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European markets lower and US mixed as markets digest Fed decision

Lucy Harley-McKeown
Updated
ftse VIVA GLAM 30 Ambassadors for M·A·C Cosmetics, part of The Estée Lauder Companies, Danna Paola, left, and Kim Petras, pose for photos on the floor of the New York Stock Exchange before ringing the opening bell, Wednesday, June 12, 2024. U.S. stocks are rallying Wednesday following a surprisingly encouraging update on inflation. (AP Photo/Richard Drew)
VIVA GLAM 30 Ambassadors for M·A·C Cosmetics, part of The Estée Lauder Companies, on the floor of the New York Stock Exchange, 12 June 12 2024. US markets were mixed on Thursday while the FTSE was down. (Richard Drew, Associated Press)

European stocks and the FTSE 100 rode a wave of caution on Thursday, falling by the closing bell. US markets meanwhile, were mixed following the Federal Reserve's latest signal on its interest rate path and the latest jobs data.

  • The FTSE 100 (^FTSE) was 0.9% lower by the closing bell, while Germany's DAX (^GDAXI) fell 1.9% and the CAC (^FCHI) dropped 2% into the red.

  • Wednesday's 1% drop for the FTSE was its biggest one-day decline since mid-April, following UK GDP figures which showed stagnant growth for the economy.

  • The pan-European Stoxx 600 (^STOXX) was down 1.3%.

  • In the US, the S&P 500 (^GSPC) edged down 0.2% after the benchmark topped 5,400 to close at a fresh all-time high on Wednesday. The Nasdaq Composite (^IXIC) popped 0.1% on the heels of taking out a record of its own, as tech stocks led the broader charge higher. But the Dow Jones Industrial Average (^DJI) headed lower, down 0.7%.

  • The moves come following a decision by the Federal Reserve to hold its interest rates again, with its "dot plot" prediction for the year factoring in one rate cut before 2025.

  • The dot plot showed that in total, 15 Federal Reserve officials predicted a rate cut this year, but it was a close call between one or two cuts. Eight officials estimate two cuts, while seven officials see just one cut. Four predict no cuts at all. Notably, no officials project three cuts compared to nine in March. Officials also do not see rates ticking higher in 2024, consistent with March.

Follow along for live updates:

LIVE COVERAGE IS OVER19 updates
  • Featured
    Lucy Harley-McKeown

    Labour Party manifesto live coverage

    Read more on Yahoo UK

  • Lucy Harley-McKeown

    Thanks for reading!

    Head over to our US site for more market moving news

  • Lucy Harley-McKeown

    More detail on jobs numbers

  • Lucy Harley-McKeown

    Poor streak for US data

    Some commentary on the recent wobbly streak for the US from Alex Kuptsikevich, senior market analyst for FxPro:

    The black streak in US data continues. A sharp jump in weekly jobless claims was paired with a weak PPI, complementing the soft consumer inflation report the day before.

    Manufacturers cut prices by an average of 0.2% in May, and the annual rate of PPI growth fell from 2.3% to 2.2%, contrary to the expected acceleration of 2.5%. Core PPI slowed from 2.5% to 2.3%. The unexpected slowdown in PPI growth calls into question the upward trend we have seen since the beginning of the year. It also increases the chances of a further slowdown in consumer prices in the coming months.

    The other dose of bad news is the jump in weekly unemployment benefits claims. That figure rose to 242k, the highest since last July. The trend has been up there since the beginning of the year. Many see this as an important first signal of a turnaround in the labour market.

    The impression is that the economic cycle in the US has already turned, and the Fed, looking for evidence of this, is trailing the cycle, being late in making monetary policy changes. It may well be that already in September-October, we will see a net reduction in employment, and then the Fed will again have to adjust the course in a hurry - this time, to a softer tone.

  • Lucy Harley-McKeown

    How US stocks are faring at the open

  • Lucy Harley-McKeown

    Bitcoin falls to multi-week lows

    Bitcoin fell to a multi-week low following the US Federal Reserve's hawkish announcement at Wednesday's monetary policy meeting.

    At this week's Federal Open Market Committee (FOMC) meeting, the Fed kept its key interest rate unchanged and indicated that it now expects to cut rates only once this year, a revision from the three quarter-point reductions projected in March.

