Stocks up and dollar down as data seals US rate cut

The FTSE 100 posted strong gains on Thursday as soft US jobs data, despite accelerating inflation, kept the Federal Reserve on track to lower interest rates next week.

“Inflation was a touch higher than expected and tariffs are likely to keep it elevated over coming months, but the weakening of the jobs market is now the Fed’s priority, with rising jobless claims hinting at a pick-up in lay-offs at a time when hiring is subdued,” said James Knightley at ING.

The FTSE 100 index closed up 72.19 points, 0.8%, at 9,297.58.

The FTSE 250 ended 159.65 points higher, 0.7%, at 21,693.75 and the AIM All-Share finished up 5.09 points, 0.7%, at 767.10.

In New York, at the time of the London equities market close, the Dow Jones Industrial Average was up 1.2%, the S&P 500 rose 0.8%, and the Nasdaq Composite firmed 0.7%.

Data from the US Bureau of Labour Statistics showed the US annual consumer price index accelerated to 2.9% in August from 2.7% in July, as anticipated by the FXStreet-cited consensus.

The monthly inflation rate sped up to 0.4% in August from 0.2% in July, higher than the consensus of an increase to 0.3% in August.

The core annual inflation rate remained unchanged at 3.1% in August, as expected.

The monthly core inflation rate was unchanged at 0.3%, also as anticipated.

Separately, the US Department of Labour reported that the latest number of new unemployment insurance claims was 263,000 in the week to September 6, an increase of 27,000 from 236,000 a week prior, the latter of which was revised down from 237,000.

The most recent figures are the highest since October 2021, when they stood at 268,000, and topped the consensus which had pencilled in a decrease to 235,000.

Thomas Feltmate at TD Economics thinks goods prices are likely to continue to drift higher over the coming months as businesses increasingly pass on more tariff costs.

He believes US policymakers will need to balance the risks of reducing the policy rate by enough to “breathe some life” back into the labour market, but not by so much that they risk unnecessarily stoking inflation.

“We see the Fed delivering on three quarter-point cuts by year-end, with the first coming at next week’s meeting,” he added.

In Europe, the CAC 40 in Paris ended up 0.8%, while the DAX 40 in Frankfurt closed 0.3% higher.

The European Central Bank left interest rates unchanged amid a brighter forecast of economic growth, and a broadly unchanged assessment of the inflation outlook.

The decision, which was widely expected, leaves the rate on the deposit facility at 2.00%, on the main refinancing operations at 2.15%, and on the marginal lending facility at 2.40%.

President Christine Lagarde affirmed that the ECB will take a data-dependent approach to ensure it stays in the “good place” it currently finds itself in.

Ms Lagarde said inflation is “where we want it to be” and the central bank will take a “meeting-by-meeting approach to decisions”.

Irene Lauro, eurozone economist at Schroders, said: “The ECB today appears to confirm our view that the easing cycle has ended.

“With trade uncertainty fading, the euro area’s recovery is set to accelerate.”

But Wells Fargo expects the evolving growth, wage and inflation trends will still see the ECB deliver one final quarter point rate cut, to 1.75%, at its December meeting.

“We expect growth to soften in the coming quarters, reflecting slower employment and income growth, and still subdued sentiment and confidence,” the broker said.

The US data put the dollar under pressure.

The pound rose to 1.3578 dollars late on Thursday afternoon in London, compared to 1.3548 dollars at the equities close on Wednesday.

The euro climbed to 1.1743 dollars, against 1.1722 dollars.

Against the yen, the dollar was trading lower at 147.06 yen compared to 147.35 yen.

The yield on the US 10-year Treasury was quoted at 4.02%, trimmed from 4.06% on Wednesday.

The yield on the US 30-year Treasury was quoted at 4.67%, narrowed from 4.71%.

On the FTSE 100, Compass Group rose 2.8% as Deutsche Bank upgraded to “buy” from “hold” with a 2,900 pence price target.

But M&G traded 1.8% lower as it traded ex-dividend.

On the FTSE 250, Trainline steamed ahead by 12% after raising earnings guidance and announcing a £150 million share buyback.

In a trading statement, the London-based rail and bus ticketing platform said revenue increased around 2.6% to £235 million in the six months to August 31 from £229 million the year prior.

Net ticket sales were 8.3% higher at £3.25 billion from £3.00 billion.

UBS said net ticket sales were 0.4% above Visible Alpha’s consensus of £3.24 billion, while revenue was around 1.6% ahead.

For the full year, Trainline now expects adjusted earnings before interest, tax, depreciation and amortisation to grow at the top end of its previous guidance range of between 6% and 9%.

“The overall tone is upbeat and that’s exactly what the market needed to hear to get the share price moving higher again,” said Russ Mould, AJ Bell investment director.

On AIM, Fevertree Drinks cheered investors, climbing 13%, as it announced plans to cancel its share premium account to create additional distributable reserves, a move aimed at supporting future dividends, share buybacks and broader corporate flexibility.

The premium cancellation, subject to shareholder and court approval, would give the premium mixers maker more headroom to return capital to investors, the London-based manufacturer of premium drink mixers said.

A barrel of Brent traded at 66.42 dollars on Thursday afternoon, down from 67.31 dollars on Wednesday.

Gold eased to 3,636.97 dollars an ounce on against 3,646.88 dollars on Wednesday.

The biggest risers on the FTSE 100 were BAE Systems, up 115.5p at 1,947.5p, Compass Group, up 70.0p at 2,610.0p, Babcock International, up 30.0p at 1,130.0p, ICG, up 60.0p at 2,262.0p and Rolls-Royce, up 24.0p at 1,123.5p.

The biggest fallers on the FTSE 100 were M&G, down 4.7p at 253.2p, Entain, down 15.6p at 860.0p, Experian, down 63.0p at 3,832.0p, WPP, down 3.8p at 394.7p and Segro, down 5.6p at 613.8p.

There are no significant events scheduled in Friday’s local corporate calendar.

The global economic calendar on Friday has UK GDP and industrial production data, and inflation figures in France and Germany.

– Contributed by Alliance News