2nd Feb 2023 12:09
(Alliance News) - Stock prices in London were higher at midday on Thursday, after the Bank of England and US Federal Reserve announced interest rate hikes in line with market expectations.
The FTSE 100 index was up 32.86 points, 0.4%, at 7,793.97. The FTSE 250 was up 376.01 points, 1.9%, at 20,274.55, and the AIM All-Share was up 8.44 points, 1.0%, at 881.64.
The Cboe UK 100 was up 0.4% at 779.16, the Cboe UK 250 was up 1.8% at 17,691.28, and the Cboe Small Companies was up 0.2% at 14,087.82.
The BoE's Monetary Policy Committee raised the UK bank rate by 50 basis points - half a percentage point - to 4.0%. Of the nine policymakers, 7 voted for the 50-point hike and 2 for no change.
On Wednesday, the Federal Reserve raised US interest rates by 25 basis points, slowing from 50 points in December and 75 points per meeting earlier in 2022. The Federal Open Market Committee lifted the target range for the federal funds rate to 4.50% to 4.75% from a previous range of 4.25% to 4.50%. All twelve members of the committee voted for the rise.
Next up, the European Central Bank will unveil its interest rate decision at 1300 GMT, with a 50-basis-point hike expected.
In a hawkish press conference after the release of the ECB's monetary policy statement in December, President Christine Lagarde had said: "We should expect to raise interest rates at a 50-basis-point pace for a period of time."
This will take the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility to 3.00%, 3.25% and 2.50%, respectively. They currently stand at 2.50%, 2.75% and 2.00%.
Eurozone consumer price inflation slowed in January, according to a flash estimate from Eurostat, released on Wednesday. The eurozone annual inflation was estimated at 8.5% last month, down from 9.2% in December. A year earlier, the inflation rate for January was 5.1%. On a monthly basis, consumer prices in the eurozone fell by 0.4% in January.
Back in the US, in a press conference that followed the Fed's decision on Wednesday, Chair Jerome Powell said the central bank will need "substantially more evidence" to be confident that inflation is on a sustained downward path in the US, despite "encouraging" recent developments.
Looking ahead, the Fed said it anticipates that ongoing increases in the target range "will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time".
"Investors got a bit of a reality check from the Federal Reserve again," said AJ Bell investment director Russ Mould.
"The headline news was much as expected with the scale of the rate hike dialled back to 25 basis points. However, Fed chair Jerome Powell poured cold water on any potential pivot in the near term as he pointed to at least a couple more increases to come and no reduction in rates until 2024.
"Yet for the time being the market seems minded to concentrate on the positives, with Powell noting the 'disinflationary process has started'."
Wall Street is expected to continue its rally on Thursday, with stocks called open higher. The Dow Jones Industrial Average is called marginally up, the S&P 500 index up 1.1%, and the Nasdaq Composite up 2.0%.
The dollar was lower after the Fed decision.
The pound was quoted at USD1.2344 shortly after the BoE decision, up from USD1.2332 just before and USD1.2315 at the London equities close on Wednesday.
The euro stood at USD1.0998, up against USD1.0919. Against the yen, the dollar was trading at JPY128.76, down compared to JPY129.28.
In European equities on Thursday ahead of the ECB decision, the CAC 40 in Paris was up 0.6% and the DAX 40 in Frankfurt was up 1.5%.
In the FTSE 100, JD Sports jumped 7.8%, making it the London's best blue-chip performer around midday.
The Lancashire-based sportswear retailer plans to open 250 to 350 new stores annually over the next five years.
It will pay for all this from a target for cash generation of GBP1 billion per year, as well as double-digit revenue growth, double-digit market share in key regions, and double-digit operating margin.
Chief Executive Officer Regis Schultz said: "Today marks a new, distinct chapter in the growth story of JD as we set our plans to become the leading global sports-fashion powerhouse. Building on our strong existing position and attractive long-term market dynamics, we see significant growth opportunities ahead by expanding JD internationally, notably in North America and Europe. We will also be enhancing our omni-channel retail offering, investing in technology and analytics, and leveraging our long-term strategic brand partnerships, to better serve more customers.
"Our track record of disciplined investment and strong retail execution means that JD is extremely well positioned to capitalise on its material headroom for growth globally and continue delivering value for shareholders."
FTSE 100 heavyweight Shell gained 2.8%, after it announced a multi-billion-dollar share buyback.
Oil major Shell set out plans for USD4 billion share buyback, having recently completed a repurchase programme of the same size.
The company rounded off 2022 with a fourth-quarter revenue rise of 12% to USD101.20 billion, from USD90.22 billion in 2021. Pretax profit edged by a more modest 1.1% on-year to USD16.44 billion from USD16.27 billion, as total expenditure was 15% higher at USD84.75 billion.
Fourth-quarter adjusted earnings, however, jumped 54% to USD9.81 billion from USD6.39 billion. Adjusted EPS rose to USD1.39 from USD0.83.
For the whole of 2022, adjusted earnings more than doubled to a record USD39.87 billion from USD19.29 billion. Adjusted EPS surged to USD5.43 from USD2.49.
Shell made a yearly pretax profit of USD64.81 billion, more than doubling from USD29.83 billion. Revenue for 2022 soared 42% to USD386.20 billion from USD272.66 billion.
It was a year when Shell benefited from skyrocketing oil prices. The price of Brent topped the USD130 mark in the wake of Russia's invasion of Ukraine, and as demand for the commodity picked up as Covid curbs across the globe eased.
Brent oil was quoted at USD82.62 a barrel at midday in London on Thursday, down from USD84.42 late Wednesday.
"Whatever the context this was a truly stunning set of numbers from Shell, way ahead of what forecasts had pencilled in and the highest profit in its entire history," AJ Bell's Mould said.
"When many others are enduring economic hardship the optics aren't great, and they will do nothing to quieten demands for further windfall taxes to redistribute some of the bounty Shell has enjoyed this year thanks to the Ukraine-inspired disruption to global energy markets."
Shell declared a dividend of USD0.29 for its fourth quarter, up from USD0.24 a year earlier; this brings the full-year dividend to USD1.04 up from USD0.89.
BT gained 2.5%. The telecommunications operator reported a drop in revenue and profit, following the removal of BT Sports revenue to a new joint venture.
In the nine months to December 31, the telecommunications firm said revenue edged down 1.0% to GBP15.59 billion from GBP15.68 billion a year before.
BT said this was due to lower global strategic equipment sales, the migration of a MVNO customer, removal of BT Sport revenue and the decline of legacy products. These factors offset improved trading and price increases in Openreach and Consumer divisions.
In May of last year, BT agreed to a deal with Warner Bros Discovery which saw BT Sport and Eurosport combine. Adjusting for its new Sports joint venture, revenue was up GBP65 million.
Pretax profit dropped 15% to GBP1.31 billion from GBP1.54 billion.
"Despite extraordinary energy costs and other inflationary headwinds, we are reaffirming our outlook for the year," said Chief Executive Philip Jansen.
Gold was on the rise on Thursday, amid the dollar weakness, quoted at USD1,953.75 an ounce against USD1,928.82.
In the economic calendar on Thursday, alongside the ECB's interest rate decision, there also is the weekly unemployment insurance claims report from the US at 1330 GMT.
By Sophie Rose, Alliance News reporter
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