FTSE 100 up slightly, all eyes on ECB interest rate decision
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FTSE 100 up slightly, all eyes on ECB interest rate decision

Jun 15, 2023

Stock prices in London rose in the morning on Thursday, as investors eye a key interest rate decision from the European Central Bank, just a day after the US central bank lifted its rates.

The FTSE 100 index was up 16.29 points, 0.2%, at 7,693.18. The FTSE 250 was up 144.87 points, 0.8%, at 19,331.41, and the AIM All-Share was up 2.87 points, 0.4%, at 769.02.

The Cboe UK 100 was up 0.3% at 767.45, the Cboe UK 250 was up 1.0% at 17,017.26, and the Cboe Small Companies was up 0.1% at 13,754.58.

Overall, global market sentiment was positive, with investors forecasting that Wednesday’s interest rate hike from the Federal Reserve would be the last in this cycle of monetary tightening.

In a move priced in by financial markets, the central bank’s Federal Open Market Committee raised its funds rate by a quarter percentage point to a target range of 5.25%-5.50%. Wednesday’s increase followed a brief reprieve at the previous meeting in June, when the FOMC held the benchmark rate steady.

‘As expected, the US Federal Reserve increased rates by 25 basis points overnight but there was no indication of a definite hike when the central bank next meets in September and there is hope inflation can be brought under control without inflicting too much economic damage across the Atlantic,’ said AJ Bell investment director Russ Mould.

‘Whether the same is true on this side of the pond remains to be seen – with the European Central Bank, and its counterparts at the Bank of England, facing a more stubborn challenge on inflation.’

The ECB will announce its interest rate decision at 1315 BST on Thursday, while the Bank of Japan will end the week on Friday with its own monetary policy call.

Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index up 0.6%, and the Nasdaq Composite up 1.3%.

In European equities on Thursday, the CAC 40 in Paris was up 1.3%, while the DAX 40 in Frankfurt was up 0.8%.

The pound was quoted at $1.2972 at midday on Thursday in London, higher compared to $1.2931 at the equities close on Wednesday. The euro stood at $1.1149, higher against $1.1074. Against the yen, the dollar was trading at JP¥139.99, down compared to JP¥140.33.

In the FTSE 100, St James’s Place was down 16%, despite swinging to an interim profit and increasing its funds under management.

The Cirencester, Gloucestershire-based wealth manager reported an IFRS pretax profit of £385.0 million in the six months that ended June 30, swung from a £295.5 million loss a year before. IFRS stands for international financial reporting standards.

Fund under management totalled £157.5 billion on June 30, a new record high and up 6.1% from £148.4 billion on December 31.

‘This has been a challenging period for many UK savers and investors who have had to contend with high and persistent inflation, rising borrowing costs, a mini banking crisis in the US and attendant stock market volatility, and continued macro-economic and geo-political uncertainty,’ commented Chief Executive Officer Andrew Croft.

Centrica jumped 6.0%.

The Windsor, England-based owner of British Gas said it swung to a pretax profit of £6.42 billion from a pretax loss of £1.18 billion a year prior. This was partly driven by a 44% reduction in the cost of sales to £5.10 billion. Net finance costs also fell by 54% to £36 million.

Revenue soared by 60% to £16.52 billion from £10.32 billion the year before.

Centrica declared an interim dividend of 1.33 pence per share, up 33% from 1.0p per share the year before.

However, the company said looking ahead that it expects growth to slow in the second half of 2023.

‘Centrica needs to tread carefully given many households are struggling to pay the bills. The scandal over forced installation of pre-payment meters means the company is already skating on thin ice,’ said AJ Bell’s Mould.

‘Political and regulatory pressure may mount on the business if it continues to show largesse with its shareholder returns while taking a hard line with vulnerable customers. All in all, these stonking numbers could put Centrica in the firing line.’

In the FTSE 250, Jupiter Fund Management jumped 13%, after positing a ‘good start’ to the year.

Jupiter said that assets under management rose to £51.4 billion from £48.8 billion. Pretax profit surged to £34.8 million from £18.8 million. Peel Hunt’s Stuart Duncan noted that these results are ‘well ahead of expectations.’

Amongst London’s small-caps, Lookers jumped 26%.

Global Auto Holdings said it has agreed with the board of Lookers on an increased cash offer of 130p in cash for the company.

Global Auto is the bidding vehicle of Alpha Auto Group Holdings LP, a Toronto-based operator of auto retail dealerships across North America. It had previously offered to pay 120p per share for Lookers, which is based outside of Manchester.

A week ago, the agreed takeover offer was declared dead in the water, as Lookers’ largest shareholder withdraws the letter of intent it had given to the bidder. On Thursday, it confirmed it has reached an agreement with the board of Lookers for the increased offer.

‘As the increased offer is to be implemented by way of a takeover offer, the board of Lookers will propose a resolution to adjourn the court meeting and general meeting which are due to take place today in connection with the Scheme indefinitely and they will not be rescheduled,’ Lookers said.

Headlam shed 10%.

The floor-coverings distributor warned recent trading volumes have been weaker than expected, with recovery now expected to be a more prolonged process. It noted independent data show that DIY/Home Improvement spend is the most affected non-essential category by lower consumer spending.

On the back of the update, Peel Hunt lowered its rating for Headlam to ’hold’ from ’buy’.

Brent oil was quoted at $83.11 a barrel at midday in London on Thursday, lower from $83.16 late Wednesday. Gold was quoted at $1,976.43 an ounce, down against $1,974.44.

Thursday’s economic calendar has a European Central Bank interest rate decision at 1315 BST, before a press conference with President Christine Lagarde. There is a US gross domestic product reading at 1330 BST.

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