Proactive Investors -
- FTSE 100 climbs 43 points to 8190
- Eurozone set for more growth, with ECB rate cut still expected
- Premier Inn owner Whitbread (LON:WTB) plans 1,500 job cuts
FTSE 100 sets new record high
The FTSE 100 has gone on another burst higher in recent minutes, approaching its all-time intraday high, set yesterday morning.
Led by HSBC (LON:HSBA)'s gains, which have increased as the morning has gone on, the blue-chip index is up 43 points to top 8,190 for the first time ever.
This topped the London benchmark previous intraday record high of 8189.14 from yesterday.
And it looks like it's heading up to further heights in coming minutes.
Eurozone set for more growth, with ECB rate cut still expected
The earlier eurozone GDP numbers confirm a turning point to faster eurozone growth this year, according to the Centre for Economics and Business Research.
"This morning’s confirmation of quarterly growth in Q1 has put an end to a short-lived recession in the Eurozone, with the economy having turned a corner since the beginning of 2024," said Sam Miley, managing economist at the Cebr.
"Prospects are likely to improve further throughout the year, driven by the expectation of interest rate cuts. Further data released this morning showed that inflation has now stood within one percentage point of target for seven consecutive months, suggesting a suitable environment for the European Central Bank to consider adopting looser monetary policy."
Miley says rate cuts from the ECB will support growth this year, with the Cebr forescating the eurozone economy will expand by 0.6% in 2024, up from 2023’s growth figure of 0.4%.
Bert Colijn at ING said after the encouraging GDP data for Q1, "the continued modest recovery is putting the eurozone on track for a better-than-expected growth rate for 2024.
"With inflation remaining relatively benign at the moment and unemployment at record lows, the economic environment in the eurozone is looking up."
Daniele Antonucci, chief investment officer at Quintet Private Bank said the GDP figure beat exceeds the highest prediction in the key polls of forecasters.
He said the GDP figures paint a picture of an improving eurozone economy, well, that "the glass-half-full story", following the shallow recession the region has gone through in the second half of last year.
The caveat, he says, is that consumer spending across many European countries remains quite feeble.
"The glass-half-empty story is that the pace of growth remains rather anaemic, with the forward-looking indicators pointing to moderately positive economic conditions.
"The contrast with the US, where domestic demand looks resilient and GDP growth appears to be re-accelerating, is stark."
In the context of inflation, price data for the US has surprised to the upside lately, while the Eurozone data shows a sideways trajectory for overall inflation, in line with expectations and lower in absolute terms than in the US.
Core inflation is slowing somewhat less than expected, just like in the US, but the path remains one of deceleration nonetheless.
"This is why we think the European Central Bank looks set to lower its key policy rate in June, while the Fed will probably wait a while longer and cut to a lesser extent this year. One risk, though, is that the ECB might refrain from lowering rates more than once or twice if the Fed delays the start of its rate-cutting cycle.
"If the ECB were to press ahead regardless, the euro might weaken, as short-term currency dynamics tend to be driven by interest rate differentials between the two regions. A weaker euro would likely raise imported inflation, and so complicate the ECB goal of returning consumer inflation back to its 2% target."
Gilt fears allayed
A UK sale of five-year government debt was oversubscribed by a record amount, the UK Debt Management Office has revealed.
This allays worries that the glut of planned bond issuance this year may struggle to find investor demand.
The DMO put up £4 billion of gilts for sale, receiving bids of more than £12.8 billion.
Last week the government upped the planned level of bond sales to £277.7 billion this fiscal year, the second highest ever.
Thoughts on mortgages
After UK mortgage approvals rose to an 18-month high in March, economists note that this increase was much smaller than those seen in the previous two months.
"This likely reflects the effect of rising mortgage interest rates," says Peter Arnold, chief economist for EY UK.
"With mortgage rates set to edge up further, as the impact of higher swap rates feeds through, the EY ITEM Club expects the recovery in mortgage approvals to continue to cool.
"Another strong rise in gross unsecured lending adds to the evidence that consumers are shedding the caution that overshadowed 2023," he said, with solid real income growth also being seen, he added that the EY ITEM Club expects "stronger demand for credit to drive a consumer-led upturn in activity through 2024".
Rob Wood at Pantheon Macroeconomics said the figures showed households "moved swiftly to capitalise on lower mortgage rates" seen in the quarter, "but it remains to be seen whether this resilience lasts" after the recent rise in borrowing costs, including yesterday's hikes from NatWest (LON:NWG), Nationwide and Santander (BME:SAN).
Redbird flies away from Telegraph
An attempt to purchase of the Daily Telegraph by UAE-backed investor RedBird IMI (LON:IMI) is being called offer, Bloomberg reports.
IMI is withdrawing and will look to sell on its rights to the newspaper and Spectator British outlets.
The auction for the options over the media assets begins Tuesday and bidders have already approached the group with expressions of interest, RedBird IMI said in a statement on Tuesday. RedBird IMI said it would focus on securing the best possible value for the assets, “which remain highly attractive.”