Investors digested the latest monetary policy announcements from the Bank of England and US Federal Reserve with both opting to keep rates unchanged this month.
European markets and the FTSE 100 were higher on Thursday afternoon after the Bank of England (BoE) announced it was keeping its benchmark interest rate unchanged at 5.25%.
Following the update, France’s CAC 40 was up 1.90% to 7,064.54 points, while Germany’s DAX rose 1.58% to 15,157. 76. In London, the FTSE 100 was also in the green, up 1.28% to 7,436.77 points.
“As expected, the Bank of England kept its policy rate at 5.25%. The conflict between growth and inflation remains in place. Wage growth and underlying price pressures are still too strong for the BoE to respond to signs of weaker activity, such as rising unemployment. As a result, this continued pause is not yet a prelude to rate cuts, but it also confirms that an additional hike will only materialize if inflation were to rise again,” Mathieu Savary, chief strategist at BCA Research, said.
US Federal Reserve holds interest rate
The monetary policy announcement followed the US Federal Reserve’s (Fed) update on Wednesday night. The central bank decided to keep its current rate unchanged in a range of 5.25%-5.50%. However, it kept the door open for further action as it works to bring inflation back to the central bank's 2% target.
“The Fed funds rate was kept unchanged, with the statement repeating the line that further tightening may be appropriate,” said Matthew Ryan, head of market strategy at financial services firm Ebury. “As we had anticipated, the language on the US economy was upgraded, with ‘strong’ growth seen in the third quarter, an upgrade from the ‘solid’ expansion observed in September.”
“These hawkish remarks were interwoven with caution, and [Fed chair Jerome] Powell appeared keen for markets to not get too carried away with the possibility of additional hikes,” he added. “In particular, he highlighted the recent tightening in financial conditions and the time lag of Federal Reserve policy transmission. We think that these two factors ensure that the next move in rates will be lower, albeit the strength of the US economy and the labour market suggest that we may have to wait until the second half of 2024 for the first cut.”
Meanwhile, Norway's central bank, Norges Bank, also opted to keep its interest rate unchanged on Wednesday at 4.25%.
Company updates: Shell and Apple in focus
On the corporate front, investors will also be keeping across a raft of company updates, including earnings reports from oil and gas giant Shell, as well as Apple’s latest results.
Shell said that its third quarter (Q3) profit came in at $6.2 billion (€5.8 billion), compared to $5.1 billion in Q2, which was in line with market estimates, as it benefited from higher oil prices and refining margins. However, it was a substantial drop from the $9.45 billion profit it posted a year ago.
The energy giant also announced a $3.5 billion share buyback to be carried out over the next three months.
In other earnings, BT also reported a rise of 29% in pre-tax profit for the first half, to £1.08 billion. It also said its revenue increased slightly to £10.41 billion. The interim dividend, meanwhile, was left unchanged at 2.31p.
UK food retailer Sainsbury’s also updated investors on its latest financials and said group sales were up 2.9% to £18.67 billion (€21.4 billion) for the first half. Underlying pre-tax profit was unchanged at £340 million.
Deutsche Lufthansa AG, meanwhile, reported Q3 earnings that surpassed analyst expectations, subsequently sending its shares up 6.5%.
The German airline said adjusted earnings before interest and tax (EBIT) came in at €1.47 billion ($1.56 billion), up 31% year-on-year. Lufthansa put it down to strong consumer demand for flights, despite the cost of living crisis.
"Even though the geopolitical situation remains challenging, our booking outlook gives us reason to be positive - not only for a very good group result this year, but also beyond," Chief executive, Carsten Spohr, said.
Apple’s earnings will also be in focus today with the tech giant due to report its Q4 results. The company’s share price was up 1.56% ahead of the update.