- FTSE 100 climbs 67 points
- Bank of England keeps interest rates unmoved
- BoE governor Bailey "optimistic" that rates will come down
- Pound rises as US Fed cuts rates by 50bps
- Next and Ocado hike full-year guidance
4.05pm: A good day for stock markets
The FTSE 100 is up over 67 points or 0.8% as we approach the end of Thursday's trading at 8,321.5.
Mid-caps are doing even better, with the FTSE 250 up 256 points or 1.2% to 21,091.
Over in Europe, the CAC 40 is up 1.9% in Paris and the DAX is up 1.3% in Frankfurt.
Across the Atlantic, the Nasdaq is up 2.7%, the S&P 500 up 1.7%, the Dow Jones 1% and the Russell 2000 up 1.6%.
The pound has eased back further from its two-and-a-half-year high against the dollar of $1.33 earlier to $1.3265, up 0.4%.
3.57pm: VW job cuts larger than expected
German media are reporting that Volkswagen Group (XETRA:VOW) could cut 30,000 jobs as it battens down the hatches to cope with slower car sales in Europe.
Earlier this month the car manufacturer admitted it was contemplating closing two factories in Germany as it faces challenges in shifting from fossil fuel vehicles to electric models.
VW is considering closing up to five facilities under threat, analysts at Jefferies are saying today, accounting for 15,000 jobs.
But the jobs numbers is closer to 30,000, according to local business magazine Manager Magazin.
VW refused to confirm that figure but said it was "clear" that the company "has to reduce its costs at its German sites" as it "the only way the brand can offer attractively priced vehicles and still make enough money for future investments".
Upcoming talks with employee groups are set to work out how these costs can be cut, a spokesperson added.
3.43pm: Fed had 'little option' to cut due to US deficit
One key reason for the big Fed cut yesterday was the ballooning US budget deficit, says Russ Mould, investment director at AJ Bell.
While it has won praise for the signals it sends on the fight against inflation and the economic growth, "it just may be that the central bank has little option," says Mould.
Neither presidential candidate seems willing to address the issue, with nearly half of the US government’s debt maturing in the next two years and an interest bill already running at an annualised rate of more than $1 trillion a year.
"Rolling over cheaper, older borrowing to prevailing bond yields would increase an annual bill that already stands at record highs and could potentially leave America with a choice between austerity or further debt accumulation, and thus potentially inflation and money printing further down the road," says Mould.
The combination of interest rates around 5% equating to higher rates that the government pays on bonds and ever higher government borrowing means that the interest bill is going up quickly.
While that wasn't much of a problem when interest rates were at record lows for the decade following the global financial crisis of 2007-09, but it is when interest rates higher and debt must be refinanced at considerably higher rates.
Also, while the annual $1 trillion interest bill implies an interest rate of 3.1% across the aggregate $34.8 trillion stock of debt, Mould notes that the US yield curve currently shows yields above that across the board.
"As a result, any debt that matures now will be refinanced at a higher interest rate, adding to the interest bill."
And that is before any further US government borrowing is taken into account, with both Donald Trump and Kamala Harris pledging policies that would increase borrowing.
“This issue is becoming particularly acute, since nearly half of US government debt matures in what is left of 2024, 2025 and 2026," Mould says.
Forecasts from the Congressional Budget Office point to annual overspends of nearly $2 trillion every year from 2025 to 2029, so lower interest rates and bond yields would help rein in those interest payments.
"America is never, ever going to go broke – it can simply print more money to pay its bills, interest or otherwise, should it so choose," says Mould, adding that basic economics dictates that the consequences are that when the supply of something goes up then its value goes down.
"Money is no different. The loss of value can come in the form of purchasing power, or in simpler terms, inflation."
This is probably why US two-year and 10-year bond yields both rose when Fed chair Jay Powell announced Wednesday’s 50 basis-point interest rate cut, he adds, and may also be why gold trades at record highs, "as investors look for something that could be a store of value, one where supply grows very slowly relative to the supply of fiat money and paper obligations such as government bonds".
3.35pm: Did Close Brothers get a bad deal?
Close Brothers’s £200 million disposal of its asset-management business (CBAM) has allowed the bank to shore up its capital base amid uncertainty over a regulatory review into its motor finance business.
