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LONDON MARKET CLOSE: Europe slumps and NY mixed after Fed hold

13th Jun 2024 17:01

(Alliance News) - Stocks in Europe fell on Thursday, though shares in New York showed a bit more resilience in the face of a Federal Reserve US interest rate hold that had a hawkish tilt.

The FTSE 100 index closed down 51.81 points, 0.6%, at 8,163.67. The FTSE 250 fell 301.45 points, 1.5%, at 20,195.95, and the AIM All-Share fell 6.93 points, 0.9%, at 780.43.

The Cboe UK 100 ended down 0.9% at 812.42, the Cboe UK 250 closed down 1.6% at 17,682.71, and the Cboe Small Companies fell 0.3% at 16,731.11.

In European equities on Thursday, the CAC 40 in Paris and the DAX 40 in Frankfurt both plunged 2.0%.

In New York, the Dow Jones Industrial Average was down 0.6% at the time of the London close. The S&P 500 traded flat, while the Nasdaq Composite was up 0.3%.

After being boosted by a softer US inflation reading on Wednesday, beleaguered European stocks were sold off again on Thursday. Stocks on the continent have suffered selling pressure this week in the wake of the weekend's European elections.

Putting pressure on equities on Thursday, the Federal Reserve held rates and signalled just one cut before the end of the year, trimming its projection from three previously and offering a hawkish tilt to Wednesday's decision.

The central bank maintained the federal funds rate range at 5.25% to 5.50%, a 23-year high.

The Fed's latest economic projections, which includes the dot-plot of median interest rate expectations, suggests only one cut could be forthcoming before the end of 2024. The previous projection in March suggested three.

Four members of the Federal Open Market Committee said they expected to make no cuts, while seven said they thought they would make one quarter-point cut. Eight of the 19 members backed two cuts.

Analysts at Barclays commented: "As we had expected, the new summary of economic projections (was somewhat hawkish, showing a median of only one 25bp rate cut this year. This came despite a surprisingly weak May CPI inflation print. FOMC participants also lifted their longer​-​run dot to 2.75%.

"We continue to think the cut could take place at the earliest in September. Our baseline is predicated on inflation gradually moderating in the coming months on a sequential basis and the economy gradually slowing. However, if inflation is stronger than in our baseline, we would expect the first rate cut to be postponed to December. We view this as almost as likely as our baseline scenario."

The pound was quoted at USD1.2764 latte on Thursday in London, lower compared to USD1.2836 at the equities close on Wednesday. The euro stood at USD1.0763, down against USD1.0848.

Against the yen, the dollar was trading at JPY156.88, much higher compared to JPY155.77.

Focus turns to the Bank of Japan which announces an interest rate decision on Friday.

Rabobank analysts commented: "The soft stance of the JPY suggests the market sees little scope for a hawkish surprise from the BoJ at tomorrow's policy meeting. The market's bearish outlook on the JPY is an ongoing problem for Japanese policy makers, though it may present an opportunity for Governor Ueda to attempt to wrongfoot the consensus."

In London, shares in Halma jumped 13% as the safety equipment maker's earnings impressed. Pretax profit jumped 17% to GBP340.3 million in the financial year ended March 31 from GBP291.5 million a year prior, as revenue climbed 9.8% to GBP2.03 billion from GBP1.85 billion.

Halma recommended a final dividend of 13.20 pence per share, up 7.0% from 12.34p a year prior. This brings the total payout to 21.61p, up 7.0% from 20.20p.

AJ Bell analyst Russ Mould commented: "The company's focus on niche areas and providing technology-enabled health, safety and environmental solutions proved to be a winning formula yet again."

Stocks exposed to interest rate worries struggled, however. Housebuilder Persimmon lost 3.8% and property investor Land Securities fell 3.2%. The duo were among the worst FTSE 100 performers.

Wise plunged 11%. Disappointing guidance took the shine off a year of financial progress and customer gains.

In the financial year ended March 31, the London-based money transfer services provider reported that revenue jumped 24% to GBP1.05 billion from GBP846.1 million a year earlier.

Pretax profit rose to GBP481.4 million, more than triple GBP146.5 million a year prior. Underlying pretax profit rose to GBP241.8 million from GBP74.3 million.

Looking ahead, Wise expects 15% to 20% annual underlying income growth for financial 2025, "driven by customer growth."

Over the medium term, Wise expects to operate to an underlying pretax margin of 13% to 16%.

Broker Jefferies said the 2025 guidance for underlying income was, at its mid-point, 2% below the consensus of GBP1.41 billion.

Worse, Jefferies said the underlying pretax margin guidance implies pretax profit of GBP175 to GBP225 million, 19% below the consensus of GBP247 million.

Brent oil was quoted at USD82.53 a barrel late in London on Thursday, up from USD82.07 late Wednesday. Gold was quoted at USD2,307.79 an ounce, down against USD2,326.83.

Following Friday's BoJ decision, the economic calendar has eurozone trade data at 1000 BST.

The local corporate diary has a trading statement from grocer Tesco.

By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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