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London open: Stocks edge lower as Fed signals just one rate cut this year
London stocks edged lower in early trade on Thursday as investors mulled the latest policy announcement from the US Federal Reserve, which signalled there would be just one rate cut this year.
At 0825 BST, the FTSE 100 was down 0.2% at 8,199.64.
The Fed held interest rates on Wednesday at between 5.25% and 5.5% and marked down its forecast for the number of rate cuts this year to just one from three in March.
Oxford Economics said: “The FOMC’s updated projections won’t change our forecast for two rate cuts this year, however, with the first to come in September.
“We expect a string of more favourable inflation releases – on the heels of Wednesday’s softer-than-expected May CPI report – will clear the way for the Fed to lower rates in September.”
On home shores, a survey released earlier by the Royal Institution of Chartered Surveyors (RICS) showed the recovery in the housing market “slipped into reverse” after Prime Minister Rishi Sunak called a general election.
The monthly net balance of house prices fell to -17 in May from a downwardly revised -7 in April, marking the lowest reading since January.
Meanwhile, the RICS new buyer enquiries gauge fell to -8 from -1, marking the lowest reading since November.
RICS senior economist Tarrant Parsons said: “The recent recovery across the UK housing market appears to have slipped into reverse of late, with buyer demand losing momentum slightly on the back of the upward moves seen in mortgage rates over the past couple of months.
“Nevertheless, expectations point to this delaying, rather than derailing, a modest improvement going forward.”
In equity markets, Intermediate Capital, Land Securities, JD Sports, Compass and LondonMetric all fell as they traded without entitlement to the dividend.
St James’s Place was in the red as it appointed the chief financial officer of Credit Suisse’s UK operations – Caroline Waddington – as its new CFO, replacing Craig Gentle who will be retiring from the business after six years leading the finance function.
On the upside, BT Group rallied after Mexican billionaire Carlos Slim took a 3.2% stake in the telecoms firm. According to a regulatory filing late on Wednesday, the stake – worth around £400m – was taken by Slim’s family business Inbursa.
Halma gained after it reported another year of record profit and revenue as it hailed a solid performance in the safety and the environment & analysis sectors. In the year to the end of March 2024, adjusted pre-tax profit rose 10% to £396.4m on revenue of £2.03bn, up 10% on the previous year.
Virgin Money was little changed after it posted an 18% jump in interim profit as it continued to benefit from higher interest rates and a lower bad debt charge, but said it expected headwinds in the second half of the year with the Bank of England expected to cut its benchmark base rate.
Pre-tax profit for the six months to March 31 came in at £279m from £236m a year earlier. Net interest income rose 2% to £868m, while net interest margin – the difference between the bank’s lending and savings rates – was up three basis points to 1.94%.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Halma Plc | +9.87% | +232.00 | 2,582.00 |
| 2 |  |
Bt Group Plc | +2.82% | +3.65 | 133.05 |
| 3 |  |
Relx Plc | +0.81% | +29.00 | 3,601.00 |
| 4 |  |
British American Tobacco Plc | +0.42% | +10.00 | 2,391.00 |
| 5 |  |
Ocado Group Plc | +0.32% | +1.10 | 350.00 |
| 6 |  |
Intercontinental Hotels Group Plc | +0.27% | +22.00 | 8,216.00 |
| 7 |  |
Sainsbury (j) Plc | +0.16% | +0.40 | 256.80 |
| 8 |  |
Gsk Plc | +0.16% | +2.50 | 1,607.50 |
| 9 |  |
Bae Systems Plc | +0.14% | +2.00 | 1,390.50 |
| 10 |  |
Melrose Industries Plc | +0.13% | +0.80 | 633.20 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Land Securities Group Plc | -2.80% | -18.00 | 624.50 |
| 2 |  |
Fresnillo Plc | -2.07% | -11.50 | 543.00 |
| 3 |  |
Johnson Matthey Plc | -1.97% | -32.00 | 1,595.00 |
| 4 |  |
Croda International Plc | -1.92% | -82.00 | 4,188.00 |
| 5 |  |
Tui Ag | -1.91% | -11.50 | 591.50 |
| 6 |  |
Itv Plc | -1.78% | -1.40 | 77.10 |
| 7 |  |
Marks And Spencer Group Plc | -1.72% | -5.20 | 297.10 |
| 8 |  |
Ashtead Group Plc | -1.63% | -94.00 | 5,666.00 |
| 9 |  |
Prudential Plc | -1.60% | -11.60 | 713.80 |
| 10 |  |
Rentokil Initial Plc | -1.59% | -7.50 | 464.70 |
US close: S&P 500, Nasdaq hit new highs after CPI data and FOMC meeting
US stocks finished mostly higher on Wednesday with the S&P 500 and Nasdaq reaching new highs after data showed a larger-than-expected slowdown in inflation and the Federal Reserve gave more visibility around the interest-rate outlook.