But the merchant bank has failed to realise the full potential of this CBAM sale, writes my colleague Billy Farrington.
The price tag undershoots a valuation for CBAM that should be closer to £250 million, analysts say, which "arguably reflects the fact that this disposal is being carried out at a time when the group is in distress".
3.17pm: BoE governor Bailey "optimistic" that rates will come down
Bank of England governor Andrew Bailey has been speaking to broadcasters.
"Interest rates are going to come down and I am optimistic on that front," he said, but that the MPC wants to make sure the "residual element" of inflationary pressures are fully out of the system so that the economic is "sustainably" at its 2% inflation target.
His full comments to broadcasters are as follows:
"We have made a lot of progress. Inflation has come down a long way and, of course, we were able to cut rates in August.
"But our job is to make sure inflation is sustainably at the 2% target.
"There are still some pressures. We have seen that services inflation is still elevated.
"So I think we are now on a gradual path down, that’s the good news. Interest rates are going to come down and I am optimistic on that front. But we do need to see some more evidence and, of course, we will be looking at every meeting.
"The good news is those shocks have now passed through the system and I think the really good news on that is that they appear to have left fewer aftershocks behind than all of us feared they would.
"Inflation has come back near to target now. We need to see that sort of residual element fully taken out so that we’re sustainably back at target. I’m optimistic on that front which is why I think rates will come down further.
"We have got two more meetings left this year and we obviously take each meeting at a time so we will judge all the evidence and, of course, we will be doing a full round of forecasting in November."
2.59pm: US stocks leap at the open
As expected, the S&P 500 and Dow Jones have notched up new all-time highs, leaping 1.5% to over 5,700 and 1.2% to above 42,000 higher respectively.
The Nasdaq Composite has outdone them both on the day, surging up 2.1%, while the small cap home of the Russell 2000 has jumped 1.7%.
Apple Inc (NASDAQ:AAPL, ETR:APC) and NVIDIA Corp (NASDAQ:NVDA, ETR:NVD) have both gained over 4% to help drive the tech-heavy index, with semiconductor giants Broadcom, ASML and AMD also up between 3% and 5%.
This seems to have taken some of the wind out of the FTSE 100, which is up just 60 points or 0.7% now at 8,314.
2.17pm: Cut the cash ISA allowance to boost investment?
Ahead of the Budget at the end of next month, the Investment Association is calling for an overhaul of the ISA regime in order to create a “culture of investment to boost UK households’ financial resilience”.
One eye-catching policy suggested by the IA is to cut the cash ISA allowance in order to “reset the balance between stocks and shares and cash ISAs”.
Theoretically, this policy would encourage savers to put more money into investments that will drive growth in the UK economy (...read more here).
1.58pm: Record highs expected for Wall Street
A strong rebound is expected on Wall Street after yesterday's small fall on the back of the Federal Reserve 50bps rate cut.
Futures for the Nasdaq 100 were pointing to a 2.1% bounce, with new record highs anticipated for the S&P 500 and Dow Jones with futures rising 1.6% and 1.2%.
The CME’s FedWatch tool shows that market participants are leaning towards a further 75bps of rate cuts before year-end, with traders seeing a 67% chance that the central bank will make a 25bps cut at the November meeting.
Long-term data from Evercore ISI shows that the S&P 500 on average gains 14% over the six months following the rate cut in a cycle (thanks Reuters).
Meanwhile, back in the Square Mile, the FTSE 100 is up 79 points or almost 1% at 8,332.2, while the mid-caps of the FTSE 250 are up 248 or 1.2% at 21,084.
Top risers on the FTSE 350 are tech names, Bytes Technology at 8.1%, Softcat (LSE:SCT) at 5.4%, Trustpilot 5.2% and Ocado 4.7%.
Fallers are led by Close Brothers, down 8.5% now after its update earlier, and IG Group Holdings, down 3.5%.
1.49pm: Rolls and GameStop
One of our most-read stories today is about retail investor favourite Rolls-Royce Holdings PLC, not surprisingly.
The engine maker has been selected as the preferred supplier of mini nuclear reactors to state-owned Czech utility company ČEZ Group.
