8th May 2025 12:10
(Alliance News) - European equities traded higher on Thursday afternoon, in the wake of a Bank of England interest rate cut, and after the US president signalled a "full and comprehensive" trade deal with the UK.
The BoE lowered bank rate by 25 basis points to 4.25%, as expected, though the vote split highlighted some division within the nine-strong monetary policy committee. Two voted to leave rates unchanged, and two preferred a heftier 50 basis points. Among the five that voted for the quarter-point cut was Governor Andrew Bailey, who speaks at a press conference shortly.
Sterling traded at USD1.3313 early Thursday afternoon, down from USD1.3342 at the time of the London equities close on Wednesday, but up from below the USD1.33 level before the rate decision.
The FTSE 100 index rose 23.98 points, 0.3%, at 8,583.31. It lost some ground following the BoE decision, however.
The FTSE 250 added 205.37 points, 1.0%, at 20,542.37, similarly sitting at a slightly weaker level than it did before the BoE decision. The AIM All-Share climbed 6.27 points, 0.9% at 719.53.
The Cboe UK 100 was up 0.4% at 855.80, the Cboe UK 250 rose 0.8% at 17,982.69, and the Cboe Small Companies was 0.2% higher at 15,706.62.
In Paris, the CAC 40 shot up 1.1%, while the DAX 40 in Frankfurt surged 1.2%.
"There has been substantial progress on disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations. That progress has allowed the MPC to withdraw gradually some degree of policy restraint, while maintaining bank rate in restrictive territory so as to continue to squeeze out persistent inflationary pressures," the BoE said.
The BoE maintained that a "gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate". Some analysts predicted that the BoE would change that wording in its policy, however.
The euro fell to USD1.1295 early Thursday afternoon, from USD1.1344 at the time of the London equities close on Wednesday. Against the yen, the dollar rose to JPY144.70 from JPY143.39.
The Fed can afford to be patient with monetary policy as it awaits to see the full impact of US trade policy on the economy, Fed Chair Jerome Powell said on Wednesday.
"We think we can be patient, we are going to be watching the data," Powell said, noting there is so much uncertainty about the scale, scope and timing of tariffs.
Speaking to reporters, Powell said the Fed can move quickly when "that's appropriate" but won't make progress on its goals this year if tariffs stay.
At the conclusion of its two-day meeting the Federal Open Market Committee voted unanimously to maintain the target range for the federal funds rate at 4.25-4.50%.
In New York, the Dow Jones Industrial Average is called up 0.8%, the S&P 500 1.0% higher and the Nasdaq Composite up 1.4%.
US President Donald Trump on Thursday called a forthcoming agreement with Britain "full and comprehensive", after reports the two countries were expected to sign a trade deal.
"The agreement with the UK is a full and comprehensive one that will cement the relationship between the US and the UK for many years to come," Trump posted on his TruthSocial network.
"Because of our long time history and allegiance together, it is a great honor to have the UK as our FIRST announcement. Many other deals, which are in serious stages of negotiation, to follow!"
Trump is set to hold a press conference in the Oval Office at a 1000 EDT, 1500 BST, where he is expected to reveal the agreement.
It would be the first such trade agreement since Trump imposed sweeping tariffs on US trading partners on what he called "Liberation Day" on April 2.
Prime Minister Keir Starmer will provide an update on trade talks with the US later on Thursday, Downing Street has said.
"The Trump administration has already caused turmoil in the business world with the Liberation Day tariff plan. We’re now entering the next phase as countries do deals with the US, and Trump once again changes the rules as he rips up Joe Biden’s playbook," AJ Bell analyst Russ Mould commented.
"A deal of some kind is expected to be announced today between the UK and the US. It’s hoped that the agreement will lower tariffs imposed on certain UK goods sold into the US, but nothing is certain with Trump until we get the full details."
Mould added: "At the same time, heightened tensions between India and Pakistan are being watched closely, with investors hoping the situation does not escalate further."
In London, Mondi shares rose 4.0%, among the best FTSE 100 performers. The Weybridge, England-based packaging firm said underlying earnings before interest, taxes, depreciation and amortisation was EUR290 million for the first quarter of 2025, up 11% from EUR261 million in the fourth quarter last year. Underlying Ebitda surged 36% from EUR214 million in the first quarter last year.
The company said higher sales volumes, good cost control and fewer planned maintenance shuts in the first quarter offset lower average selling prices when compared to the last three months of 2024.
At the other end of the index, British Gas owner Centrica shed 6.7%. It backed annual profit guidance but said the warm weather had hit British Gas, while its Energy unit faced "challenging" markets.
The Berkshire, England-based energy and services company said British Gas Residential Energy has been impacted by warmer than normal weather in the second quarter but is still expected to be within its medium-term sustainable adjusted operating profit range in 2025.
In addition, adjusted operating profit at Centrica Energy is expected to be towards the bottom of its range for the year, with profitability heavily weighted to the second half, the firm added.
This is primarily due to more "challenging" market conditions in the gas & power trading segment, Centrica noted.
Elsewhere in London, S4 Capital fell 2.0%. The advertising agency reported a decline in first-quarter revenue as it grapples with "volatile global macroeconomic conditions" which kept a lid on client spend.
Revenue in the three months to March 31 fell 15% to GBP178.1 million from GBP210.2 million. Net revenue declined 12% to GBP163.7 million from GBP186.4 million.
"As indicated previously, trading in the first quarter reflects the continuing impact of, to say the least, volatile global macroeconomic conditions. As a result, clients remain generally cautious, with technology clients, which account for almost half our revenue, in particular, continuing to prioritise capital expenditure on AI over operating expenditure, such as marketing," Executive Chair Martin Sorrell said.
A barrel of Brent rose to USD62.05 on Thursday afternoon, from USD61.45 late Wednesday. Gold traded at USD3,339.45 an ounce, falling from USD3,386.18.
By Eric Cunha, Alliance News news editor
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