FTSE 100 live: London climbs to highest for two months after central banks hold rates

Both the FTSE 100 and FTSE 250 posted gains

The FTSE 100 has climbed to its highest level for almost two months on Thursday, despite caution from the Bank of England over expectations that interest rates will be slashed next year.

Europe’s top markets surged in early trading after they took their cues from the Federal Reserve meeting in the US on Wednesday.

The Fed held rates again but traders were most interested by the fact rate setters were pricing in at least three reductions to borrowing costs next year.

However, unchanged rates from the Bank of England and European Central Bank on Thursday pared back these gains.

The capital’s premier bluechip index was moved 1.33%, or 100.54 points, higher to finish at 7,648.98.

The Dax index was 0.08% lower for the day at the close and the Cac 40 closed up 0.66%.

By midday, after the Bank of England confirmed its third straight rate hold, the FTSE 100 was well into the green, trading at 7,699.14 up two per cent.

Meanwhile, the FTSE 250 index, which is more aligned with the UK domestic market, was soaring at 19,216.74, up 2.79 per cent.

This comes after the US Federal Reserve kept interest rates on hold for a third time in a row, as “inflation has eased over the past year but remains elevated”. 

After GDP dropped by 0.3 per cent this week, the Bank of England (BoE) has left interest rates on hold for a third time in a row and signalled it would not make cuts any time soon as it continues to battle inflation while keeping one eye on the state of the economy.

Interest rates remain at a 15-year high of 5.25 per cent after six of the central bank’s Monetary Policy Committee’s (MPC) nine members voted to hold at its final meeting of 2023.

CMC Markets analyst Michael Hewson said: “It had been widely anticipated that Fed chairman Jay Powell’s main challenge yesterday would be in trying to push back on the idea that the US central bank was ready to cut rates sharply over the next 12 months. With the sharp fall in yields since November there was an expectation that the loosening in financial conditions might put the central banks fight against inflation at risk.

“It was therefore quite surprising that yesterday’s statement and dot plots embraced that narrative, delivering an early Christmas present to the markets, returning the 2024 median for dot plots to 4.6 per cent, back to where it had been in September, while forecasting core PCE to decline to 2.4 per cent..

“At the press conference Powell tried to give the impression that the Fed retained the option to hike rates again, however this message is rather undermined by the fact that the FOMC cut their dot forecasts as much as they did. The admission that the FOMC discussed rate cuts was also noteworthy.

“If ‘higher for longer’ wasn’t dead before last night, it certainly is now, and certainly makes the job of both the Bank of England, as well as the ECB later today that much harder in maintaining a hawkish bias, with European markets set to open sharply higher, with new record highs expected for the DAX and CAC 40.”

To top off a key week for central banks, the European Central Bank will make its statement at 1315 GMT about rates in the Eurozone.

Markets update

Ocado’s shares were the biggest risers on the FTSE 100 by midday, up more than 9.8 per cent, while Ashtead and Entain also rose by around eight per cent each.

By midday, the biggest risers on FTSE 250 were National Express owner Mobico, up more than 10 per cent to 71.30 pence per share, and Currys, up more than 9.5 per cent, following its results this morning.

On a relatively quiet corporate morning, Currys recorded a 40 per cent drop in earnings before interest and tax (EBIT) in its UK and Ireland arm for the six months to 28 October. 

In disappointing results, its chief executive blamed the cost of living crisis, and difficulties in its ‘Nordics’ branch, to get back on track.

“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,” said chief executive Alex Baldock.

“In the Nordics, our trusted brands have delivered substantial gross margin gains, which combined with strong cost discipline have resulted in significantly improved profits. There’s still a long way back to healthy Nordics performance, but we’re on the way.”

Following its results, Currys share price went up 8.97 per cent by midday. Russ Mould, investment director at AJ Bell, said; “It was a good day to release positive news with the market in such a buoyant mood and today’s announcement from Currys, while not unblemished, certainly represented progress from the electronics retailer.

“For more than a year Currys has been a tale of Nordic noir as its previously reliable Scandinavian business has been beset by competitive pressures. Margins for this region being back at their level from two years ago will reassure shareholders that Currys is starting to put its problems behind it.

“Revenue is under pressure across the board, and the company chalked up a first-half loss, but it is telling it felt confident enough to stick with full-year guidance – hinting the Christmas trading period must be off to a solid enough start.

In other corporate news, government contractor Capita has reaped the rewards of a major restructure and sell off, with a boost in revenue and efficiency.

Meanwhile, Thames Water appointed former Aggreko chief executive Chris Weston as its new boss, as the embattled firm looks to turn the page on a miserable few years. 

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Delivery firm Bunzl said it expects profit for the year to the end of December to be “slightly ahead” of previous guidance, with chief executive Frank van Zanten saying: “I’m pleased with the performance Bunzl has delivered this year, reflecting the dedicated efforts of our people in supporting our customers around the world.

“The group is on track to deliver moderate adjusted operating profit growth, supported by a record operating margin, and we are guiding to further growth in 2024, continuing to build on the strong performance we have seen over recent year.”

Elsewhere as stability returned to the mortgage market over the past few weeks, the housing market has started to show signs of improvement, a new survey conducted by the Royal Institution of Chartered Surveyors (RICS) has said. 

A net balance of 11 per cent of property professionals reported sales falling rather than rising, narrowing from a reading of  23 per cent in October. 

While this suggests that buyer demand is still falling it is the least negative figure for this metric since April 2022.

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