The Dow closed down 0.1% at 38,712.21, while the S&P 500 gained 0.9% to a new peak of 5,421.03, while the Nasdaq finished 1.5% higher at an all-time high of 17,608.44.
Ahead of the opening bell, data from the Department of Labor showed that the consumer price index (CPI) was flat in May on seasonally adjusted terms – the first such occurrence since July 2022. Economists had pencilled in an increase of 0.1% after a 0.3% gain in April. In annual terms, the increase in headline CPI eased to 3.3% from 3.4% the month before, while the core rate fell to 3.4% from 3.6% – with both undershooting expectations by 0.1 percentage points.
Wall Street opened on the front foot following the data, with gains mostly held as the Federal Open Market Committee concluded its two-day policy meeting. As expected, the Fed chose to keep interest rates unchanged, but the ‘Dot Plot’ graph showed policymakers are now predicting just one rate cut in 2024, compared with earlier forecasts for three cuts.
“After the Fed meeting, the market is now pricing in a 55% chance of a rate cut in September, slightly lower than the 65% expected after the CPI report, and a 75% chance of a rate cut in December,” said Kathleen Brooks, research director at XTB.
In the subsequent press conference, Fed chair Jerome Powell said Wednesday’s CPI data was a “step in the right direction”, but cautioned about getting too carried away “by any single data”.
“Until we get the next main data print, the core PCE, that is due for release later this month, we may not see too much adjustment in financial markets. We think that interest rate expectations will stay around this level until the core PCE report,” Brooks said.
The yield on a 10-year US Treasury note was down 8.5 basis points at 4.320% by the close of trade in New York.
Market movers
Apple shares gained another 3%, extending their stellar run following the announcement of the company’s new Apple Intelligence AI system. The stock finished at the $213.07 mark, giving it a market capitalisation of $3.27trn, pulling back after touching a record high of $220.20 in afternoon trade which saw it briefly surpass Microsoft as the world’s most valuable publicly listed company.
Also in the tech sector, Oracle surged 13% to its highest-ever level after announcing partnerships with Google and OpenAI, with investors shrugging off worse-than-expected quarterly results.
Casey’s General Stores managed to impress with its quarterly earnings and revenues, sending the convenience store stock up 17%, while semiconductor group Broadcom was on the rise ahead of its results due out after the closing bell.
Thursday newspaper round-up: Revolut, BT Group, housing market
Pensioners and people on disability benefits are the winners from radical changes to the welfare system made by the Tories over the last decade, while working-age families are losing out by thousands of pounds every year, according to a report by the Resolution Foundation. The Conservatives’ 14-year overhaul of social security has shifted spending away from children and housing to supporting elderly people, and broken the link between entitlement and need for some of the poorest households in the country, the report says. – Guardian
Keir Starmer will put economic growth and wealth creation at the heart of Labour’s offer to voters as he launches a business-friendly manifesto targeted at former Conservative voters. The Labour leader will launch his election manifesto in Greater Manchester on Thursday, promising to emphasise economic stability in a deliberate contrast to the Conservatives’ more policy-heavy offering earlier this week. – Guardian
Revolut has signed a 10-year lease on a skyscraper in the heart of Canary Wharf in a boost for the financial district. The financial technology business has taken the top four floors of the recently refurbished 30 South Colonnade – now known as YY London. The building will feature two Revolut logos on either side, subject to planning permission, with a move-in date earmarked for May 2025. – Telegraph
Mexican billionaire Carlos Slim has bought a £400m stake in BT weeks after chief executive Allison Kirkby unveiled a bold shake-up of the telecoms giant. Latin America’s richest man, worth $93bn (£72.4bn), on Tuesday disclosed a 3.2pc stake in the FTSE 100 group, making him one of BT’s largest shareholders. The swoop by Mr Slim, who made his money in telecoms in Latin America, is likely to prompt speculation about his intentions. – Telegraph
The housing market’s nascent recovery in the early months of this year has already “slipped into reverse”, with mortgage rates having edged higher again in recent weeks. Estate agents are taking fewer inquiries from would-be buyers, agreeing fewer sales and seeing more price reductions than they were only a month or so ago, according to the most recent industry survey from the Royal Institution of Chartered Surveyors. – The Times
