Josh White Sharecast News

14 Dec, 2023 17:19 14 Dec, 2023 17:19

London close: Stocks rise as BoE keeps rates on hold

dl city of london square mile financial district london stock exchange lse ftse commuters london underground tube district line unsplash — Sharecast / Lukas Souza via Unsplash

Currys

93.20p

17:15 23/12/24

0.05%

0.05p

London stocks closed higher on Thursday after the Bank of England maintained interest rates at lunchtime, as anticipated.

Zigup

317.50p

16:45 23/12/24

-0.78%

-2.50p

The FTSE 100 index rose 1.33% to close at 7,648.98 points, while the FTSE 250 showed a more robust performance, gaining 3% to reach 19,256.96.

In currency markets, sterling was last up 1.23% on the dollar, trading at $1.2773, while it saw a slight uptick of 0.1% against the euro to change hands at €1.1614.

"It's not been the greatest year for the FTSE 100, but the index is certainly trying to make up lost ground as December begins to wind down," said IG chief market analyst Chris Beauchamp.

"A host of sectors have led the way higher today, providing the kind of broad-based action that has been lacking for some time."

Beauchamp quipped that there had been "too many false dawns" for the FTSE to get too hopeful this year.

"Disappointed investors will hope that a few judicious rate cuts around the globe will provide the boost the index has looked in vain for throughout 2023.

"While the Bank of England didn't sound too hopeful in that regard, the Fed's dovish move might force the MPC's hand later in 2024."

Bank of England stands pat on busy day for rate announcements

In a series of pivotal decisions across global central banks, the Bank of England adhered to market expectations by maintaining interest rates at 5.25% at midday.

The Monetary Policy Committee, with a majority vote of six to three, opted to keep rates steady, with governor Andrew Bailey and chief economist Huw Pill among those in favour.

Three committee members - Megan Greene, Jonathan Haskel, and Catherine Mann - advocated for a 25 basis point rate hike, citing concerns about "persistent inflationary pressures".

It marked the MPC's third consecutive decision to keep rates unchanged as it grappled with surging inflation, with the consumer price index currently standing at 4.6%, well above the long-term target of 2%.

"The MPC has downplayed the recent downside surprises from CPI inflation and wage growth, and has reiterated its view that monetary policy is likely to need to be restrictive for an extended period of time," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"We continue to think that the MPC will remain reluctant to signal that interest rates can fall soon until it is confident that businesses will not hike wages substantially in the first half of next year, and until it is sure the chancellor has not softened the fiscal consolidation in the budget ahead of the next general election."

On the continent, the European Central Bank (ECB) also maintained the status quo by leaving its interest rates unchanged.

The primary financing rate remained at 4.5%, the deposit facility rate at 4%, and the marginal lending facility at 4.75%.

In its announcement, the ECB acknowledged that while inflation had temporarily dropped in recent months, it anticipated a gradual decline over the next year, eventually approaching the 2% target by 2025.

"The market continues to ignore the ECB's higher for longer rhetoric, as investors begin to question if the Federal Reserve will cut first, given Jay Powell's dovish twist yesterday," said Alex Livingstone, head of foreign exchange and trading at Titan Asset Management.

"Given the particularly weak Eurozone inflation prints over the past three months, it looks as if any additional rate hikes are well and truly off the table, with the ECB set to remain cautious about cutting rates, given the long and variable lags of monetary policy."

Elsewhere, Switzerland's central bank upheld expectations by keeping its policy rate steady at 1.75%.

Despite slightly easing inflationary pressure over the past quarter, the bank highlighted ongoing uncertainty.

Meanwhile, Norway's central bank raised its benchmark interest rate by 25 basis points to 4.5%.

The move was largely in line with analysts' expectations, as the bank indicated that the rate level would likely persist for an extended period.

Overnight, the US Federal Reserve opted to maintain its current interest rates for the third consecutive meeting.

The federal funds rate remained in the 5.25% to 5.5% range, consistent with market predictions.

In its announcement, the committee noted a slowing of economic activity in the fourth quarter, with moderation in job gains and a decrease in inflation, although inflation remained at elevated levels.

Fresh signs of stability in UK housing market

In economic news, November brought signs of stability in the UK housing market, according to the Royal Institution of Chartered Surveyors' latest survey.

Although the house price balance remained in negative territory at -43, it marked an improvement from October's revised figure of -61.

Additionally, the net balance for new buyer enquiries showed a less negative reading of -14, indicating a reduction in falling buyer demand, albeit still negative.

Near-term sales expectations also improved with a positive reading of 6, the first since early 2022.

"The survey provides further evidence that sentiment is a little less negative than previously was the case, with - critically - the new buyers enquiries indicator finally beginning to stabilise," said Simon Rubinsohn, RICS chief economist.

"This is being aided by increased confidence that the interest rate cycle has peaked, which is reflected in somewhat more competitive mortgage products coming to the market."

Across the Atlantic, the US Labor Department revealed a decline in initial jobless claims by 19,000 to 202,000, defying analyst expectations of steady claims.

The four-week moving average, considered a more reliable indicator, decreased to 213,250, indicating a healthier labour market.

In the American retail sector, the US Department of Commerce reported a moderate increase in retail sales for November, with volumes rising by 0.3%.

The growth was led by motor vehicle and non-store retailer purchases, contrary to economists' forecasts of a 0.1% dip.

October's previously reported decline was also revised down to -0.2%.

Currys surges, AB Foods falls as it goes ex-dividend

On London's equity markets, electrical retailer Currys surged 11.2% after the company maintained its annual guidance, with narrowed interim losses and improved gross margins in its Nordics unit.

Currys reported a loss of £46m before tax - a marked improvement from the £548m loss recorded a year earlier.

However, UK like-for-like revenue declined by 3% to £2.2 billion.

Ocado Group stood out with an impressive 10.13% rise despite a less optimistic note from Goldman Sachs.

The bank lowered its price target on Ocado shares from 900p to 700p while maintaining a 'neutral' rating.

Its analysis suggested limited upside potential for the stock, but market observers noted that Ocado's rally was likely driven by broader market positivity towards tech stocks.

Bunzl managed a modest gain of 0.32% after it expressed optimism about its operating profit for the year, expecting it to surpass previous guidance.

Serco Group also made gains, climbing 4.54% after announcing its full-year performance was set to exceed initial expectations.

Ladbrokes owner Entain continued its upward trajectory with an 8.06% surge, marking the second consecutive day of gains.

The rally followed the recent announcement of the immediate departure of its chief executive officer, Jette Nygaard-Andersen.

On the downside, Primark owner Associated British Foods declined 2.13%, as its stock traded without entitlement to the dividend.

Redde Northgate and Mitie Group also registered declines of 0.01% and 2.2%, respectively, as they also went ex-dividend.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,648.98 1.33%
FTSE 250 (MCX) 19,256.96 3.00%
techMARK (TASX) 4,203.09 1.30%

FTSE 100 - Risers

Ocado Group (OCDO) 718.60p 11.62%
Ashtead Group (AHT) 5,486.00p 10.16%
Entain (ENT) 920.00p 8.67%
Croda International (CRDA) 5,132.00p 7.75%
Anglo American (AAL) 1,795.40p 7.50%
Kingfisher (KGF) 243.50p 6.89%
Land Securities Group (LAND) 708.20p 6.79%
Endeavour Mining (EDV) 1,804.00p 6.56%
Barclays (BARC) 150.00p 6.32%
Spirax-Sarco Engineering (SPX) 10,035.00p 5.81%