European stocks were on the front foot again on Thursday as falling borrowing costs and optimism around a cease-fire in the Middle East propelled sentiment higher. Strong earnings across Europe also played a part in boosting the mood.
After the FTSE 100 looked like it was going to break lower and possibly test 8,000 just a few days ago, a lower inflation reading yesterday reset interest rate expectations and raised hopes pressure on the economy would start to ease.
The gloom present in financial markets at the start of the year has been replaced by quiet optimism. That said, slower than expected UK GDP is a reminder of the job the government has on its hands to support UK growth.
Contributing to equity market buoyancy, bond yields were steady again on Thursday, signalling concerns about the UK’s fiscal health was easing.
“Investors were in a risk-on mood after a ceasefire deal between Israel and Hamas and a positive response to corporate results in the European retail, luxury, and automotive sectors,” said Russ Mould, investment director at AJ Bell.
“The Dax briefly hit a new record high as investors raced to buy shares in German e-commerce platform Zalando after it said full-year earnings would beat previous guidance. Strong customer growth paints a very different story to the UK retail market where shopkeepers are finding life hard in the wake of cost headwinds and an uncertain consumer backdrop.”
Rightmove was the top riser at the time of writing on hopes home buyers would jump at the chance of lower mortgages.
Experian added 2% following yesterday’s strong trading update and a broker price target increase.
Housebuilders gave back some of yesterday’s gains following an update from Taylor Wimpey. Taylor Wimpey was unable to create the feel-good factor Vistry and Persimmon did with their latest updates. Taylor Wimpey’s average selling price was not as strong as their peers and completions fell.
This hit the whole sector on Thursday, but Taylor Wimpey was the biggest casualty, giving up 4%.
Whitbread shares also suffered following the release of a trading statement highlight slowing UK sales.
“Hotel giant Whitbread checked in with a mixed third quarter update, showing a 3% dip in UK revenue but hints of recovery as hotel performance steadied, said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“Premier Inn continues to shine as the group’s flagship, but challenges loom with weak UK hotel prices and a sluggish German economy potentially slowing expansion plans. While resilience is evident, Whitbread will need to keep Premier Inn leading the pack to weather an uncertain market.”