- FTSE 100 up 100 points at 7,648
- US Federal Reserve signals rate cuts in 2024
- BoE leaves interest rates unchanged
4:45pm: FTSE finishes on a high
London's main stock index finished 100 points higher at 7,648 for a gain of 1.3% on the day.
3:15pm: FTSE 100 slips from highs, mid-caps fly
Heading towards the close of an eventful 24 hours for markets and the FTSE 100 remains firmly in positive territory, although well off early highs, up 85 points at 7,634.
Although the Bank of England didn't follow the US central bank in signalling rate cuts, the market is firmly of the belief that lower rates are on their way, pricing in around 125 basis points worth of reductions in 2024.
Ocado remains the top riser, up more 10%, followed by Ashtead and Entain.
Rate sensitive stocks such as housebuilders and property companies have had a good day while away from blue chips encouraging results lifted Currys.
Indeed, the mid-cap 250 has powered 3.0% higher with Mobico and Helios Towers among those notching double digit gains,
2:58pm: Bailey says too early to talk about cutting rates
The Governor of the Bank of England, Andre Bailey has been speaking after the decision to leave interest rates unchanged.
On interest rates, Bailey said: “Markets have to form a view, they must do that of course."
"At the moment, we are more cautious because we need to see those more persistent elements of inflation, which we see in things like services prices, turn in the right direction quite decisively."
"My view at the moment is, it’s really too early to start speculating about cutting interest rates."
"We’ve got to see more progress. I’m encouraged by the progress we’ve seen, don’t get me wrong."
"I’m very encouraged by the progress we’ve seen."
"But it’s too early to start speculating that we will be cutting soon."
2:47pm: FTSE off highs despite more gains on Wall Street
US markets opened higher on Thursday as the Federal Reserve’s interest rate pivot saw Christmas arrive early on Wall Street.
Shortly after the opening bell, the Dow Jones Industrial Average was up 99.67 points, 0.3%, at 37,189.91, the S&P 500 was up 24.27 points, 0.5%, at 4,731.36 and the Nasdaq Composite was up 81.40 points, 0.6%, at 14,815.37.
“The Fed’s acknowledgement that cuts will come in 2024 has fuelled positivity,” said Susannah Streeter at Hargreaves Lansdown.
That mood was further boosted by a surprise in retail sales which rose, despite markets forecasting a drop, figures showed on Thursday.
According to the Census Bureau, US retail sales rose by 0.3% in November from October, compared to expectations for a 0.1% decline.
Excluding automobiles, sales rose 0.2% in November from October.
They had been flat on-month in October.
Economists at ING said the much better than expected figures, combined with a tight labour market means there is little prospect of an imminent rate cut despite the Fed's dovish shift yesterday.
Meanwhile, US initial unemployment benefits claims fell in the most recent week, numbers on Thursday showed.
According to the US Department of Labor, initial jobless claims totalled 202,000 in the week ended December 8, falling from 221,000 a week prior.
The previous week's reading was upwardly revised from 220,000.
2:01pm: Sterling shoots higher as BoE doesn't follow 'dovish' Fed
The different appraches by central banks is reflected in a sharp jump in the pound which has risen 0.8% and now trades above $1.27.
The 'dovish' language of the US Federal Reserve, which forecast rate cuts of 75 basis points, contrasted to the more 'hawkish' hold by the Bank of England which said rates would neeed to stay high for an extended period of time.
The slide in the dollar has seen the price of gold jump to $2,037/ounce giving the share prices of Endeavour Mining and Fresnollo a lift.
Otherwise, the FTSE 100 is still sitting pretty, although earlier highs as we await the restart in New York.
1:51pm: ECB holds rates and plays down rate cuts
The ECB’s decision to leave its deposit rate unchanged at 4.0% today and make only limited changes to the policy statement suggests that policymakers are pushing back against market expectations for rate cuts to begin in March next year, said Andrew Kenningham, Chief Europe Economist at Capital Economics.
"However, the Bank has cut its inflation forecasts sharply and we think it will change its tune on interest rates before long," he added.
ING thinks the ECB’s forecasting mistakes of the past are probably an almost automatically built-in brake on premature and large-sized rate cuts.
