FTSE 100 index traded up 44.40 points, 0.6%, at 8,184.21 / Image source: Adobe

Markets in Europe showed signs of recovery on Wednesday at around midday, with investors pleased that Federal Reserve Chair Jerome Powell kept hopes of a rate cut for this year alive.

Speaking in Congress, Powell told lawmakers on the Senate Banking Committee that the most recent readings ‘have shown some modest further progress’ since the first quarter of the year.

Investors are now looking ahead to Powell’s next testimony to US lawmakers later on Wednesday.

The FTSE 100 index traded up 44.40 points, 0.6%, at 8,184.21. The FTSE 250 was up 178.11 points, 0.9%, at 20,823.13, and the AIM All-Share was up 3.37 points, 0.4%, at 775.31.

The Cboe UK 100 was up 0.6% at 816.00, the Cboe UK 250 was 1.0% higher at 18,099.38, and the Cboe Small Companies was up 0.1% at 17,076.16.

In mainland Europe, both the CAC 40 in Paris and Frankfurt’s DAX 40 climbed 0.7%.

‘The semi-annual testimony from Powell continues to dictate price action across a wide range of assets as investors seek more clarity about the monetary policy outlook. It seems investors are desperately looking for more reasons to stay long on equities, following the latest political developments in Europe, as we go deeper into the summer season, which traditionally leads to lower transaction volumes and less directional trends. Monetary policies are coming back under the spotlight, and most traders are focused on another speech from Powell this afternoon, ahead of US and German CPI data tomorrow,’ ActivTrades analyst Pierre Veyret commented.

Thursday’s data is expected to show the US annual inflation rate cooled to 3.1% in June, from 3.3% in May. A hotter-than-expected reading could support the dollar, while an in-line or cooler one could hit the US currency and send cable higher. The pound-dollar exchange rate could be on the rise back towards $1.30, Societe Generale analyst Kit Juckes commented.

The pound was quoted at $1.2809 early Wednesday afternoon, up from $1.2781 at the time of the London equities close on Tuesday. The euro stood at $1.0821, rising from $1.0810. Against the yen, the dollar was trading at JP¥161.53, up from JP¥161.46.

‘We won’t see GBP/USD or EUR/GBP back to pre-Draghi or pre-Brexit levels without a structural change in the UK economy, but a soft US CPI print (we expect +0.3%, so not soft at all) and a solid UK GDP print (0.2 or better) might be enough to put GBP/USD 1.30 firmly back in the markets’ sights,’ SocGen’s Juckes explained.

Shares in New York are called to open largely higher. The Dow Jones Industrial Average is called to open flat, the S&P 500 up 0.2% and the Nasdaq Composite 0.3% higher.

In London, travel stocks and bookmakers shone. Flutter Entertainment, now out of the FTSE 100, rose 1.6% after JPMorgan placed the Paddy Power operator on ’positive catalyst watch’. Ladbrokes owner Entain rose 3.7%, among the best FTSE 100 performers.

International Consolidated Airlines Group, the owner of British Airways, added 3.6% after Morgan Stanley raised it to ’overweight’ from ’underweight’. Shares in budget carrier easyJet also rose, adding 3.0%.

SSP jumped 12%. The travel food outlet operator said the second half of its financial year has ‘started well’ and confirmed its annual outlook.

Sales in the third quarter ended June 30 were up 15% on a year before, or 16% at constant currency rates, with like-for-like growth of 6%. For the first nine months of the financial year, which ends on September 30, revenue was up 15%, or 18% at constant exchange rates.

‘Led by an increasing demand for leisure travel, we have seen a strong sales performance across all regions,’ SSP said.

For the full-year, SSP backed its prior guidance, expecting like-for-like sales growth of between 6% and 10%. It expects annual revenue of £3.4 billion to £3.5 billion, underlying earnings before interest, tax, depreciation and amortisation of £345 million to £375 million, and underlying operating profit of £210 million to £235 million.

These results would compare with revenue of £3.01 billion, underlying Ebitda of £280 million and underlying operating profit of £164 million in financial 2023.

Crest Nicholson rose 2.6%, while Bellway fell 0.7%. Crest Nicholson said it is minded to accept a revised bid proposal from fellow housebuilder Bellway.

Last Wednesday, Surrey-based Crest Nicholson said Bellway submitted a new bid approach, after two previous plans had been rejected.

Under the revised terms, Crest Nicholson’s shareholders would receive 0.099 shares in Bellway for each share they own plus a 4 pence per share dividend. This would comprise a 1p per share dividend and 3p per share special dividend.

Under the terms of the proposal, Crest Nicholson’s shareholders would hold 18% of the enlarged group’s share capital.

The firms said that based on the Bellway share price of 2,718 pence at close of business on June 13, the day before the talks were revealed, the proposal values each Crest share at 273p.

Brent oil was quoted at $84.55 a barrel early Wednesday afternoon, down from $84.76 at the time of London equities close on Tuesday. Gold was quoted at $2,372.61 an ounce, up from $2,353.59.

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Issue Date: 10 Jul 2024