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Highlights:
- London markets close positively: FTSE 100 rises 0.2% and FTSE 250 increases 1.23%, bolstered by US jobless claims and Chinese support measures.
- US jobless claims drop: Initial claims fall to a four-month low, reflecting a strengthening labor market amid broader economic growth.
- UK consumer confidence declines: Concerns over the upcoming Budget lead to weakened sentiment about personal finances and economic prospects.
London's financial markets closed on a positive trajectory on Thursday, buoyed by a decrease in US jobless claims to a four-month low and renewed support initiatives from China. The FTSE 100 index rose by 0.2%, ending the day at 8,284.91 points, while the FTSE 250 saw a more substantial increase of 1.23%, closing at 21,010.44.
In currency exchanges, the British pound appreciated by 0.65% against the US dollar, trading at $1.3410, and rose 0.31% against the euro, reaching €1.2005. IG chief market analyst Chris Beauchamp noted that Chinese markets had seen significant gains over the past week, with European and US indices responding positively, albeit with less dramatic increases.
“The risk of a US recession has diminished, and recent actions by Chinese authorities are countering economic weakness,” stated Beauchamp, adding that stock market bears may be running out of justifications for their pessimism. Despite the generally favorable macro outlook, Beauchamp cautioned that investors should brace for potential volatility in October, particularly given it is an election year.
On the economic front, initial jobless claims in the US fell to 218,000 for the week ending September 21, marking the lowest figure in four months. This decline defied expectations of an increase to 225,000, although continuing claims rose by 13,000 to 1.83 million. Additionally, the Bureau of Economic Analysis reported a 3% year-on-year growth for the US economy in the second quarter of 2024, with upward revisions to previous years’ data showing a stronger economic performance than previously estimated.
In the UK, consumer confidence took a hit in September, with the British Retail Consortium indicating declines in both personal finance sentiment and economic expectations. The impending Budget announcement from new chancellor Rachel Reeves has contributed to this uncertainty, leading to a more cautious outlook among consumers.
UK car production also faced challenges, declining 8.4% year-on-year in August, with electric and hybrid vehicle production down significantly. Meanwhile, consumer sentiment in Germany improved slightly in October, although concerns remain.
On the London stock exchange, shares of companies with exposure to China surged, with Burberry Group leading the charge with an 8.71% increase. In contrast, oil majors BP and Shell faced downward pressure amid reports of potential increases in Saudi oil production, with BP falling 4.41% and Shell dropping 3.91%.