"In fact, we think that it would require a sharper economic downturn and/or inflation sustainably falling below 2% to see the ECB cutting rates by as much as the currently priced in 150bp," ING said.
"Our base case scenario remains a more gradual shift towards full dovishness and more gradual rate cuts in 2024," the bank added.
1:22pm: ECB leaves rates unchanged
The European Central Bank has followed the Federal Reserve and Bank of England by leaving interest rates unchanged.
The ECB’s Governing Council said it has decided to keep the three key ECB interest rates unchanged, stating that while inflation has dropped in recent months, it is likely to pick up again temporarily in the near term.
We kept our interest rates unchanged at our latest meeting.
See our monetary policy decisions https://t.co/whYDllDcVm pic.twitter.com/X1tGIEazzA
— European Central Bank (@ecb) December 14, 2023
In a statement the ECB said: “The Governing Council’s future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary.”
According to the latest Eurosystem staff projections for the euro area, inflation is expected to decline gradually over the course of next year, before approaching the Governing Council’s 2% target in 2025.
Overall, staff expect headline inflation to average 5.4% in 2023, 2.7% in 2024, 2.1% in 2025 and 1.9% in 2026. Compared with the September staff projections, this amounts to a downward revision for 2023 and especially for 2024.
12:55pm: Nothing particularly dovish in BoE statement - ING
ING’s James Smith said unlike the Federal Reserve, the Bank of England is clearly reluctant to endorse market pricing for rate cuts in 2024.
The Bank has reiterated that rates need to stay restrictive for quite some time, but markets are probably right to expect cuts by next summer, he thinks.
Smith pointed out that given there was no press conference or new forecasts today there were only ever going to be limited avenues for the BoE to push back on market expectations.
Even so, there’s nothing particularly dovish about today’s decision, he said.
“We still have three out of the nine committee members voting for an immediate rate hike, and that’s a mirror image of the November decision,” he noted.
He pointed out the Bank also opted against changing any of its forward guidance – that is, statements about the future direction of policy.
Smith felt that’s not surprising, but it is another signal that the Bank isn’t totally comfortable with market rate cut pricing.
12:10pm: BoE says policy to remain restrictive for extended period
The Bank of England warned monetary policy is likely to need to be restrictive for an extended period of time as it left interest rates unchanged.
Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures, it said.
It continued to judge that the risks to inflation projections were skewed to the upside, such that the mean projection for CPI inflation was 2.2% and 1.9% at the two and three-year horizons.
It expects GDP growth to be broadly flat in the fourth quarter and over the coming quarters.
Employment growth is likely to have softened, and there has been further evidence of some loosening in the labour market but there remain upside risks to the outlook for wage growth.
It also cautioned key indicators of UK inflation persistence remain elevated.
12:00pm: Bank of England leaves interest rates unchanged
The Bank of England has left interest rates unchanged at 5.25%.
The Monetary Policy Committee voted by a majority of 6-3 to maintain #BankRate at 5.25%. https://t.co/oheJdDcAiA pic.twitter.com/BG7WcaYqHL
— Bank of England (@bankofengland) December 14, 2023
At its meeting ending on 13 December 2023, the MPC voted by a majority of 6–3 to maintain Bank Rate at 5.25%. Three members preferred to increase Bank Rate by 0.25 percentage points, to 5.5%.
It has decided to maintain rates at that roughly 15-year high in successive meetings in September and November.
The BoE has enacted 515 basis points worth of hikes since lifting bank rate from its pandemic-induced low of 0.10% roughly two years ago.
11:52am: US markets to extend gains after Fed pivot
US markets are expected to open higher after the Federal Reserve signalled rate cuts ahead in 2024.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.3%, while those for the S&P 500 were 0.3% higher and contracts for the Nasdaq 100 futures climbed 0.4%.
The US central bank left interest rates unchanged at the conclusion of its two-day meeting on Thursday but released projections which showed a majority of officials expect 75 basis points of interest rate cuts in 2024.
Jim Reid at Deutsche Bank said; “Yesterday’s FOMC meeting did its best to give investors an early Christmas present, all packaged with a bow and extra special gift wrapping.”
Ian Shepherdson at Pantheon Macroeconomics said the Fed "is catching up with the reality that the credibility of its threats to hike again has been near-zero in markets for some time now."
