Late market roundup: Stocks higher after central banks hold rates

Stocks ended higher in London on Thursday after the US and EU elected to hold interest rates steady, as investors digested a raft of corporate earnings which included a strong showing from oil major Shell.

In London, the FTSE 100 index ended up 27.57 points, 0.3%, at 10,722.07. The FTSE 250 ended 34.90 points higher, 0.1%, at 24,674.16, and the AIM all-share advanced 2.53 points, 0.3%, at 763.45.

The Cboe UK 100 ended up 0.3% at 1,064.04, the Cboe UK 250 closed 0.5% higher at 21,745.53, and the Cboe small companies rose 0.2% to 18,991.31.

In European equity markets on Thursday, the CAC 40 in Paris ended up 1.1%, while the DAX 40 in Frankfurt climbed 1.3% after the European Central Bank's decision to leave interest rates unchanged.

The central bank maintained its deposit facility rate at 2.50%, the main refinancing operations rate at 2.65% and the marginal lending facility rate at 2.90%, as it warned that rising energy prices could push inflation higher while weighing on economic growth.

"Energy prices have continued to rise, posing upside risks to the inflation outlook and downside risks to the growth outlook," the ECB said.

Thursday's decision came hours after ECB President Christine Lagarde announced that she would step down on February 7, 2027, eight months before her term was due to expire in October.

Lagarde, who has led the central bank since November 2019, informed the Governing Council and European Council President Antonio Costa of her decision, setting the stage for a leadership contest at a critical time for eurozone monetary policy.

JPMorgan analyst Greg Fuzesi observed: "The decision was expected by financial markets with the expectation that an interest rate hike will follow in December."

He noted that Lagarde said, however, that there was a debate about hiking at today's meeting and that the ECB "could" have hiked given the data.

"She also said that barring surprises, 'the direction of travel is clear to all of us'. A hike in December therefore remains very likely and we continue to expect at least one further hike after that, most likely in March," Fuzesi said.

Against the dollar, the euro firmed to USD1.1162 on Thursday from USD1.1148 on Wednesday. Against the yen, the dollar was trading at JPY157.85, down from JPY158.23.

The pound was quoted at USD1.3369, up from USD1.3310. Against the euro, sterling climbed to EUR1.1977 from EUR1.1941.

In New York, markets were lower. The Dow Jones Industrial Average was down 0.3% at the time of the closing bell in London on Thursday. The S&P 500 was also 0.3% lower and the Nasdaq Composite slid 1.3%.

The US central bank also left interest rates on hold on Wednesday, despite accelerating inflation.

At the press conference following the announcement, Federal Reserve Chair Kevin Warsh reaffirmed his determination to ensure price stability as he looked to justify leaving interest rates unchanged despite the backdrop of accelerating inflation.

Warsh told reporters it was the "right policy decision for this moment" and that the US central bank "will deliver price stability, no ifs, no buts".

Eric Winograd, chief US economist at AllianceBernstein said he was "struck" again by the gap between Warsh's "very strong rhetoric" about fighting inflation and the committee's decision to delay action.

"My perception is that Chair Warsh prefers not to raise rates if he can avoid it. If the data force his hand he will do so, but the bar to a hike seems higher for him than the bar to a hold," he added.

Morgan Stanley expects two more 25 basis point hikes in December and March, bringing the terminal range to 4.25%-4.5%.

"The Fed's measured approach, tightening financial conditions, and Chair Warsh's emphasis on productivity-led growth suggest less need for aggressive tightening," Morgan Stanley analysts said.

The pressure on the US central bank was reflected in figures on Thursday which showed the personal consumption expenditures price index rose 3.6% in September, accelerating from 3.4% in August and meeting the FXStreet cited forecast.

The core reading, which excludes food and energy, is the Federal Reserve's preferred inflationary measure. The core PCE price index picked up 3.1% on-year in September, quickening from 3.0% in August and also in line with the market forecast.

On Wall Street, Google owner Alphabet slumped 12% after poorly received earnings.

David Morrison at Trade Nation said Alphabet's falls came as "investors clocked a sharp drop in free cash flow, along with a slowdown in Google's search engine growth."

The latter raised concerns that alternative AI large language models were "increasingly eating" into Google's search engine dominance.

"Both earnings per share and revenues came in below expectations, something that hasn't happened in close to four years," Morrison noted.

The yield on the US 10-year Treasury was quoted at 5.00%, trimmed from 5.03%. The yield on the US 30-year Treasury was quoted at 5.33%, unchanged from Wednesday.

Also supporting equity markets was an easing in oil prices amid a renewed diplomatic push to bring the US and Iran back to the negotiating table.

US Vice President JD Vance has contacted Iran's security chief in a bid to revive peace talks that could head off a renewed American assault on the Islamic republic, the Wall Street Journal reported Wednesday.

Brent was quoted at USD113.75 a barrel, down from USD116.37 at the same time on Wednesday.

In London, WPP rose 5.4% as it reiterated its annual guidance following a third-quarter performance in line with expectations, as the company continued implementing its Elevate28 strategic turnaround plan.

The London-based advertising and marketing services group said revenue for the three months to September 30 rose 0.5% to £3.27 billion from £3.26 billion a year earlier.

Revenue less pass-through costs fell 2.0% on a reported basis to £2.41 billion from £2.46 billion.

Shell gained 2.1%, despite the lower oil price, as it reported better-than-expected third quarter results and increased the size of quarterly share buybacks.

Adjusted earnings rose to USD10.81 billion from USD5.43 billion a year ago, beating USD10.33 billion consensus compiled for Shell by Vara.

This was supported by higher refining margins, higher realised liquefied natural gas prices and higher Integrated Gas volumes, partly offset by lower crude and oil products trading and optimisation, higher well write-offs and lower realised liquids prices.

Analysts at RBC Capital Markets commented that Shell's "underlying earnings and cash flow performance highlight a business that is extremely well suited to take advantage of the current disruptions in the energy complex, across oil, products and gas."

Elsewhere, Haleon slumped 15% as it lowered full-year revenue guidance after a weaker than expected third quarter.

The Surrey, England-based consumer healthcare company now expects 2026 organic revenue growth to be around 2.5%, down from between 3% to 5% previously.

Haleon, which owns Aquafresh oral health brand, Centrum vitamins and Panadol painkillers, said sales rose 2.5% to £2.87 billion in the three months ended September 30. Organic growth of 2.6% was below consensus which looked for an increase of 3.4%.

The FTSE 100 listing said performance in the quarter was held back by soft cold and flu consumption leading to lower orders in North America, and a raw material classification change for Centrum over-the-counter products in China which meant it had to "cease importation until further notice".

Gold was quoted at USD4,012.39 an ounce, down from USD4,039.18.

The biggest risers on the FTSE were WPP, up 20.70p at 404.90p, 3i Group, up 77.00p at 2,432.00p, London Stock Exchange Group, up 258.00p at 9,444.00p, ICG, up 47.00p at 1,851.00p and Melrose Industries, up 11.90p at 475.00p.

The biggest fallers on the FTSE 100 were Haleon, down 56.30p at 317.70p, Lloyds Banking Group, down 5.24p at 98.66p, St James's Place, down 41.00p at 1,072.50p, Rio Tinto, down 187.00p at 6,206.00p and Diageo, down 36.00p at 1,701.50p.

Friday's local corporate calendar has third quarter results from lender NatWest, oil major BP and drugs firm AstraZeneca.

Friday's global economic calendar has an interest rate decision in Japan overnight, inflation figures in France and Germany, GDP data in Canada and the Chicago PMI.

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