Lunchtime market roundup: Europe mixed before expected ECB hike

Stock prices in Europe were mixed on Thursday afternoon as investors braced for a rate hike from the European Central Bank, while elevated US government yields weighed on sentiment.

"These renewed energy price pressures add to the inflation concerns that have been weighing down global fixed income," analysts at Rabobank commented.

"When the 30-year yield surpassed 5.30% in August, Bessent announced an expansion of the Treasury buyback operations, which effectively changes a liquidity management tool into a potential instrument for market interventions. However, this week's operation disappointed."

The Treasury Department announced it was tripling buybacks of long-term bonds to USD6 billion, though Rabobank noted "the operation is at the lower end of the USD5-8 billion that the market had expected".

The FTSE 100 index was down 41.54 points, 0.4%, at 10,628.52. The FTSE 250 fell 84.49 points, 0.4%, at 24,024.17, and the AIM all-share declined 2.53 points, 0.3%, at 793.72.

The Cboe UK 100 was 0.4% lower at 1,056.67, the Cboe UK 250 was down 0.3% at 20,824.79 and the Cboe small companies shed 0.4% at 18,586.53.

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

The yield on the 10-year US Treasury stretched to 4.86% on Thursday afternoon from 4.81% at the time of the London equities close on Wednesday. The 30-year yield spiked to 5.31% from 5.26%.

In New York, the Dow Jones Industrial Average was called up 0.2%, the S&P 500 up 0.1%, but the Nasdaq Composite down 0.3%.

A barrel of Brent rose to USD102.06 midday Thursday from USD101.07 at the time of the London equities close on Wednesday. Gold fell to USD4,385.18 an ounce from USD4,420.33.

"It's been another lacklustre start for the Footsie as crude prices have stayed stubbornly above USD100 a barrel, with no relief in sight. Hopes that there would be some kind of resolution before the US mid-terms, to offer relief at the pumps for voters, have been dashed, with President Trump warning the conflict won't end before the elections," Wealth Club analyst Susannah Streeter commented.

US President Donald Trump on Wednesday promised that every American adult would be given USD5,000 from the federal government if his Republican Party succeeds in keeping control of Congress in midterm elections.

"So if the Republicans win, you win with us and you get USD5,000. It will be called the Trump dividend," Trump told Republicans in Texas, as the party struggles in polls against the Democrats.

He did not say where the money would come from, citing only that "our country is making so much money."

Wealth Club's Streeter commented: "While it may boost spending in the short term, it will only add to concerns about the profligate nature of his presidency. These concerns are showing up as warning lights in the bond markets, especially with Norway's sovereign wealth fund proposing to cut its US Treasury holdings by potentially tens of billions of dollars. A decision by US Treasury Secretary Scott Bessent to ramp up bond buybacks landed like a damp squib. It signalled the administration is worried about yields, but the scale of the buyback suggests it isn't prepared to throw serious financial firepower at the problem."

Sterling was down at USD1.3539, 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 JPY154.09 from JPY153.24.

The euro was down at USD1.1624 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.

Lloyds analysts commented: "The ECB is expected to raise the Deposit rate a further 25bps to 2.50% on Thursday. That has been fully priced for some time, but we have seen a continuing shift in expectations across the balance of the meeting dates, with two further quarter point increases now expected by April.

"Clearly, the ECB's reaction function means the door for more tightening will remain open, but whether such risks warrant an additional two, or even three, rate hikes beyond September, in the face of already tighter financial conditions, is debatable."

In London, AB Foods shares slumped 11%.

A sales miss at Primark hit AB Foods shares on Thursday, overshadowing home delivery plans at the retail unit, while the summer heatwave in the UK and Europe did no favours for parts of the firm's Grocery arm.

At Primark, AB Foods expects fourth-quarter sales growth of 2% on-year, as well as a 2% rise for the financial year as a whole. But on a like-for-like basis, a 3.0% fourth-quarter decline is expected, along with a 2.6% annual fall.

Analysts at Davy noted that the expected fourth-quarter like-for-like outcome represents a deeper decline than the 2.2% fall forecast by Visible Alpha consensus.

THG shares declined 7.7%. Although it reported improved half-year earnings, supported by higher sales of its Myprotein-branded products, it noted "broader market challenges around consumer discretionary spend, record high whey commodity pricing, as well as recent EU tariffs".

Genus reported stronger annual profit and announced a buyback, though the animal biotechnology and genetics company is seeing "cyclical weakness in key agricultural markets".

"Group FY27 adjusted profit before tax is expected to be second half weighted, reflecting first half disease-related challenges in North American pork production, low pork prices in Brazil and subdued global dairy prices," it added.

Eleco shares jumped 70% after agreeing to a buyout. The software provider for the construction and built environment sectors will be bought by Accel-KKR 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.

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