31st Jul 2024 17:03
(Alliance News) - Markets in Europe got a boost on Wednesday, ahead of two key interest rate decisions, starting with the US Federal Reserve this evening.
The Bank of England will take the spotlight on Thursday, with markets eyeing an interest rate cut.
The FTSE 100 index closed up 93.57 points, 1.1%, at 8,367.98. The FTSE 250 ended up 168.20 points, 0.8%, at 21,600.71, and the AIM All-Share closed up 8.86 points, 1.1%, at 787.02.
The Cboe UK 100 ended up 0.9% at 834.70, the Cboe UK 250 closed up 0.3% at 18,858.58, and the Cboe Small Companies ended down 0.3% at 17,252.69.
The CAC 40 in Paris ended up 0.8%, while the DAX 40 in Frankfurt ended up 0.5%.
In New York, at the time of the London close, the DJIA was up 0.6%, the S&P 500 index was up 1.7%, and the Nasdaq Composite was up 2.6%.
After falling 7.0% on Tuesday, chipmaker Nvidia jumped 12%. Advanced Micro Devices rose 5.2% after results, but underwhelming Cloud sales saw Microsoft fall 1.3%, bucking the positive market trend.
Figures released on Wednesday showed the US labour market cooled in July.
ADP employment report showed US private sector employers added 122,000 jobs in July, easing from 155,000 in June. June's reading was upwardly revised from 150,000.
Job growth of 150,000 was expected for July, according to FXStreet, so the actual reading fell short.
Pay gains also slowed this month. Year-on-year pay hikes for job stayers eased to 4.8% in July, the slowest pace in three years, from in 4.9% June. For job changers, pay growth cooled to 7.2% from 7.7%.
The news boosted hopes that the Federal Reserve would cut interest rates at its September meeting.
On Wednesday, though, the US central bank is widely expected to leave interest rates unchanged but investors think it lay the ground work for a September rate reduction.
The decision will be announced at 1900 BST on Wednesday.
"With encouraging inflation data and the labour market showing signs of moderation, we expect the [Federal Open Market Committee] to hint at a September rate cut. But with key data to come in the next several weeks and markets having already priced in a September cut, we see little upside for the FOMC to provide a strong signal," Barclays said.
On Thursday, the Bank of England will make its interest rate call with the decision viewed as finely balanced.
Goldman Sachs expects the Monetary Policy Committee to vote 5-4 to cut bank rate by 25 basis points to 5.00%.
"The totality of the data continues to show significant progress on curbing inflationary pressures, and we think that the updated projections will continue to show inflation slightly undershooting the target two to three years ahead even if the MPC lowers Bank Rate in line with the market-implied path. We think that this will be enough for [Andrew] Bailey, [Sarah] Breeden, and [Clare] Lombardelli to join [Dave] Ramsden and [Swati] Dhingra in voting for a cut, despite recent strength in services inflation."
"That said, limited communication from these committee members means that their votes are difficult to predict," the investment bank added.
"We therefore view the decision to lower bank rate as a close call and see a low bar for the MPC to delay the first cut until September."
The pound was quoted at USD1.2844 at the London equities close Wednesday, higher compared to USD1.2829 at the close on Tuesday. The euro stood at USD1.0826 at the European equities close Wednesday, up against USD1.0808 at the same time on Tuesday. Against the yen, the dollar was trading at JPY150.36, sharply lower compared to JPY153.88 late Tuesday, on the back of a Bank of Japan rate hike.
Boosting the FTSE 100, mining stocks Antofagasta, Glencore and Anglo American rose 4.6%, 3.2% and 3.2% respectively.
Also on the rise, HSBC shares climbed 4.0%. It announced a share buyback programme of up to USD3 billion as it reported a slightly lower pretax profit after a fall in net interest income.
It posted a pretax profit of USD21.56 billion for the first half of 2024, down 0.5% from USD21.66 billion a year prior. The lender's net interest income fell 7.4% to USD16.91 billion from USD18.26 billion. Profit beat consensus of around USD20.5 billion, however.
Shell rose 2.7% ahead of half-year results on Thursday and as the oil price firmed on rising tensions in the Middle East.
Brent oil was quoted at USD80.37 a barrel at the London equities close Wednesday, up from USD78.51 late Tuesday.
Gold was quoted at USD2,423.09 an ounce at the London equities close Wednesday, higher against USD2,384.97 at the close on Tuesday.
Leading the FTSE 100 fallers, InterContinental Hotels Group slipped 3.0% after industry peer Marriott International cut guidance and warned of softer trading in China and North America. Marriott was 5.6% lower in New York on Wednesday.
GSK fell 2.0% as raised guidance was overshadowed by an underwhelming performance at its Vaccines arm and disappointing Shingrix sales.
Citi analyst Peter Verdult said while second quarter revenue and adjusted EPS beat expectations by 5% and 12% respectively, and full year guidance was raised, "we anticipate investor focus to fall on the lowered expectations for the vaccines division as a result of uncertainty around the target Arexvy patient population in the US following the June [Advisory Committee on Immunization Practices] meeting and slowing US Shingrix momentum."
"The vaccines portfolio was weaker, missing consensus by 9%," he noted while Shingrix missed by 20%, driven by weakness in the US.
In the FTSE 250, Rathbones rose 7.5% after it said it was ahead of target in the first half of 2024, with the company achieving synergies and gaining additional funds following its merger with Investec Wealth & Investment.
The London-based investment and wealth management company said that in the six months that ended June 30, pretax profit more than doubled to GBP65.3 million from GBP26.0 million.
Rathbones raised its interim dividend by 3.4% to 30 pence per share from 29p before.
Elsewhere, Metro Bank soared 30% after the high-street lender upped its outlook, believing a return to profit is in the offing this year.
Ferrexpo rose 4.0% after the producer of iron ore pellets in Ukraine reported a 64% rise in revenue to GBP548.5 million for the first half of 2024, from GBP334.0 million a year prior. Its pretax profit more than doubled to GBP75.7 million from GBP35.4 million.
Thursday's UK corporate calendar is packed with FTSE 100 heavyweights. BAE Systems, Barclays, Mondi, Next and Shell are among those reporting earnings.
Still to come on Wednesday, the US interest rate decision. On Thursday, the Bank of England follows with its rate call. There is also weekly jobless claims data in the US due out.
By Jeremy Cutler, Alliance News reporter
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