Paul Ashworth at Capital Economics thinks the first rate cut will probably come at the March meeting next year.
Elsewhere, retail sales are expected to have fallen 0.1% in November, which would match October’s decline, while weekly jobless claims are forecast of 220,000 in the week ended December 9, the same figure as the previous seven-day period.
11:28am: Entain climbs as another activist fund takes stake
Shares in betting operator Entain PLC (LSE:ENT) have risen a further 6.4% after US activist hedge fund, Corvex Management LP bought a 4.4% stake, buying 28 million shares.
Corvex said: "We believe Entain is at a critical juncture and can benefit from the constructive engagement of a well-informed shareholder with substantial industry and company-specific experience and expertise."
"While the Company's recent management change was a necessary first step, further change is required."
"Simply put, Entain's recent performance has been unacceptable and all options must be considered to drive value," it said.
It said it intends to immediately engage with Chairman Barry Gibson and Interim CEO Stella David to be a "helpful force for change."
On Wednesday, Entain, which owns Ladbrokes and Coral, said its boss, Jette Nygaard-Andersen was stepping down immediately.
11:05am: Ocado top riser despite Goldman downgrade
Ocado led the way as the FTSE 100’s top riser on Thursday morning, despite trimmed back expectations from Goldman Sachs (NYSE:GS).
Shares in the online grocer were up more than 9% at 702p, though analysts at the bank had cut 12-month targets for the stock from 900p to 700p earlier on.
Goldman had pointed to strong potential for Ocado in non-food sectors however, highlighting retail, pharmacy, and automotive industries.
Shares in the delivery firm sit 75% off highs recorded in early 2021, meanwhile.
10:20am: Thames Water appoints new chief executive
Thames Water has announced Chris Weston will take the helm on January 8, as the supplier to London bids to turn around its fortunes.
Formerly managing director of Centrica, Weston has also served as chief executive of FTSE 250-listed power specialist Aggreko (LSE:AGK).
He has a “proven track record working in regulated environments, turning round business performance and improving customer experience,” Thames Water chairman Sir Adrian Montague said.
“He brings strong operational and strategic expertise as we enter this crucial period of delivering our refocused turnaround plan and providing the service that customers rightly expect of us.”
Thames Water, which supplies 15 million people in and around London, has hit trouble this year as fears mount - including of collapse - over its £14.7 billion debt pile.
Former chief executive Sarah Bentley left Thames suddenly in June, as the sector also faced intense pressure over leaks and sewage spills across the country.
10:06am: FTSE continues to rally as BoE rate call approaches
The FTSE 100 was up 145 points at 7,693 as investors eagerly awaited the Bank of England’s latest rate call on Thursday in the wake of optimism from policy setters across the Atlantic.
London’s blue chip market reacted positively after the US Federal Reserve held rates at a 22-year high of 5.5% but signalled cuts of as much as 75 basis points next year on subsiding inflation.
The Bank of England is due to make its latest decision on rates later this morning, with expectations being that the Monetary Policy Committee will follow suit and also hold at 5.25%.
Given optimism of cuts over the coming year, AJ Bell analyst Russ Mould commented:
“For the near-term, expect to see investors pile back into long duration assets such as infrastructure and property.
“These were sold down as interest rates went up so it makes sense to suggest they will come back into fashion as rates go back down.
“Just remember the stock market is forward-looking and investors will price in a lower rate environment well before it actually happens."
9:53am: Taylor Wimpey and Bellway climb on Citi backing
Taylor Wimpey PLC (LSE:TW.) and Bellway PLC (LSE:BWY) climbed 5% and 4.4% respectively as Citi analysts backed both with ‘buy’ ratings in a bullish note on the housing market.
Improving sentiment as mortgage rates decline, and a subsequent return of buyers who had been holding off, should fuel a recovery into next year, Citi analysts said in a note.
Depending on the pace of such a recovery, potential re-ratings could be in order as housebuilders benefit from rebounding demand, analysts added.
“We continue to be bullish on the sector’s multi-year cyclical recovery prospects,” Citi said.
“Significant pent-up demand [...] is likely to drive strong site absorption rates as current affordability constraints ease on the back of lower rates.”