Rolls-Royce won the competitive bid over seven other SMR technology providers, said Chris Cholerton, chief executive of Rolls’s SMR division, saying that discussions to finalise contract terms are "ongoing".
And here's our most-read US story overnight.
GameStop Corp (NYSE:GME) boss Ryan Cohen has agreed to pay a $1 million civil penalty to settle the US Federal Trade Commission’s claim he failed to report the acquisition of more than $100 million worth of Wells Fargo shares.
1.32pm: Investment trust boost
Earlier, the UK government said investment trust costs will no longer be double-counted with the scrapping of current cost-disclosure rules that make them appear more expensive to investors.
HM Treasury announced plans to reform retail disclosure rules inherited from the EU next year, with an exemption for investment trusts coming in before that.
Following a consultation on replacing these EU-inherited regulations, the Treasury said it will legislate "as soon as possible" to provide the FCA with the appropriate powers to deliver this reform, with "more tailored and flexible rules" and help with costs.
While we wait for that, from today, the Financial Conduct Authority said it "will not take supervisory or enforcement action" for investment trusts that remove the double-counting of their costs, as an interim forbearance measure, pending the longer-term reform.
1.05pm: Nintendo sues 'Pokemon with guns' maker
A knockabout story from the world of video games.
Earlier this year, the Palworld game was released in early-access form, garnering generally positive reviews and substantial interest across social media and the gaming press reviews praising its "hilarious attitude".
But the colourful, bizarre title quickly was also met with a degree of bemusement for its undeniably close appearance to Pokemon, one of Nintendo’s flagship gaming titles with multiple spinoffs in other media.
There were indeed many similarities in character and environment design, though the key difference in that that the main character beats his enemies with firearms, giving Palword the unofficial title of ‘Pokemon with Guns’.
Little surprise then, that Nintendo is suing.
12.36pm: BoE effect on mortgages and stocks
Even though the UK base rate hasn’t budged since the start of August, the personal finance landscape "remains dynamic in anticipation of further cuts to the base rate in the not-too-distant future", says Myron Jobson, senior personal finance analyst at Interactive Investor.
"Those in the market for a mortgage, whether they are prospective buyers or homeowners approaching the end of their fixed-rate deal, will be encouraged by the flurry of mortgage rate reductions in recent weeks.
"With the Bank of England indicating that further rate cuts are likely before the year is up, many will be holding off until the last possible moment to secure the best deal.
"The harsh reality for those looking to remortgage is that new deals will be far from the attractive rates of yesteryear."
For investors, says Susannah Streeter, head of money and markets at Hargreaves Lansdown, the decision to keep rates on hold and sound a note of caution on the pace of rate cuts ahead seemed to lead to the FTSE 100 giving up ground.
"Governor Andrew Bailey underlined there was wariness around the table about cutting too fast or by too much," she said.
"The recent rise in services inflation will have been a concern, with worries it could be passed on in the form of higher prices to consumers.
"Nevertheless, there is still optimism that although the path may be a bit slower, the recent painful era of high interest rates is still coming to an end. That would offer more relief for companies and consumers who have been struggling with high borrowing costs."
Streeter said there was still "an underlying pulse of positivity" to lift London-listed stocks thanks to the Fed decision to cut rates for the first time in more than four years.
The gains by the pound to reach a new two-year high against the dollar is "not exerting huge downwards pressure on share prices".
"Hopes that the US will avoid a downturn appear to be outweighing the pressure on dollar-denominated revenues due to the currency movements. The more domestically focused FTSE 250 has also held onto gains, amid hopes that with interest rates still forecast to fall again by the end of the year, there may be more relief in store, particularly for consumer-focused stocks."
12.26pm: 'Gradual approach' an important change
Economist Paul Dales at Capital Economics's summary of the MPC decision is that the BoE "underlines that interest rates will be reduced gradually".
"By leaving interest rates at 5.00% the Bank of England showed it is more like the ECB than the Fed and is cutting interest rates gradually rather than rapidly."
Rather than the two expected by markets, Dales expects only one further 25bps cut this year, at the next meeting in November, "although the pace of cuts may quicken next year with rates eventually falling to 3.00% rather than to the 3.25-3.50% priced into markets."
