The FTSE 100 was lower on Thursday as markets adjusted to new interest rate expectations after last night’s Federal Reserve interest rate decision and press conference.
Investors also digested the outcome of the US/China trade talks, including several agreements and concessions between the world’s largest economies.
The adage that ‘it’s better to travel than arrive’ could not be truer for the market reaction to developments in Asia overnight, as the FTSE 100 dropped more than 0.6% on Thursday after rallying into the talks yesterday.
“News of the emerging thaw in trade relations between the US and China wasn’t enough to power the FTSE 100 to another record this morning. It has retreated a little at the open, after reaching its best ever close of 9,756.14 on Wednesday,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“Following the conclusion of talks in South Korea, President XI said that a consensus had been reached on major trade issues, while Donald Trump revealed he’d be reducing tariffs after resolving a roadblock on Chinese exports of rare earth minerals. Details, however, were thin on the ground.”
But it was not just the ‘buy the rumour, sell the fact’ fade that dragged stocks lower. Investors also turned up their noses at the Fed Chair’s comments that dented hopes of an interest rate cut in December.
“No-one likes a party pooper, especially when they’re standing in front of the punch bowl. That’s the role taken on by Jay Powell, who poured cold water on the prospect of a December rate cut. That’s put markets on the back foot when it looked like the music was just about to ramp up,” says AJ Bell investment director Russ Mould.
“The Fed did announce an interest rate cut, but short-term Treasury yields jumped up on the back of the hawkish tone, and Jay Powell’s comments might well have elicited a hoot of derision from somewhere in the White House. The Fed chair likened the central bank’s current situation to driving in the fog, because the US government shutdown has prevented the release of key economic data.”
FTSE 100 company earnings didn’t help the equity bulls’ cause either.
WPP shares sank 14% and were languishing near the lowest levels since the turn of the century, following the release of dismal Q3 results that confirmed that the advertising giant was in big trouble.
“A 5.9% drop in third-quarter net revenue exposes how far the world’s biggest advertising group has drifted from the bravado of its Madison Avenue heyday,” said Mark Crouch, market analyst for eToro.
“WPP’s new CEO Cindy Rose inherits a brief no less daunting than a rebrand of the word “decline”. The sharp slowdown at WPP Media, once the jewel in the crown, underlines how the company’s traditional engine is sputtering in a market running on algorithms and automation.”
Shell offered some positivity with strong Q3 results that beat analyst estimates.
“The results were underpinned by record production in Brazil and 20-year highs in the Gulf of America, alongside standout contributions from its Marketing division, which logged its second-highest quarterly earnings in over a decade,” explained Garry White, Chief Investment Commentator at Charles Stanley.
Shell shares were flat on Thursday, as results gave investors no reason to sell after a recent rally that pushed the stock to its highest level since 2023. But they weren’t strong enough to spur further buying either.