The FTSE 100 was trading marginally lower on Thursday after the ECB signalled they were not in a rush to cut interest rates, and markets must wait for further evidence that high inflation levels were firmly behind us.
The ECB said rates must remain at elevated levels for an extended period to maintain the fight against inflation as it held interest rates at 4.5%. In ECB President Lagarde’s press conference, she said the interest cut debate was premature. This was not the news equity investors wanted to hear.
There has been a global melt-up in equity in the hope that central global banks will cut interest rates early in 2024. Today’s instalment from the ECB pours cold water on the idea that interest rates in Europe will fall anytime soon.
European equity traders were clearly disappointed with the news, and the German DAX dropped 0.4% while the French CAC slipped 0.35%. Equity markets are expected to be choppy for the rest of the session.
The FTSE 100 was unable to shrug off the negativity and slipped in the wake of the announcement, before recovering to trade flat.
However, the gains were contained by overarching positivity emanating from US stocks, particularly the tech sector, amid a raft of upbeat earnings.
“Unbridled optimism about the prospects for the US economy and for its stable of big tech is hard to quash. Expectations are high that stellar earnings projections will show up, and that enthusiasm for artificial intelligence products and services will keep revenues pouring in,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
Despite underlying optimism around US tech, Tesla’s Q4 earnings update provided a reason to be cautious as the EV maker sank 8% after saying sales growth would slow in the future.
Tesla has employed an erratic pricing strategy that has failed to boost sales as margins are squeezed amid a price war with Chinese rivals.
“Tesla did an incredible job to get in the fast lane with electric vehicles and steal a march on the rest of the market but as others catch up, the company and its share price are increasingly stuck in traffic,” said Russ Mould, investment director at AJ Bell.
Regarding FTSE 100 movers on Thursday, St James’s Place started the day deep in red after announcing reduced inflows. The company is facing pressure from the regulators over its fee structure and outcomes for clients.
St James’s Place shares were down 5% at the time of writing after being significantly lower earlier in the session.