"Most importantly," he says, was the new line in the policy statement that said "in the absence of material developments, a gradual approach to removing policy restraint remains appropriate".
He noted how this contrasts with the Fed’s jumbo 50bps rate cut last night, but which "makes sense as the Bank has yet to shift from worrying less about inflation and worrying more about weak activity".
This is why the markets are pricing in a slower pace of rate reductions in the UK than in the US, Dales says, predicting the BoE will cut rates a little slower than the market is currently pricing.
12.16pm: Bank makes no changes, emphasises gradual approach
The statement from the MPC said that as well as voting 8-1 in favour of holding rates steady, the committee also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes.
The reduction will be by £100 billion over the next 12 months, which would reduce it to a total of £558 billion, which is the same as the pace over the past 12 months.
"In the absence of material developments, a gradual approach to removing policy restraint remains appropriate," was a new lined added to th statement.
"Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further," the committee said.
It noted that since its previous meeting, global activity growth has "continued at a steady pace, although some data outturns suggest greater uncertainty around the near-term outlook".
Oil prices fell back and the market-implied paths for policy rates across major advanced economies declined, with generally limited changes in UK economic indicators, including CPI inflation this week being revealed to have remained at 2.2% in August, while services CPI stood at 5.6%.
Headline CPI is expected to increase to around 2.5% towards the end of this year as declines in energy prices last year fall out of the annual comparison, while GDP growth is expected to return to its underlying pace of around 0.3% per quarter in the second half of the year, the MPC forecast.
12.03pm: Bank of England stands pat
The Bank of England's monetary policy committee has left rates at 5.0%.
Eight members of the committee voted to keep rates unchanged, with one vote for a cut (update the dissenter was external MPC member Dr Swati Dhingra). This compared to a 5-4 vote to cut in the August meeting.
Governor Andrew Bailey said most members of the MPC think the Bank should be able to cut rates "gradually over time".
11.22am: What to watch in the Bank of England decision
The Bank of England's monetary policy committee (MPC) decision is due in less than an hour, with no press conference afterwards.
Rate setters delivered an initial rate cut at their previous meeting in August, but it was a close 5-4 vote in favour.
"This time around it’s widely expected that they’ll leave rates unchanged at 5%," said Deutsche Bank.
DB’s UK economist said the particularly interesting feature of today’s decision will be the vote on the pace of quantitative tightening for the next 12 months, to reduce the size of the bank's bloated balance sheet.
He thinks that there’ll be a QT increase of around a wider range between £107-127 billion, implying a quarterly sales target of £5-10 billion from the current £100 billion envelope.
With no press conference today, Kathleen Brooks at XTB said "traders will be parsing the BOE’s statement and minutes from this meeting, to see what the BOE could do next".
As well as the QT another thing worth watching is the UK’ s growth outlook, which "could take the shine off sterling".
If the rate of QT is tightened it "looks like the BOE will be giving with one hand (expected future rate cuts) and taking away with another (reducing the money supply)", she says, predicting the reaction to the MPC decision could be mild.
Francesco Pesole at ING said there is a notion that the BoE is treading more carefully than the Fed, and in general not giving away much in terms of guidance, which he says "is contributing to gilt underperformance and ultimately GBP strength.
"That shouldn’t change after today’s meeting. Some focus will be on the plans for quantitative tightening, which will be announced today. The consensus is probably for the pace of balance sheet reduction to be kept the same (£100bn over the next year)."
Pesole and his colleagues think GBP/USD "can end the week higher" on the back of the Fed-BoE divergence, attempting another break above $1.33.
"EUR/GBP could slip back below 0.8400 after the BoE, but we remain more reluctant to a sustainable outperformance of the pound over the euro beyond the near term."
11.03am: CMA expenses
The Competition and Markets Authority staff have been filing some hefty expenses claims, including £25,000 for two staff to take business class flights and stay in a hotel for a conference in San Francisco and £177 on a taxi fare in Durham.
Expenses logs for the antitrust watchdog have been highlighted by Financial News this morning, with chief executive Sarah Cardell responsible for the San Fran conference as well as another £6,500 on US flights, and technology chief Karen Croxson expensing over £11,000 for the trip to San Francisco, plus almost £7,000 on another US trip.
