Gold bar against market graphs
The blue-chip benchmark rose despite lingering doubts over the timing of US interest rate cuts / Image source: Adobe

London’s FTSE 100 rose on Thursday morning, despite doubts over the timing of US Federal Reserve interest rate cuts still lingering, while gold reached another record high.

The FTSE 100 index opened up 18.52 points, 0.2%, at 7,955.96. The FTSE 250 was up 34.02 points, 0.2%, at 19,787.66, and the AIM All-Share was up 0.82 of a point, 0.1%, at 742.90.

The Cboe UK 100 was up 0.3% at 795.53, the Cboe UK 250 also rose 0.3% to sit at 17,209.40, while the Cboe Small Companies was flat at 14,656.34.

The CAC 40 in Paris rose 0.2%, while the DAX 40 in Frankfurt traded flat.

US stocks ended largely higher overnight. The Dow Jones Industrial Average fell 0.1%, the S&P 500 rose 0.1% and the Nasdaq Composite added 0.2%.

In Tokyo on Thursday, the Nikkei 225 rose 0.8%, while the S&P/ASX 200 in Sydney added 0.5%. Financial markets in Hong Kong and Shanghai will be closed for Tomb Sweeping Day both Thursday and Friday.

The US central bank has held interest rates at a 23-year high of between 5.25% and 5.50% as it seeks to bring inflation firmly down to its long-term target of 2%.

Last month, Fed policymakers pencilled in three rate cuts for this year, staying the course despite a recent uptick in inflation which has disrupted recent progress against rising prices.

Powell told a conference in California that the current risks to the US economy were ‘two-sided,’ with negative consequences for the economy if policymakers moved to cut rates too fast or too slow.

‘The risk, though, of moving too soon, really is.. that inflation does move up,’ he said, adding that it ‘would be quite disruptive if we were to have to then come back in.’

But if the US economy continues to evolve as expected, most Fed participants still expect it will be ‘appropriate to begin lowering the policy rate at some point this year,’ he said.

XTB analyst Kathleen Brooks commented: ‘The soothing tones of Jerome Powell who spoke at Stanford University on Wednesday, were enough for the markets to breathe a sigh of relief and for the S&P 500 and the Nasdaq to break their losing streaks so far this month. The Fed chair said that the Fed remained data dependent, but that the latest inflation figures should not stop the Fed from cutting interest rates. He also reaffirmed his view that rates should be lowered ’at some point this year’.

‘Overall, the reassurances from Powell are important, and the fact that he can move the markets shows two things: 1, his speeches still have the power to move the dial for markets, especially when the outlook is unclear, and 2, what he says matters, even if the inflation and labour market data has been surprising on the upside, the prospect of interest rate cuts are still in play. On the back of Powell’s comments, there is now a slightly higher chance of a June rate cut from the Fed, with a 61.5% chance, according to CME’s Fedwatch tool. This is up from a 55% chance a week ago. While this suggests that there is still a sizeable number of people who think a June cut is a possibility, the market is not overwhelmingly convinced, and the timing of the first hike remains up in the air.’

Eyes now turn to Friday’s nonfarm payrolls reading, which is expected to show the pace of jobs growth eased to 200,000 in March, from 275,000 in February, according to FXStreet.

Numbers on Wednesday from payroll processor ADP showed the US private sector added more jobs in March than a month earlier.

Private sector employment increased by 184,000 jobs in March, rising from 155,000 in February. March’s jobs growth topped the FXStreet cited consensus of 148,000.

Still to come on Thursday, the latest US jobless claims reading is at 1330 BST. Elsewhere, the economic calendar has a producer price reading from the eurozone at 1000 BST, as well as a slew of composite purchasing managers’ index readings, including the UK at 0930 BST.

The pound was quoted at $1.2665 early Thursday, up from $1.2630 late Wednesday. The euro stood at $1.0853, rising from $1.0827. Against the yen, the dollar was trading at JP¥151.70, down slightly from JP¥151.72.

Gold was quoted at $2,297.22 early Thursday UK time, rising from $2,286.90 at the time of the London equities close on Wednesday. It had spiked to $2,304.89 earlier on Thursday. Brent oil was quoted at $89.35, falling from $89.69.

In London, Future shares shot up 11%. The online magazine publisher and owner of the Go.Compare price comparison website hailed a return to organic revenue growth in its second quarter ended March 31.

‘The return to growth has been driven by a strong performance in Go.Compare, alongside good growth in B2B, and a resilient performance in magazines,’ it said.

It noted a continued ‘challenging performance’ in digital advertising, however, ‘as macroeconomic pressures and low visibility continue to impact the wider sector’. It added it is on track to meet its full-year expectations.

Ascential rose 4.0% as it earmarked a shareholder return plan of £850 million.

BT and Vodafone moved in opposite directions, as a UK watchdog announced a deeper probe of the latter’s planned tie-up with Three.

BT added 2.5%, while Vodafone lost 0.3%.

The UK’s competition watchdog on Thursday said the proposed merger of Vodafone’s UK offering with CK Hutchison-owned Three UK will be the subject of a more in-depth probe.

The Competition & Markets Authority said any measures to soothe antitrust concerns were not offered to the regulator.

‘The CMA has therefore decided to refer this merger for a phase 2 investigation,’ it said.

Elsewhere in London, Cavendish Financial jumped 30%.

The stockbroker, created by the merger of finnCap Group and Cenkos Securities, said it saw ‘significant growth’ in the second half to March 31, with revenue jumping 77% to £34.5 million from the pro-forma first-half revenue of £19.5 million. Revenue for the full-year is expected to rise 44% to £47.5 million from £32.9 million. Pro-forma revenue of £54 million is expected, rising from £50.5 million.

The pro-forma calculations are made adding the revenue of finnCap and Cenkos as if they were consolidated fully during that time.

‘The newly merged team delivered an H2 performance well ahead of H1 as we completed multiple deals for our clients, across all parts of our business and strengthened our balance sheet further,’ Cavendish said.

‘Whilst the interest rate cycle appears to have peaked, conditions continue to impact demand for UK equities, making deal execution in ECM challenging across all market participants. However, private and public M&A has remained buoyant in H2 and our pipeline across both ECM and M&A remains good.’

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Issue Date: 04 Apr 2024