9:29am: Federal Reserve move "quite the pivot"
Neil Wilson described the move by the US Federal reserve as “quite the pivot.”
But he wondered whether it’s come too soon.
“You cannot deny inflation is coming down, but it looks as though the ‘last mile’ just got that bit harder,” he said.
“Is it any coincidence that ’24 is an election year? Or is it the tacit acceptance that they won’t hit 2% and need to accept inflation is going to be higher now? Or have they actually done the impossible and won?” he asked.
It has certainly sparked London into life with equities up and bond yields tumbling as traders rush to price in rate cuts next year.
We will have to see if the Bank of England join the party and squash the mood at 12.
9:05am: Rics sees improvement in housing market in November
Amid the bullish markets, some upbeat news on the housing market which improved in November as mortgage rates eased, marking the first rise in sales expectations since early 2022, according to a property survey.
The Royal Institution of Chartered Surveyors (RICS) said that its measure of forecasted sales over the next three months rose to six in November, up from minus 17 in October.
This is the first positive reading since April 2022.
The Rics data suggested the improvements in the market, reflected in rising house prices and mortgage approvals, would continue into the months ahead as mortgage rates fall back further from their summer peak.
Simon Rubinsohn, Rics chief economist, said the improvement had been “aided by increased confidence that the interest rate cycle has peaked, which is reflected in somewhat more competitive mortgage products coming to the market”.
8:37am: Property, housebuilders rally on rate cut hopes
Some big moves in the FTSE 100 with only six fallers in the blue chip index at present.
Rate sensitive sectors such as housebuilders and property are enjoying a strong morning with Segro up 5.5%, Land Securities up 5.7%, Rightmove up 3.4% and Taylor Wimpey up 3.3%.
The sharp rise in the price of gold has helped push Fresnillo and Endeavour Mining up 5.7% and 6.0% respectively.
Susannah Streeter, head of money and markets, Hargreaves Lansdown said there is "enthusiasm in the air that the punishing rate hikes of the last two years will start being reversed, sooner rather than later.”
But she pointed policymakers are still set to stay behind the market curve when it comes to expectations of looser monetary policy.
8:12am: FTSE soars as Fed delivers early Christmas present
The FTSE 100 is in festive mood, soaring at the open, after the US central bank’s pivot on interest rates.
At 8:15am, London’s lead index was up 130.62 points, 1.7%, at 7,679.06 while the FTSE 250 leapt 476.07, 2.6%, at 19,171.83.
The US central bank left interest rates unchanged, at a 22-year high, but forecast rate cuts of 75 basis points in 2024.
Jim Reid at Deutsche Bank said; “Yesterday’s FOMC meeting did its best to give investors an early Christmas present, all packaged with a bow and extra special gift wrapping.”
The shift in tone by the US central bank comes ahead of the interest rate decision in the UK later today.
But Kallum Pickering at Berenberg doesn’t expect Bank of England Governor Andrew Bailey to follow the Fed’s ‘dovish’ rhetoric.
“After raising the bank rate using open market operations, policymakers are now trying to prevent financial conditions from becoming too easy by influencing market expectations using open mouth operations,” he said.
He expects BoE policymakers “to push back against rising expectations for rate cuts in 2024.”
“If markets listen, it may prompt some temporary market volatility” he added.
Markets in London have reacted to the US move by pricing in more rate cuts in the UK next year, with 125 basis points of cuts now predicted.
In company news, Bunzl was an early riser, up 1.3%, after raising operating guidance.
Matt Britzman, equity analyst, at Hargreaves Lansdown said the statement was “an early Christmas present for investors with a small upgrade to margin guidance.”
“As we move into 2024 comparable periods should ease on the top line, reflected in guidance for some revenue growth next year which is likely ahead of most analysts’ forecasts,” he said.
Currys was also in demand, up 8.2%, after reporting trading in the Nordics had improved helping half-year losses narrow.
7:47am: Bunzl in optimistic mood, ups guidance
Distribution and services group Bunzl PLC has offered a shot of optimism, stating that adjusted operating profit is projected to surpass prior guidance for the year ending 31 December.
Boring Bunzl anticipates its 2023 revenue to align closely with the previous year's figures at constant exchange rates, despite various challenges, including the disposal of its UK healthcare business and a post-pandemic market normalisation.