Conference organisers reimbursed a portion of the costs for CMA staff.
Another senior CMA staffer expensed for “funeral attendance”.
10.45am: FTSE 100 is soaring
The FTSE 100 is soaring now, up 91 points or 1.1% to 8,344.7.
Top of the leaderboard is Burberry Group PLC (LSE:BRBY), up almost 5%, followed by JD Sports Fashion PLC at 4.5%.
US-focused equipment hire group Ashtead Group PLC (LSE:AHT) and a group of miners, led by Anglo American PLC (LSE:AAL), are next.
Analysts at Saxo noted that China is "widely expected" to trim its main lending rates on Friday, which may be seen as a boost for luxury stocks like Burberry that generate a large proportion of sales from Asia, and also miners with China being the biggest importer of metals.
Also this morning, the pound is up 0.5% against the US dollar at $1.3276 and flat against the euro at £0.8414.
10.30am: Planning permission at decade low
Planning permissions for new homes in England fell to the lowest in a decade, according to figures from the Home Builders Federation that it said illustrated a "mounting housing crisis".
The housebuilding body said it illustrates "the scale of the challenge the new government faces as it looks to increase housing supply", though Labour has pledged to reform the planning system to stop it being an impediment to building new homes.
In the three months to June, 53,379 homes were approved in England, the lowest quarterly figure since 2014, while approvals across Great Britain fell 12% over the 12 months to June, with social housing approvals down 27%.
“The steep fall in planning permissions starkly illustrates the challenge the new Government faces to boost housing supply,” said Neil Jefferson, HBF chief executive.
Amid higher interest rates he called for "more support for buyers" in the upcoming budget from chancellor Rachel Reeves, as "creating demand for new homes provides the confidence the industry needs to invest and deliver both private and affordable homes".
10.13am: Sorrell moves to react to challenging ad market
Shares in Sir Martin Sorrell’s S4 Capital PLC (LSE:SFOR) have tumbled another 11.5% following a disappointing interim trading update, bringing year-on-year market losses to nearly 50%.
Analyst Jessica Pok at Peel Hunt noted that revenue fell 15.6%, EBITDA declined 17.5% and net debt grew to £183 million from £109 million amidst "ongoing weakness in large tech client spend".
The analysts said she is reducing her LFL net revenue decline from -5% to -11%, leading to a 7% reduction to net revenue estimates, while keeping EBITDA estimate broadly unchanged.
"Despite adding a 'whopper' in the period, the trading environment remains challenging. Management has been swift to react with effective cost-cutting measures that should protect profitability. However, given the backdrop, we retain our Hold rating for now."
10.01am: Next 'rediscovering mojo'
Next's interim results confirmed that the strong progress already highlighted by the previous sales updates in May and August and "a stronger than hoped for start to H2, as UK weather turned more seasonal", says Jefferies analyst James Grzinic.
"The emergence of new growth drivers are starting to increasingly detach NXT from domestic demand conditions, but it looks like all stars started aligning in recent weeks."
Next share trade at "close to historic cyclical peaks", says Grzinic, but the shares have added 1.3% this morning as the upgrade to guidance today was well received.
"In our mind, historic highs are less of a fundamental impediment as the group rediscovers its growth mojo," the analyst says.
9.55am: More support needed, say car makers
European automobile manufacturers have urged the EU to "come forward with urgent relief measures", including bringing forward regulation reviews to 2025, after figures showed the continued trend of shrinking market share for battery electric cars.
New car registrations were down 18.3% in August and the battery electric (BEV) market share was down by almost a third.
In August, BEV cars accounted for 14.4% of the EU car market, down from 21% the previous year.
For the seven months to the end of July, fully electric vehicles made up 12.5% of the total of new car registrations in the bloc, the European Automobile Manufacturers’ Association (ACEA) said, which it said "sends an extremely worrying signal".
The auto industry has invested billions in electrification to bring vehicles to market, it noted, but "the other necessary elements for this systemic shift are not in place", the industry body said, with "the rapid erosion of the EU’s competitiveness" a key factor.
