The FTSE 100 index set a new record high early Wednesday, after firm, but not overly hawkish, remarks by US Federal Reserve Chair Jerome Powell triggered a rally on Wall Street.
London’s equity benchmark was up 58.66 points, or 0.8%, at 7,923.37 Wednesday morning, having hit a new high of 7,926.35 immediately after the open. The index is up 4.9% so far in 2023.
The FTSE 250 index was up 161.68 points, 0.8%, at 20,350.68, and the AIM All-Share was up 2.51 points, 0.3%, at 881.64.
The Cboe UK 100 was up 0.6% at 791.11, the Cboe UK 250 was up 0.8% at 17,749.28, and the Cboe Small Companies was down 0.5% at 14,099.25.
European equities were similarly upbeat, with the CAC 40 index in Paris up 0.7%, while the DAX 40 in Frankfurt was up 0.5%.
Markets were following a lead from a rally on Wall Street on Tuesday, following a speech by Federal Reserve Chair Jerome Powell.
Powell, speaking at The Economic Club of Washington, reasserted that the US central bank will need to keep raising interest rates.
‘We think that we’ll need to do further rate increases and we think we will need to hold policy at a restricted level for some time,’ Powell said, echoing his language at a press conference last week.
When asked on Tuesday whether the Fed would have still lifted rates by 25 basis points had members known about Friday’s strong US jobs data, Powell said: ‘We didn’t expect it to be this strong but I would say it kind of shows you why we think this will be a process that takes a significant period of time.’
Despite the firm words, equity market investors saw the positive in Powell’s remarks.
Wall Street finished higher after the Powell talk, with the Dow Jones Industrial Average ending up 0.8%, the S&P 500 up 1.3%, and the Nasdaq Composite up 1.9%.
The dollar was weaker early Wednesday in London.
Sterling was quoted at $1.2085, higher than $1.2015 at the London equities close on Tuesday. The euro traded at $1.0747, higher than $1.0700. Against the yen, the dollar was quoted at JP¥130.97, down from JP¥131.17.
Sentiment in the UK also was lifted by a more upbeat economic forecast for the country’s economy.
The National Institute of Economic & Social Research has forecast that the UK will swerve a technical recession - as defined by two or more quarters of falling gross domestic product in a row - not just in the final three months of 2022, but also throughout 2023.
It is a more optimistic outlook for the UK economy than that offered by the Bank of England last week, which predicted a shallower but still protracted recession, as well as a recent gloomy prediction from the International Monetary Fund, which saw Britain being the only major economy to suffer a contraction this year.
But that is largely where the optimism ends, with NIESR warning in its latest report that it will ‘certainly feel like a recession’, with real personal disposable income having contracted for four consecutive quarters.
The FTSE 100 was lifted to its record high by share price gains for some of its biggest constituents. Oil major BP was up 3.3% and miner Glencore up 1.7%, after price target upgrades from brokers.
Housebuilder Barratt Developments rose 0.6%, as it reported strong growth in its half-year ended December 31, with revenue rising 24% year-on-year to £2.78 billion from £2.25 billion.
Pretax profit rose 16% to £501.5 million from £432.6 million, despite operating margin narrowing to 17.8% from 19.3%. Total home completions rose 6.9% to 8,626. Barratt said the strong half-year was due to its ‘significant’ forward order book at the end of June. However, it has seen lower reservation rates for future sales in the new financial year, particular in the second quarter.
‘Whilst we have seen some early signs of improvement in current trading during January, we will need to see continued momentum over the coming months before we can be confident that these challenging trading conditions are easing,’ Barratt said.
Davy Research said the results were in line with market expectations. ‘Despite sales continuing to be very sluggish in early H2, the company will still deliver a satisfactory volume outturn in FY23,’ the Dublin-based broker said.
JD Sports added 1.4% as it said it has completed the divestment of some brands to Frasers Group, namely, the businesses which trade as Tessuti (including Xile), Scotts, Choice, Giulio and Cricket, but noted Rascal Clothing Ltd will no longer be part of the transaction.
Frasers Group rose 2.0%.
Smurfit Kappa was the worst blue-chip performer, down 4.3%, despite reporting a ‘highly successful’ year.
The Dublin-based packaging maker said pretax profit in 2022 rose 42% to €1.29 billion from €913 million in 2021. Revenue climbed 27% to €12.82 billion from €10.11 billion. The company declared a final dividend of 107.6 euro cents per share, up 12% from 96.1 euro cents a year prior.
However, Smurfit Kappa noted a slight fall in box volumes, as demand slowed due to inflation.
‘This slowdown was particularly evidenced in the latter part of the year, especially in the month of December, where we saw stock reductions and downtime taken by customers,’ the company said.
In the FTSE 250 index, PZ Cussons dropped 6.4%.
In the six months to December 3, the consumer goods and healthcare products firm said revenue rose 19% to £336.9 million from £283.7 million a year before, led by the Childs Farm acquisition.
Pretax profit surged 72% to £40.5 million from £23.5 million. The interim dividend was left unchanged at 2.67p. ‘We remain mindful of significant macro-economic uncertainty, including the continued depreciation of the Nigerian naira, but expect to report FY23 adjusted profit before tax in line with current market estimates,’ PZ said.
On AIM, Deltic Energy jumped 19%.
The North Sea-focused natural resources investor announced a ‘significant’ gas discovery at Pensacola on licence P2252 in the southern North Sea.
‘Pensacola could represent one of the largest natural gas discoveries in the southern North Sea in over a decade,’ the firm said.
Its first exploration well points to an estimated ultimate recovery of 302 billion cubic feet.
In Asia on Wednesday, the Nikkei 225 stock index in Tokyo closed down 0.3%. The S&P/ASX 200 in Sydney closed up 0.4%. In China, the Shanghai Composite lost 0.5%, while the Hang Seng index in Hong Kong was down 0.1%.
Gold was quoted at $1,883.24 an ounce early Wednesday, up from $1,875.35 on Tuesday. Brent oil was trading at $83.94 a barrel, rising from $82.75
Copyright 2023 Alliance News Ltd. All Rights Reserved.
