Stocks rally on dovish Fed; eyes on Boe, ECB

(Alliance News) - Stock prices in London rallied at the open on Thursday, as investors celebrated anticipated cuts to US interest rates in 2024.

Investors are also eyeing key interest rate decisions from the Bank of England and European Central Bank, with both expected to follow in the Fed's footsteps and leave rates unchanged.

The FTSE 100 index opened up 155.54 points, 2.1%, at 7,703.98. The FTSE 250 was up 598.88 points, 3.2%, at 19,294.64, and the AIM All-Share was up 10.59 points, 1.5%, at 734.69.

The Cboe UK 100 was up 1.9% at 768.77, the Cboe UK 250 was up 3.4% at 16,736.57, and the Cboe Small Companies was basically flat at 14,109.71.

In European equities on Thursday, the CAC 40 in Paris was up 1.5%, while the DAX 40 in Frankfurt was up 1.3%. German stocks reached a record high on Thursday, buoyed by the US Fed. It soared past 17,000 points.

The BoE announces its rate decision at 1200 GMT, before the ECB at 1315 GMT. A press conference with President Christine Lagarde follows the ECB decision at 1345 GMT. There is no post-decision conference for the BoE this time.

The US Federal Reserve was the first of the central banks to make an interest rate decision.

On Wednesday, the US Fed left its benchmark interest rate unchanged, as expected, but signalled rate cuts of as much as 75 basis points in the coming year.

The decision from the Federal Open Market Committee extends a pause in monetary policy that has been in place since July, leaving the federal funds rate at a 22-year high of 5.25% to 5.5%.

But the economic projections that accompanied the US central bank's statement showed that most Federal Reserve officials forecast that the US central bank could cut rates by around 75 basis points next year.

"The Federal Reserve wraps up the year with a resounding finale. The Fed is not bothered to see the US yields fall in preparation for a rate cut. On the contrary, they endorsed the idea of a policy pivot thanks to an encouraging fall in inflation and sounded way more dovish than everybody expected at their announcement yesterday – which clearly exposed that the policy pivot is coming," said Swissquote Bank Ipek Ozkardeskaya.

"This is the major take of the final FOMC meeting of the year, and it was totally unexpected."

In the US on Wednesday, Wall Street ended higher, as investors celebrated the dovish twist. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite were all up 1.4%.

The news sparked a sharp fall in the dollar. The pound was quoted at USD1.2624 early on Thursday in London, higher compared to USD1.2525 at the equities close on Wednesday. The euro stood at USD1.0884, higher against USD1.0792.

Gold also rallied following the decision. Gold was quoted at USD2,033.32 an ounce on Thursday morning, up against USD1,983.30 late Wednesday.

Gold wasn't the only thing rallying on Thursday morning. FTSE 100 firms shot up as investors brought, leaving just four company's in the red on the index. BAE Systems lost 1.8%, Relx shed 0.4%, AB Foods was down 0.1% and Centrica down 0.1%.

At the top of the index were Ocado, Endeavour Mining and Segro, up 11%, 6.8% and 6.5%, respectively.

Bunzl rose 2.2%, after it upgraded its profit outlook.

The distribution firm said it expects adjusted operating profit in 2023 to be slightly ahead of prior guidance.

Revenue is expected to be broadly in line with 2022, at constant exchange rates and excluding the impact of the disposal of its UK healthcare business. Inclusive of the disposal of its UK healthcare business, total revenue in 2023 is expected to be 1 to 2% lower than in 2022, at constant exchange rates, and with currency over the year expected to have minimal impact.

In the FTSE 250, Currys shot up 11%.

Currys hailed a "solid" performance in the half year ended October 28, despite a tough environment.

The consumer electronics retailer noted that like-for-like revenue fell 4% whilst adjusted pretax loss was GBP16 million, in line with the prior year.

Chief Executive Alex Baldock said: "Our priorities this year are simple: to get the Nordics back on track, to keep up the UK&I's encouraging momentum, while strengthening our balance sheet and liquidity. We're making good progress on all these in a still challenging economic environment."

Amongst London's small-caps, abrdn Diversified Income & Growth climbed 11%.

In October, the investor had announced a strategic review into the company. On Thursday, it said it plans to wind down the company.

The review sought to address the material discount to net asset value at which its shares have traded and consider how best to deliver shareholder value.

Marston's rose 6.9%. JPMorgan raised the company's stock to 'overweight' from 'neutral'.

In Asia on Thursday, the Nikkei 225 index in Tokyo was down 0.7%. In China, the Shanghai Composite closed down 0.3%, while the Hang Seng index in Hong Kong was up 1.1%. The S&P/ASX 200 in Sydney closed up 1.7%.

Against the yen, the dollar was trading at JPY142.04, lower compared to JPY145.11.

Brent oil was quoted at USD74.71 a barrel early in London on Thursday, up from USD73.80 late Wednesday.

By Sophie Rose, Alliance News senior reporter

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