Early market roundup: FTSE 100 down as US bond move fails to inspire

Stock prices in Europe were mostly higher on Thursday morning, though the FTSE 100 faded, as investors expect the European Central Bank to announce a rate hike later.

Despite the advance in Europe, and a late turnaround in Tokyo which saw the Nikkei 225 end in the green, the mood in equity markets was largely nervy.

A US Treasury announcement on bond buying failed to boost stocks on Wednesday, with equities in New York closing in the red.

The FTSE 100 index was down just 4.27 points at 10,665.79. It has fallen every day this week.

The FTSE 250 fell 16.63 points, 0.1%, at 24,092.03, and the AIM all-share rose just 0.30 of a point at 796.55.

The Cboe UK 100 was slightly lower at 1,060.29, the Cboe UK 250 was flat at 20,887.67 but the Cboe small companies was down 0.2% at 18,616.46.

The CAC 40 in Paris rose 0.2%, while Frankfurt's DAX 40 edged up 0.1%.

In Tokyo on Thursday, the Nikkei 225 rose 0.2%. In China, the Shanghai Composite closed 0.4% lower, while the Hang Seng Index was down 1.3% in late trade. The S&P/ASX 200 in Sydney shed 1.0%.

Sterling was steady at USD1.3555, barely budging from the USD1.3554 it bought at the time of the London equities close on Wednesday. Versus the euro, it fell to EUR1.1641 from EUR1.1644. Against the yen, the dollar rose to JPY153.41 from JPY153.24.

The euro was largely unmoved at USD1.1640 from USD1.1639, ahead of an expected ECB rate hike on Thursday. The decision at 1315 BST is followed by a press conference with President Christine Lagarde at 1345.

ING analysts commented: "As the ECB delivers its well-telegraphed 25bp hike, we doubt it will signal enough commitment to further tightening to validate the market's aggressively hawkish pricing. That leaves EUR/USD exposed to downside risks, particularly as the dollar may find additional support after yesterday's smaller-than-expected Treasury buyback announcement."

The yield on the 10-year US Treasury stretched to 4.84% on Thursday morning from 4.81% on Wednesday. The 30-year yield spiked to 5.30% from 5.26%.

On Wednesday, the 10-year yield moved to the cusp of the 4.86% mark, and the 30-year went above 5.31%.

The rise came after the Treasury Department announced it was tripling buybacks of long-term Treasury bonds to USD6 billion, part of a strategy announced last month by Treasury Secretary Scott Bessent to calm the bond market.

The jump in yields also came as Brent oil prices jumped above USD100 a barrel for the first time since late July on escalations in the US-Iran war.

"The bond market's negative reaction signals that expectations were clearly of a higher figure – somewhere around USD10 billion had been rumoured. However, that prompted a dollar rebound, as some risk premium linked to outsized Treasury intervention was unwound," ING added.

In New York on Wednesday, the Dow Jones Industrial Average lost 0.8%, while the S&P 500 fell 0.5%. The tech-heavy Nasdaq Composite declined 0.6%.

A barrel of Brent rose to USD101.54 on Thursday morning from USD101.07 at the time of the London equities close on Wednesday. Gold fell to USD4,411.63 an ounce from USD4,420.33.

Rabobank analysts commented: "Brent futures broke through USD100 per barrel after a series of attacks in the Middle East raise concerns that the conflict could intensify again. Iran said that it is ready to escalate its counterstrikes if the US continues to attack its territory and infrastructure. Parliament speaker Ghalibaf warned that Iran's next targets are US oil and gas company assets in the region. The Houthis already struck energy facilities in Saudi Arabia in a direct response to the US attacking several Iranian oil tankers."

On the London Stock Exchange, AB Foods shares slumped 9.7%.

The company announced a plan to begin home delivery in Great Britain at its Primark unit, striking a deal for a distribution centre with boohoo to aid its push. However, it reported a hit from weak pricing at its Sugar arm and said the heatwave tempered sales at Primark and of Twinings tea.

boohoo, meanwhile, said the £90 million Sheffield distribution site deal will cut debt. The firm, which trades as Debenhams, said net debt will be "negligible" come its financial year end in February. Shares in the retailer jumped 10%.

Elsewhere in London, Eleco shares jumped 69% as it backed a buyout from funds managed and/or advised by Accel-KKR.

The software provider for the construction and built environment sectors will be bought at 235 pence per share in cash, a 75% premium to its closing price on Wednesday.

The deal values its issued, and to be issued, ordinary share capital at around £207.6 million.

The takeover has the support of around 45% of Eleco shareholders.

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