“We are missing crucial conditions to reach the necessary boost in production and adoption of zero-emission vehicles: charging and hydrogen refilling infrastructure, as well as a competitive manufacturing environment, affordable green energy, purchase and tax incentives, and a secure supply of raw materials, hydrogen and batteries," it said.
9.14am: FTSE indices and France's CAC leading Europe higher
A new lease of life has been found in London after an hour of trading, possibly from investors logging in after enjoying a longer lie-in, with the FTSE 100 index now up 74 points to 8,327, a rise of 0.9%.
The FTSE 250 is up 201 or almost 1%.
Both London indices are among the best runners around Europe this morning, along with France's CAC 40, which is up 1.2% thanks to 2%-plus gains for the likes of Stellantis, ArcelorMittal, Pernod Ricard, Hermes International and LVMH.
Germany's DAX and Italy's FTSE MIB are both up 0.7% and Spain's IBEX 35 has added 0.4%.
The Euro Stoxx 600 pan-continental index has risen 0.8% this morning, with Ocado's 8% rise top of the leaderboard, followed by payment groups Worldline and Adyen at 6% and 4%, while Davide Campari-Milano and Norsk Hydro are also up there.
9.01am: UK companies did not breach EU state aid rules
Shares in ITV PLC (LSE:ITV) are up 1.1% but London Stock Exchange Group PLC (LSE:LSEG) is down 0.3% after a decision by Europe's top court on state aid.
Reuters is reporting that the Court of Justice of the European Union sided with the UK in its fight against the European Union's order to recover millions from LSEG, ITV and others.
This relates to businesses using the UK-controlled foreign companies regime, which were hit by a decision by the European Commission regulators in 2019.
8.49am: Fed reaction in bonds and gold
Yesterday’s Fed policy meeting "hailed a new era for central banking", says analyst Kathleen Brooks at XTB.
"The Fed slashed their interest rate forecasts even though their forecasts for core PCE inflation are not set to fall back to the Fed’s own target rate until 2026.
"The Fed has ditched waiting for inflation to fall back to target before aggressively starting their rate-cutting campaign.
"This would not have happened in past decades, and it suggests that the Fed is less guided by its inflation target than it once was, and instead avoiding a recession is its chief focus."
Fed chair Jerome Powell said that starting the rate-cutting cycle with a large move lower would protect against a downturn, though Brooks said there are some people who "worry that this is over-optimistic, and it does not take account of another flare up in inflation".
This, she said, "is why we expect gold to continue to trade with an upward bias in the medium term".
The bond market reaction to the Fed meeting was also interesting, Brooks said, as US bond yields closed higher across the curve, including 2-year yields.
"Even though the Fed was more dovish than expected and downwardly revised their expectations for interest rates, the market was still ahead of the Fed, and was pricing in more interest rate cuts, particularly for this year.
"This means that the market reaction to a Fed meeting which was considered dovish, could lead to rising bond yields (bearish for bond prices) and a scaling back of rate cut expectations."
8.34am: Close Bros and Babcock impress
There were a few other FTSE 250 updates out this morning.
Shares in Close Brothers Group PLC (LSE:CBG) are up 4.2% after the merchant bank reported an operating profit of £170 million in line with consensus for the year ended July.
The £200 million sale of Close Brothers Asset Management (CBAM) was also announced, with Oaktree Capital as the buyer.
This price and the divisional performances and guidance were consistent with market expectations, say analysts at Peel Hunt.
Babcock International PLC (LSE:BAB) shares are up 1.85% after the defence contractor said trading for the five months to 31 August has been encouraging and in line with the board's expectations.
Positive momentum has continued into 1H, and the group has delivered good organic revenue growth, particularly in civil and naval Nuclear and in the Land Sector.
The FTSE 100 is up 57 points or 0.7%, while the FTSE 250 has added 168 points or 0.8% to reach 21,003.
8.12am: FTSE surges as Next and mining giants drive gains
The FTSE 100 surged over 70 points higher in early deals, topping 8,331 initially before easing back a couple of points for a 0.9% gain.
Helping drive the gains, Next is one of the top risers off the back of its upbeat update, with the shares up 3.1%.
But miners are the main driving force, with Anglo American PLC (LSE:AAL), Glencore PLC (LSE:GLEN), Rio Tinto PLC and Antofagasta PLC (LSE:ANTO) all up between 2.5% and 3.2%.
