 years.

Streeter said: "There are less than 24 hours to go until the polls open for the UK’s General Election and a frenzy of last-minute campaigning is underway, as candidates jostle to win over floating voters. Even Boris Johnson, with his distinct marmite appeal, has been wheeled out by the Conservatives to help shore up support among the Tory faithful. There may be remnants of uncertainty, but they are not fazing investors, given the strength of the poll lead Labour commands.

"At this stage of the game anything other than a clear Labour majority would be more unsettling. However, for parties like the Greens and Reform, winning seats in parliament would help push more of their policies into the political limelight. Maintaining financial stability is set to be the priority for an incoming Labour government, and bond markets are sanguine, with gilt yields significantly lower than there were at the end of May and sentiment driven by the central bank rather than party policies. The pound is also little moved, trading around $1.268, with recent dips showing sensitivity to expectations that the Bank of England will move before the Fed in cutting interest rates."

In corporate news, Vodafone nudged higher after it and Virgin Media O2 said they had agreed to extend and enhance their existing mobile network sharing agreement for more than a decade, forming a new company that will invest £11bn in the project.

The agreement is subject to the planned merger of Vodafone and Three. If that deal goes through then Virgin Media O2 will buy spectrum "establishing three scaled mobile network operators each with better alignment of spectrum holding", the companies said in a statement.

Diageo fizzed higher after an upgrade to ‘buy’ at Citi. The bank said that with earnings/valuations metrics troughing and destocking headwinds likely to give way to positive earnings momentum in FY25E, an inflection point has likely been reached.

"As such, Diageo’s July FY24E results should act as the clearing event which allows investors to revisit what remains an attractive compounding growth story," Citi said.

Baltic Classifieds rallied after it reported a 20% jump in full-year EBITDA and a 19% rise in revenue, hailing "strong" performances across its business lines.

JD Sports was knocked lower by a downgrade to ‘underweight’ at Barclays, while 3i Group fell after a downgrade to ‘equalweight’ at Morgan Stanley.

Outside the FTSE 350, Keywords Studios advanced after agreeing to be taken over by European private equity firm EQT in a £2.1bn deal.

Market Movers

FTSE 100 (UKX) 8,167.25 0.57%
FTSE 250 (MCX) 20,270.93 0.38%
techMARK (TASX) 4,673.85 -0.16%

FTSE 100 - Risers

Diageo (DGE) 2,533.50p 2.84%
Antofagasta (ANTO) 2,142.00p 2.83%
Rio Tinto (RIO) 5,296.00p 2.44%
Anglo American (AAL) 2,447.00p 2.13%
Burberry Group (BRBY) 861.20p 1.60%
Glencore (GLEN) 473.60p 1.58%
Fresnillo (FRES) 560.00p 1.54%
Barclays (BARC) 213.75p 1.42%
Ashtead Group (AHT) 5,198.00p 1.29%
Melrose Industries (MRO) 558.80p 1.27%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 113.60p -3.40%
3i Group (III) 2,999.00p -1.51%
Compass Group (CPG) 2,119.00p -1.12%
easyJet (EZJ) 442.50p -0.38%
United Utilities Group (UU.) 956.20p -0.27%
Relx plc (REL) 3,572.00p -0.08%
Haleon (HLN) 322.40p -0.06%
Intertek Group (ITRK) 4,740.00p -0.04%
Aviva (AV.) 468.90p 0.00%
Severn Trent (SVT) 2,351.00p 0.00%

FTSE 250 - Risers

Drax Group (DRX) 520.00p 4.00%
IntegraFin Holding (IHP) 357.50p 2.58%
Discoverie Group (DSCV) 697.00p 2.50%
4Imprint Group (FOUR) 5,960.00p 2.41%
SSP Group (SSPG) 147.90p 2.35%
Syncona Limited NPV (SYNC) 112.00p 2.19%
Urban Logistics Reit (SHED) 119.00p 2.06%
Jlen Environmental Assets Group Limited NPV (JLEN) 88.80p 1.83%
Energean (ENOG) 1,007.00p 1.72%
TI Fluid Systems (TIFS) 130.60p 1.71%

FTSE 250 - Fallers

AJ Bell (AJB) 363.00p -4.72%
Oxford Instruments (OXIG) 2,335.00p -4.69%
AO World (AO.) 110.20p -4.67%
NCC Group (NCC) 151.00p -2.08%
Mitie Group (MTO) 113.80p -2.07%
Quilter (QLT) 111.60p -2.02%
Me Group International (MEGP) 164.00p -1.80%
Jupiter Fund Management (JUP) 76.00p -1.68%
Helios Towers (HTWS) 118.20p -1.66%
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 268.00p -1.29%