Stock prices in London closed lower on Thursday after European Central Bank president, Christine Lagarde, said discussions about interest rate cuts would be ‘totally premature’.
The FTSE 100 index closed down 59.77 points, 0.8%, at 7,354.57. The FTSE 250 ended down 87.62 points, 0.5%, at 16,783.09, and the AIM All-Share closed down 3.98 points, 0.6%, at 669.84.
The Cboe UK 100 ended down 0.9% at 733.75, the Cboe UK 250 closed down 0.5% at 14,522.00, and the Cboe Small Companies ended down 0.9% at 12,547.24.
In European equities on Thursday, the CAC 40 in Paris ended down 0.4%, while the DAX 40 in Frankfurt ended down 1.0%.
The ECB left its key interest rates unchanged on Thursday, as widely expected, but President Christine Lagarde warned that it would be ‘totally premature’ to discuss interest rate cuts.
The Frankfurt-based official lender left the interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility at 4.50%, 4.75% and 4.00% respectively on Thursday.
‘At this point in our fight against inflation and after ten successive hikes, now is not the time for forward guidance. Now is the time to really stick to our data-dependency, and we shall do so,’ Lagarde told a press conference in Athens.
The central bank chief added that members of the Governing Council did not discuss rate cuts in its most recent meeting, saying that the debate would be ‘absolutely premature.’
‘Even having a discussion on cuts is totally, totally premature,’ she said. ‘At the moment we have to be steady, we have to hold.’
The ECB has speedily enacted 450 basis points of interest hikes in total over the past year or so. Its first in the current cycle was in July of last year. Prior to this, rates had been unchanged since 2019.
Despite Lagarde’s warning against discussions of a rate cut, Carsten Brzeski at ING said that unless the eurozone economy ‘miraculously rebounds’ in the coming weeks, he expects Thursday’s ‘dovish pause’ to eventually be seen as the end of the ECB’s hiking cycle.
The pound was quoted at $1.2105 on Thursday at the London equities close, down compared to $1.2143 on Wednesday. The euro stood at $1.0527, lower against $1.0590. Against the yen, the dollar was trading at JP¥150.48, higher compared to JP¥149.93.
US economic growth picked up markedly in the third-quarter, logging the sharpest growth in almost two years.
According to the Bureau of Economic Analysis, quarter-on-quarter gross domestic product in the US grew 4.9% on an annualised basis in the three months to September 30. In the second-quarter, GDP had risen 2.1%.
The latest reading topped a market estimate, with growth of only 4.2% expected in the third-quarter, according to consensus cited by FXStreet.
It was the chunkiest quarter-on-quarter GDP rise since a 7.0% increase in the fourth-quarter of 2021.
‘The GDP data serve as a reminder of the underlying strength of the US economy and support the expectation that interest rates will remain elevated for an extended period,’ said SPI Asset Management analyst Stephen Innes.
Stocks in New York were lower at the London equities close, with the DJIA down 0.3%, the S&P 500 index down 0.7%, and the Nasdaq Composite down 1.3%.
In London’s FTSE 100, StanChart was the worst performing stock, losing 12%.
The Asia-focused lender said operating income rose 4.5% to $4.52 billion from $4.33 billion a year before. However, pretax profit dropped 54% to $633 million from $1.39 billion, well below company-compiled consensus of $1.41 billion.
The bottom-line hit came as credit impairments increased to $292 million from $227 million, which included further charges related to the Chinese commercial real estate sector.
This was alongside an impairment of around $700 million related to the reduction in the carrying value of its holding in China Bohai Bank.
Unilever shed 2.8%. It announced a series of changes to its division leadership, partly triggered by the internal promotion of a new finance chief, as it also reported a small decline in third-quarter revenue and revealed an ‘action plan’ to boost growth.
Fernando Fernandez will step up to chief financial officer from president of the Beauty & Wellbeing business group. Previously, he led Unilever’s business in Brazil and then all of Latin America.
Turnover in the third quarter was €15.24 billion, down 3.8% from a year before, though underlying sales growth was positive 5.2%. For the first nine months of the year, turnover was €45.78 billion, up 0.4% on year, with 7.7% underlying sales growth.
Unilever said its 2023 outlook remains unchanged, calling for underlying sales growth above 5% and a ‘modest’ improvement to underlying operating margin.
In the FTSE 250, Hunting was the worst performing stock, losing 8.1%.
The maker of parts and technology systems for the oil and gas sector said earnings before interest, tax, depreciation and amortisation was around $75 million in the year-to-date, doubling year-on-year.
It left its full-year Ebitda outlook unmoved at $96 to $100 million, which at best would be a 92% rise from $52.0 million.
Hunting said its order book shrunk in its third-quarter, but has since picked up. It also said it has seen some ‘softness’ in the North America onshore space.
Its order book at the end of September stood at $511 million, down from $529.7 million at the end of June. A new pact has lifted Hunting’s order book from the September level, however.
Amongst London’s small-caps, Restaurant Group rose 2.4% amid a possible twist in its takeover saga.
On Wednesday, Sky News reported that the Pizza Express owner Wheel Topco is at the preliminary stages of evaluating whether to make a rival offer for Restaurant Group, which this month agreed to be bought by Apollo Global Management for just over £500 million.
On Thursday, Restaurant Group confirmed that it has received a diligence request from the Wheel Topco.
On AIM, Safestyle UK plummeted 80%.
The retailer and manufacturer of PVCu replacement windows and doors said that it does not expect to receive a capital injection or new financing.
Earlier this month, Safestyle said it was considering a number of options, which could include the sale of some subsidiary businesses.
Brent oil was quoted at $87.74 a barrel at the London equities close on Thursday, inched up from $87.71 late Wednesday. Gold was quoted at $1,978.13 an ounce, down against $1,982.33.
In Friday’s UK corporate calendar, IAG and NatWest release their third quarter results.
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