7.59am: FTSE to leap
The pre-market predictions for the FTSE are ramping up, from around 59 points before to a gain of over 75 points now being expected.
Next looks like leading that charge, off the back of its guidance upgrade.
Asian markets are all in the green, with the Nikkei and Hang Seng both up over 2%, along with the continent-spanning Asia Dow.
7.47am: Fed rate cut
More details on the Fed rate cut from last night, following 14 months where it keopt rates on hold.
The half-a-percent cut last night lowered the fed funds target to the 4.75-5.00% range, following an 11-1 decision by the Federal Open Market Committee.
Federal Reserve governor Michelle Bowman became the first Fed governor to vote against a FOMC interest-rate decision since 2005, as she favoured a 25 basis points cut.
"The larger cut came amid a dovish shift to the Fed’s inflation and unemployment projections compared to June, with 2025 PCE inflation lowered two tenths to 2.1% and unemployment raised two tenths to 4.4%," points out Jim Reid at Deutsche Bank.
Accompanying the larger cut, he adds, "was a signal of a fundamentally strong economy with no suggestion that continued 50bp cuts were likely".
Fed growth projections were little changed and the dot plot of future expected rate moves showed the median FOMC member expects the fed funds range at 4.25-4.50% at year-end, which implies a total of 50bps of further easing over the November and December meetings.
In the press conference, Powell repeatedly framed the decision as a "recalibration", telling reporters "there is no sense that the committee is in a rush".
Powell said: "I do not think that anyone should look at this and say that this is the new pace" for easing going forward.
Reid noted that rates and equities saw a "strong initial reaction to the decision, but this then reversed as Powell spoke although equities are notably higher again in Asia".
On the equity side, the S&P 500 had been trading flat on the day and spiked by nearly 1% on the Fed decision, before giving up these gains and finished lower.
He noted that this up-and-down move was also visible across other asset classes, with the dollar dropping 0.6% against the euro intra-day but recouping losses later on. The pound is at 1.3253.
Gold touched $2600/oz for the first time ever as Powell began to speak but was down -0.41% to $2558.91/oz by the close.
7.33am: Next nudges up revenue and profit guidance
High street fixture Next PLC (LSE:NXT) has, to the surprise of precisely none of its long-term followers, lifted its outlook too.
The FTSE 100-listed clothing chain said full-price sales over the first six weeks of the second half have "materially exceeded our expectations", rising 6.9%, with sales in the first half of the year having grown 4.4%.
Full-price sales growth in the second half is now expected to grow 3.7% compared to last year, up from previous guidance for a 2.5% increase.
Full-price sales for the full year are now expected to be up 4.0% as a result, equating to total group sales growth of 6.6%.
Guidance for full-year profit before tax was also increased, with Next expecting this to grow £15 million or 8.4% to £995 million.
PBT in the first half was up 7.1% to £452 million, today's interim results showed.
7.25am: Outlook upped for Ocado Retail
Ocado Retail has raised its full-year sales guidance after reporting improved revenue growth for the third quarter, driven by growth in customer numbers.
The business, which is a 50-50 joint venture between Ocado Group PLC (LSE:OCDO) and Marks and Spencer Group PLC (LSE:MKS), said it now expects to grow its top line by a "low double digit %" up from its previous guidance of "mid-high single digits % growth".
In the third quarter it lifted revenues 15.5% to £658 million, having grown turnover 11% in the first-half of the year.
7.10am: FTSE to hit ground running
The FTSE 100 should hit the ground running on Thursday after the US Federal Reserve cut interest rates by 50 basis points last night and ahead of the Bank of England decision later today.
Futures markets are predicting London's blue-chip index will get off to a flying start, up around 59 points to reverse the 56 points lost yesterday as the index finished at 8,253.7.
Overnight, Wall Street had a slightly negative session in the main, with the S&P 500 and the Nasdaq slipping 0.3%, while the Dow Jones dipped 0.25%. The small and mid-cap Russell 2000 finished slightly above flat.
This morning in London we have results from the likes of Next PLC (LSE:NXT), Ocado Retail and Close Brothers Group PLC (LSE:CBG).