Thursday, 31 January: Dovish comments from Fed Chair Jerome Powell lifted equity markets. Only last month, after its most recent rate rise, the Fed had signalled of two more hikes this year, however last night Powell signalled they were done with raising rates, subsequently fuelling a market rally. The Dow and S&P 500 on Wall Street both closed +1.6% last night while Asian markets overnight were buoyed by improved Chinese manufacturing. As European markets opened this morning, major indices drove higher, although stock specific news kept the FTSE 100 higher as others tailed off.
Royal Dutch Shell, one of the larger components of the main London index, benefited after reporting stronger than expected quarterly earnings. Benefitting from rising oil prices, the oil giant’s profits rose as cost savings took hold, while the 3rd tranche of the group’s share buybacks began. Shares rose 3.63% at the close. Diageo, the world’s largest drinks company also announced a share buyback after better than expected operating profit, both beating its own performance year on year and analysts’ forecasts. Shares rose 4.67% to new record highs. Other stock news from the day came from BT. Reporting a fall in revenues year on year, but still ahead of forecasts, the company warned of significant market and regulatory pressures, while Brexit uncertainty was also cited. Shares fell 0.68% at the close.
In Europe, most recent data for the final 3 months of 2018 showed the euro zone economy slowest to its lowest pace of growth in 4 years. GDP in the 19 countries sharing the same currency rose 0.2% in the quarter, +1.2% year on year. GDP rose 0.3% in the EU 28 (the 28 member states in Europe) in the quarter. More specifically, Italy’s economy shrank by 0.2% in the 12 week period. This follows a 0.1% decline in Q3 of 2018. The Italian PM has warned the contraction is likely to continue in to 2019. It is now expected the ECB will reduce its GDP growth forecasts for the coming year, and ultimately take any rate rises off the agenda till next year at the earliest. The ECB is next set to meet in March. The euro fell against both the pound and US dollar.
At the close, European indices were mixed with London and France closing +0.39% and +0.36% respectively. The DAX in Germany slipped 0.19%. Wall Street trades higher, with bigger gains reflected on the S7P 500, +0.97%. The pound is up against the euro and US dollar @ €1.14 and $1.31 respectively.