Wall Street sign
The S&P and Nasdaq traded at record highs / Image source: Adobe

Equities on both sides of the Atlantic registered record highs on Wednesday, as a slowdown in US inflation prompted stocks to move higher as Federal Reserve interest rate cut hopes strengthened.

Aside from the US data, there was a slew of M&A developments threatening to steal some of the spotlight in London. The owner of the Royal Mail backed a possible bid, while Wood Group said no to a suitor again.

The FTSE 100 index rose 17.67 points, 0.2%, at 8,445.80. It closed some 30 points off its intraday high of 8,474.41, the blue-chip index’s best-ever level.

The FTSE 250 ended up 157.11 points, 0.8%, at 20,775.63, and the AIM All-Share rose 1.88 points, 0.2%, at 791.61.

The Cboe UK 100 rose 0.1% at 843.15, the Cboe UK 250 climbed 1.1% at 18,105.05, and the Cboe Small Companies added 0.5% at 16,207.89.

In European equities on Wednesday, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt ended up 0.8%. Both achieved record closes, though unlike the DAX, the CAC did not hit a record intraday level on Wednesday.

In New York, the Dow Jones Industrial Average was up 0.7% at the time of the closing bell in Europe. The S&P 500 surged 0.9% and the Nasdaq Composite was up 1.0%. The S&P and Nasdaq traded at record highs.

According to Bureau of Labor Statistics, the year-on-year consumer price inflation rate cooled to 3.4% in April, from 3.5% in March, as expected.

On a monthly basis, consumer prices increased 0.3% in April, easing from a 0.4% rise in March from February. Prices had been expected to register another 0.4% rise last month, according to FXStreet cited consensus.

The data follows comments from Federal Reserve Chair Jerome Powell on Tuesday, who cautioned on robust inflation.

Recent hot US inflation data has lowered his level of confidence that price rises will slow back down towards the bank’s long-term target, the central banker said.

‘The first quarter in the US was notable for its lack of further progress on inflation,’ Powell commented during an event in the Netherlands that was streamed online.

‘We did not expect this to be a smooth road, but these were higher than I think anybody expected,’ he continued. ‘And so what that has told us is we’ll need to be patient and let restrictive policy do its work.’

Powell said that, while he still expected inflation to move back down towards the levels seen last year, ‘my confidence in that is not as high as it was having seen these readings in these first three months of the year.’

XTB analyst Kathleen Brooks commented: ‘The market is now pricing in two full rate cuts from the Fed this year, which was not the case on Tuesday. Thus, today’s economic data has moved the dial on Fed rate cut expectations. This is a market-friendly report, which supports the Fed’s view that rates will be cut once there is evidence that inflation is falling back to the target rate. If we see another couple of CPI reports that continues in this trend, then a late summer rate cut could be in the cards.’

US retail sales were weaker than expected last month, numbers on Wednesday showed.

According to the Census Bureau, retail sales were flat in April from March, well below an FXStreet cited forecast which predicted a 0.4% rise. In March from February, retail sales had risen 0.6%, downwardly revised from an initially reported 0.7% climb.

The pound was quoted at $1.2668 at the time of the London equities close on Wednesday, higher compared to $1.2582 on Tuesday. The euro stood at $1.0872, up against $1.0818. Against the yen, the dollar was trading at JP¥154.85, lower compared to JP¥156.41.

In London, there were a series of M&A developments to grab investor focus.

Royal Mail owner International Distributions Services jumped 18% as it announced it would be minded to accept a revised non-binding proposal for a potential takeover offer from EP Corporate.

The new revised offer posted on Wednesday represents a total value of 370 pence per IDS share, 16% higher than the old offer of around 320p. It values IDS’s share capital at around £3.5 billion.

‘The proposal follows significant negotiation including a number of earlier proposals from EP Group,’ IDS said.

Prague-based EP Corporate is majority owned by Czech billionaire Daniel Kretinsky. Kretinsky’s other investments include stakes in UK supermarket chain Sainsbury’s, French newspaper Le Monde and London football club West Ham United.

After rejecting a takeover tilt, meanwhile, John Wood Group fell 7.2%. It shrugged off a new takeover proposal from planning, design, engineering and project management firm Sidara.

Consulting and engineering firm Wood Group said the new offer of 212 pence per share, around £1.46 billion in total, continued to ‘fundamentally undervalue’ the company and its future prospects. The offer was 3.4% higher than Sidara’s initial offer of 205p.

Elsewhere, housebuilder Redrow said shareholders backed its acquisition by larger peer Barratt Developments. Both Redrow and Barratt climbed 0.8%. Interest rate optimism following the US data lifted the housebuilding sector.

Accrol Group said its shareholders approved its takeover by Portuguese integrated pulp, paper, tissue and packaging Navigator. Accrol shares ended the day 0.8% higher.

Elsewhere in London, Experian added 8.4%. The Dublin-based consumer credit checker said full-year growth was ‘was at the top end of our expectations.’

Experian said pretax profit in the year ended March 31 jumped 32% to $1.55 billion from $1.17 billion a year prior. Revenue rose 7.3% to $7.10 billion from $6.62 billion.

Reflecting the strong performance, Experian upped its full year dividend by 6.8% to 58.50 cents from 54.75 cents.

On the decline, Burberry slumped 7.3%. It said pretax profit plummeted 40% to £383 million in the financial year that ended March 30 from £634 million the year prior.

Adjusted operating profit fell 34% to £418 million from £634 million. This was at the bottom end of the range of £410 million to £460 million given by Burberry in January when it lowered guidance. Revenue fell at a less severe 3.9% to £2.97 billion from £3.09 billion a year earlier.

Looking ahead, Burberry said it expects trade in the first half of financial 2025 to ‘remain challenging’.

Brent oil was quoted at $82.42 a barrel in London late on Wednesday afternoon, up from $82.25 late Tuesday. Gold was quoted at $2,381.08 an ounce, up against $2,351.24.

Thursday’s economic calendar has the latest US initial jobless claims reading at 1330 BST, before industrial production data at 1415 BST.

The local corporate calendar has annual results from telecommunications firm BT and water utility United Utilities.

Copyright 2024 Alliance News Ltd. All Rights Reserved.

Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account. AJ Bell logo

Issue Date: 15 May 2024