To be precise, group revenue for 2023 is forecasted to be one to two percent lower than in 2022, primarily due to said disposal.
However, Bunzl remains confident about its financial health, expecting moderate growth in its adjusted operating profit and a slight improvement in operating margins, surpassing the previous record.
7:43am: Capita on track with 47% increase in contract wins
Capita PLC (LSE:CPI) said it remained on track to hit medium-term targets as it reported positive trading across both its divisions.
The outsourcing specialist said in the 11 months ended November, it had seen a positive operational performance across both divisions; with adjusted revenue growth of 2.1%.
Contracts won with a Total Contract Value of £2.89 billion, increase of 47% from 2022 with a significant improvement in win rate for new contracts and expansions to 70%.
The firm reiterated its new target for cost savings of £60 million for 2024 which it underpins a target of more than doubling group operating margin from 2.9% and delivering sustainable positive free cash flow over medium term.
Capita also highlighted reduced future pension fund contributions under the recently agreed 2023 Triennial review and noted an actuarial pension surplus as at end March 2023 of £51 million.
Jon Lewis, chief executive officer, said: “We have continued to make good progress against our core priorities and remain on track to deliver our medium term guidance of mid-single digit revenue growth, doubling our operating margin and delivering positive free cash flow.”
“Capita is a growing business with a materially stronger balance sheet, reflecting the reductions in financial debt and pension deficit.”
7:29am: Currys sales slip but Nordics picks up
Currys PLC (LSE:CURY) reported narrowed half-year losses although sales remained under pressure reflecting persistent inflation and rising interest rates.
The electricals retailer said in the half-year ended October 28, pre-tax loss narrowed to £46 million from £548 million the year prior on revenue which declined 7% to £4.16 billion from £4.47 billion before.
Currys said revenue declined in all markets as consumer spending remained under pressure from persistent inflation and rising interest rates, coupled with an increased focus on more profitable sales to maximise operating cashflow.
UK&I like-for-like (LFL) revenue slipped 3%, with adjusted Ebit of £15million, down 40%, as improved gross margin and costs savings of £53 million were more than offset by inflationary pressures and non-repeat of £11 million of mobile revaluations.
Nordics profitability improved despite a difficult consumer environment, with gross margins back up to the levels of two years ago, the company said.
Nordics LFL revenue fell 6%, with adjusted EBIT of £12 million, up 300%, reflecting a significant gross margin recovery of plus 190 basis points and cost actions which offset continued market driven sales decline.
Currys said trading in the second half of the financial year has been consistent with expectations and left guidance unchanged.
It expects to finish the year in a net cash position if the disposal of its Greek business completes before the year end.
7:00am: FTSE set to soar after US Fed signals rate cuts in 2024
The FTSE 100 is expected to open sharply higher after the US Federal Reserve signalled it would cut interest rates significantly in 2024.
Spread betting companies are calling London’s blue-chip index up by around 76 points after closing up 5.67 points, 0.1%, at 7,548.44 on Wednesday.
The US central bank left its benchmark interest rate unchanged, as expected, but signalled rate cuts of as much as 75 basis points in the coming year.
The decision from the Federal Open Market Committee extends a pause in monetary policy that has been in place since July, leaving the federal funds rate at a 22-year high of 5.25% to 5.5%.
The latest quarterly dot plot showed that most officials expect rates to be in the range of 4.4% to 4.9% by the end of 2024.
A small majority of the Federal Open Market Committee anticipate at least three quarter-point cuts from current levels.
Ian Shepherdson at Pantheon Macroeconomics said the Fed "is catching up with the reality that the credibility of its threats to hike again has been near-zero in markets for some time now."
Paul Ashworth at Capital Economics thinks the first rate cut will probably come at the March meeting next year.
Today, sees rate decisions from the Bank of England and the ECB, both of which are expected to leave interest rates unchanged.
But will they follow the more ‘dovisih’ rhetoric of the Fed?
Michaeal Hewson noted: “If “higher for longer” wasn’t dead before last night, it certainly is now, and certainly makes the job of both the Bank of England, as well as the ECB later today that much harder in maintaining a hawkish bias.”
Before that, updates from Serco, Currys. Capita, Bunzl and SThree will set the tone in London.