European stock markets were on the back foot on Thursday with market sentiment weighed down by poor corporate results and the European Central Bank (ECB) hitting pause button on interest rate rises.
In London, the FTSE 100 (^FTSE) was trading 0.95% lower after noon trade, led by a slide in banking stocks after Standard Chartered (STAN.L) slumped as much as 13% after it warned of a 33% fall in profits.
Meanwhile the CAC (^FCHI) lost 0.85% in Paris, and the Frankfurt DAX (^GDAXI) was 1% down.
Read more: ECB hits pause on interest rate hikes
“Investors’ risk appetite has been seriously dented this week after poor earnings reports were published by some of the most important large European groups, primarily listed in the region’s leaders, France and Germany,” Pierre Veyret, technical analyst at ActivTrades, said.
“Both the DAX-40 and CAC-40 index are among the worst performers so far, led lower by a batch of sectors with Consumer Cyclicals and Financial shares in the lead.”
“Market volatility isn’t likely to decrease today as investors wait for another significant batch of corporate results, with 8 out of the 40 companies listed on the CAC-40 to publish their results today.”
It comes as ECB policymakers are set to keep interest rates on hold for the first time in more than a year. Last month it raised the deposit rate to 4% – the highest since the euro was launched in 1999.
However since then inflation across the eurozone has fallen to 4.3% in the year to September, down from 5.2% in August.
“After the rate hike in September, the European Central Bank (ECB) said that policy rates are now at sufficiently high levels to bring inflation down to its 2% target – a strong indication that it is done with its current rate hiking cycle,” Joost van Leenders, senior investment strategist at Van Lanschot Kempen, said;
“For inflation to reach the ECB’s target, rates will have to stay at these levels for a while, meaning it is unlikely we will see rates cut in the near future.”
Read more: Trending tickers: Meta | Ford | Unilever | Intel
Traders will also have their eyes on US GDP data later in the day. It is forecast to have grown at an annualised rate of around 4.3% in the July to September quarter, more than twice as fast as the 2.1% recorded in April-June.
Michael Hewson at CMC Markets said: “Growth estimates for today’s Q3 numbers are higher, with estimates as high as 4.5%, given how strong retail sales have been between July and September, with personal consumption expected to come in at 4%. On prices we’re expecting to see a slowdown from 3.7% to 2.5%.
“With a strong labour market and US earnings also looking strong there is a considerable upside risk that a big number today could prompt another spike higher in yields as the market goes to price in one more rate hike between now and the end of the year.”
Elsewhere, weekly jobless claims are expected to rise from 198,000 to 207,000.
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Property: 9 unusual homes with upside-down layouts
Enjoy scenic views of the Fowey estuary from this secluded property Photo John Bray estates Turning a traditional layout on its head makes perfect sense in some properties. Rather than having their living spaces downstairs and bedrooms above, their floor plans are flipped.
Locating the rooms that are used the most upstairs maximises daylight and makes the most of views, and shows off any features such as vaulted ceilings that are under-appreciated in sleeping spaces.
Unconvinced? These amazing upside-down homes for sale are all the proof you need.
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US economy grows at fastest pace in nearly two years
The US economy grew at its fastest level in almost two years in the three months to September, new data has revealed.
The economy expanded 4.9% on an annualised basis in the third quarter compared to expectations of 4.5% growth.
This is a jump from 2.1% in the second quarter and the strongest expansion since the fourth quarter of 2021 when the economy was rebounding from lockdown.
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First reactions to ECB decision…
Deutsche Bank Research, Chief European Economist, Mark Wall said
“ For the first time since summer 2022, the ECB has not hiked policy rates any further. The ECB says that patience is now key. Only by keeping rates at the current restrictive level for sufficiently long can it be sure that inflation will get back to target. The question is, how long is sufficiently long?”
Meanwhile, Mathieu Savary, chief European Strategist at BCA Research, said
The absence of a rate hike this morning confirms that the ECB is comforted by the recent deceleration in inflation and listens to the slowdown in economic data. Nonetheless, inflation remains elevated enough that the Governing Council could not let its guard down completely, especially in light of the ECB’s large balance sheet.
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ECB holds interest rates
The European Central Bank (ECB) has joined the Bank of England (BoE) and US Federal Reserve in hitting the pause button on its rate-rise programme after previously hiking interest rates to record levels.
The bank’s governing council met in Athens on Thursday, rather than at its headquarters in Frankfurt, to set monetary policy across the eurozone.
