FTSE 100 gains after Fed keeps rates on hold

On Thursday, the FTSE 100 attacked the 8,600 level as positive reactions to corporate earnings in both the UK and US lifted the mood.

Airtel Africa and St James’s Place were the FTSE 100’s standout performers, with gains of 9% and 8%, respectively.

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US stocks had a minor wobble overnight after the Federal Reserve kept rates on hold in a ‘hawkish hold’, which signalled to the market that they shouldn’t expect too much from the Fed this year in terms of rate cuts.

“The Fed, as expected, kept interest rates in a holding pattern, but dropped its recent mention of inflation making progress,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“With threats and speculation flying around about trade tariffs and the potential impact on consumer prices, its little wonder policymakers seem in no rush to cut rates again, especially given the resilience of the US economy.”

The S&P 500 sank after the decision was released yesterday evening, but most of the lost ground was quickly recovered as a raft of earnings from US tech giants had a net positive on US indices. Meta rose on strong results but Microsoft shares fell as cloud revenue growth slowed. Tesla investors choose to look past a soft quarter to the promise of earnings growth over the coming year.

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Although there was still evidence of concern around the emergence of DeepSeek as Nvidia shares slipped back again in US trade yesterday, the pessimism looks to be largely focused on chipmakers, with most of the ‘Magnificent Seven’ unscathed.

The turnaround in the final hours of US trade translated into an upbeat start in Europe, with the FTSE 100 up by 0.3% at the time of writing.

Shell shares rose following the release of fourth-quarter results. Shell released an earnings teaser earlier this month that dampened the impact of final quarterly results, so the sharp drop in adjusting earnings and EBITDA were largely priced in. 

“Shell’s fourth-quarter underlying profit slumped 39% on a sequential basis to $3.6bn, bringing the full-year total to $23.7bn, 16% lower than 2023,” said Derren Nathan, head of equity research, Hargreaves Lansdown.

“The slowdown at the end of 2024 reflected lower margins in its trading businesses as well as the marketing division which includes its network of petrol forecourts. Lower oil prices also played their part. Exploration well write-offs were another headwind reflecting the increasing difficulty of discovering new sources of hydrocarbons.

“But one thing that has kept flowing is cash. Shell generated $8.7bn of free cash flow in the final quarter and nearly $40bn over the year as a whole.”

Oil is finding its feet after several days of declines, which is providing additional support for Shell. BP rose in sympathy.

BT Group was the top faller after the company issued yet another disappointing trading update that revealed little to no growth across all business units.

“BT fell 4.1% after a patchy third quarter. It’s all well and good talking about cost transformation when sales are falling nearly across the board. Openreach was the only business area to show revenue progression,” explained Russ Mould, investment director at AJ Bell.

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