The decision to leave borrowing costs unchanged comes after a 15-month streak of rises, with the bank saying inflation was starting to come down to its target.
Last month the ECB lifted its deposit rate to 4% – the highest since the euro was launched in 1999.
However, since then, inflation across the eurozone has fallen to 4.3% in the year to September, down from 5.2% in August. But this is still more than twice the ECB’s 2% target.
The decision will now spark a debate on how long rates need to stay at record highs, with markets already betting on the next move to be a cut as soon as June, with two full moves priced in by next October.
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Israel shekel slumps to 11-year low
Israel’s shekel has plunged to an 11-year low against the US dollar on Thursday.
The shekel was down 0.3% against the dollar during the session, meaning it has now slipped more than 5% since Hamas first launched its attacks earlier this month.
It is trading at its lowest level since July 2012.
The Bank of Israel’s research department showed that GDP will expand 2.3% this year and 2.8% in 2024, down from previous forecasts of 3% for both years.
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Gold prices rise
Gold prices (GC=F) rose during early Thursday trading, approaching the crucial psychological level of $2,000.
Tensions are rising in the Middle East, with Israeli military forces entering Gaza in what appears to be the initial stages of a ground invasion. Such a scenario will be bad news for those who hoped for a de-escalation in the conflict. Instead, the stakes are getting higher, and it is becoming more likely that third parties, such as Hezbollah and Iran, will get involved.
Against this background, despite rising treasury yields and a strengthening US dollar, gold prices are rising as worried investors seek reassurance in the ultimate haven.
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Halloween house price drops revealed
GetAgent.co.uk has revealed that no less than 62% of areas within the UK housing market have seen house prices fall since last Halloween, some by as much as £84,000.
The company analysed house price data from the Land Registry looking at how the market has performed since last Halloween.
The research shows that: –
Since last October, the average UK house prices has cooled ever so slightly, falling by -0.2%, a drop of just £452. In the City of London, house prices have plummeted by £83,569. Nearby Kensington and Chelsea has also seen a frightening fall with £41,536 shaved off the average value of a home since last Halloween.
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Summer demand sees Heathrow raise passenger forecasts
Heathrow has raised its forecasts for the number of passengers it expects to travel through the airport this year thanks to summer demand.
Britain’s biggest airport said it was now expecting 79.3 million passengers this year, up from its earlier forecasts for between 70 million and 78 million travellers.
It added that 2024 passenger numbers would be back at pre-pandemic levels.
Thomas Woldbye, Heathrow CEO, said:
Heathrow is already a great national asset for Britain – and our best days still lie ahead.
We’ve got a clear plan to connect all of Britain to global growth, a flight path to net zero by 2050, and while we have a tight settlement from the CAA, we will upgrade the airport for our customers.
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PizzaExpress owner eyes slice of The Restaurant Group
Wagamama owner The Restaurant Group has revealed that PizzaExpress may be interested in a takeover deal after reports last night.
TRG said it had received a request from Wheel Topco, which owns Pizza Express, for information which could let it assess whether it would be interested in a takeover.
It told shareholders:
The Board of TRG confirms that it will provide diligence information to Wheel Topco in accordance with its obligations under the Code.
If any proposal is provided by Wheel Topco, the Board of TRG will carefully consider its terms, in conjunction with its advisers.
Restaurant Group has already accepted a £506m takeover offer from the US buyout group Apollo, which values it at 65p per share.
It comes after Sky News reported the interest last night.
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Bitcoin rally lifts memecoins
Dogecoin crypto token. Bitcoin rally Bitcoin has sustained its rally well into a second week, and is nearing the $35,000 mark. The rally has lifted tokens at the top of the memecoin market cap, such as dogecoin, shiba inu, and the uniquely-named harry potter obama sonic 10 inu (HPOS10I).
Bitcoin (BTC-USD) has risen by about 22% in the past week, now changing hands at $34,655, (£28,675) according to CoinGecko data.
As the cryptocurrency market cap has risen by 3% in the past 24 hours to reach $1.32tn, traders appear to be adjusting their strategies to make riskier bets on memecoins.
In the past 24 hours, top memecoins such as dogecoin (DOGE-USD), shiba inu (SHIB-USD), and HPOS10I (BITCOIN-USD) have all rallied, up 10%, 11%, and 16% respectively. HPOS10I has made the most impressive gains if we zoom out to the week-long scale, with a rally of 114% in the past seven days.
Watch: How does inflation affect interest rates?
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