    Equity indices responded to the news by remaining buoyant. The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) closed sharply higher at the end of trading on Wednesday.

    However, bitcoin (BTC-USD) retraced to its lowest level since 20 May, trading flat over the past day to change hands for $67,566 on Thursday, according to CoinGecko data.

  • Lucy Harley-McKeown

    Onto core pledges

    Now it's time for Labour's core pledges (but not before a protestor is evicted from the audience).

    Starmer calls it a "plan to change Britain" and a "manifesto for wealth creation."

    Some detail on tax from ITV's Joel Hills:

  • Lucy Harley-McKeown

    Manifesto launch kicks off with a plea from supermarket chain Iceland's chairman imploring people to vote for change, and a Labour party voter and dad of two describing poor living conditions in East London. They also had a first-time voter and terminal cancer patient.

    Next up is Starmer.

  • Lucy Harley-McKeown

    Labour kicks off manifesto launch

    "We can't tax our way to growth," says Angela Rayner at the launch of Labour's manifesto. A clear message from the off. "When we deliver growth it will be in every corner of the country."

    As we reported earlier we're expecting:

    • A tax lock.

    • Big public spending cuts elsewhere, as Keir Starmer tries to balance the books.

    • Other promises have amounted to a cap on corporation tax at 25%, the creation of a national wealth fund and a "new deal" for working people.

  • Lucy Harley-McKeown

    Also up in premarket: Broadcom

    Shares in Broadcom have surged over 14% in pre-market trading as it posted earnings for the second fiscal quarter that beat analysts’ estimates.

    The chipmaker also announced a 10-for-one stock split to take advantage of a rally in its shares this year.

    Broadcom manufactures advanced networking chips that help move around vast amounts of data used by AI applications such as OpenAI's ChatGPT, making it one of the beneficiaries of businesses heavily investing in the boom.

    “Talking of AI accelerators, you may know our hyperscale customers are accelerating their investments to scale up the performance of these clusters,” Broadcom CEO Hock Tan said on the earnings call. “And to that end, we have just been awarded the next-generation custom AI accelerators for these hyperscale customers of ours.”

    Broadcom reported $2.12bn in net income during the quarter, or $4.42 per share, versus $3.48bn in net income, or $8.15 per share, in the year-ago period.

    The company expects about $51bn in sales during its fiscal 2024 year, an increase over the company’s previous forecast, and slightly higher than consensus expectations of $50.42bn.

    From: Trending tickers

  • Lucy Harley-McKeown

    Musk's payday

    From Trending Tickers, by Pedro Goncalves

    Elon Musk has said Tesla shareholders have been voting to approve his $56bn (£44bn) pay package which was rejected in a court ruling earlier this year.

    In a post on X, Musk said the shareholder resolutions on his remuneration and reincorporating the company in Texas were “passing by wide margins.”

    The pay package was first agreed by Tesla’s board, and backed by shareholders, in 2018. For Musk to qualify for the money, Tesla had to hit various revenue, profit and share price targets, which were met.

    But back in January, Delaware judge Kathaleen McCormick ruled in favour of a Tesla shareholder who argued that the company’s board inappropriately set the pay package.

    The electric car maker’s chief executive said investors are also backing plans to move the company’s state of incorporation to Texas.

    Shares were up as much as 7% in premarket trade.

  • Lucy Harley-McKeown

    UK housing outlook

    Here's Anthony Codling from RBC Capital Markets on the latest data:

    According to the latest RICS data, the housing market saw a bump in the road in May, new buyer enquiries and house price expectations dipped as the prospect of mortgage rate cuts shifted to the right. However, the supply of homes for sale continues to increase and the 3-month and 12-month view of sales are looking up not down. The scene is set for recovery once the election is done and dusted and the first rate cut is seen.

  • Lucy Harley-McKeown

    Adjusting to higer rates for longer

    We have a comment from Jean Boivin, Head of the BlackRock Investment Institute on what the Fed's latest signals could mean:

    “First, it is important to separate recent CPI releases from the evolution of Fed thinking. It is unambiguously clear that a Fed that has long wanted to start cutting has gradually been adjusting to the reality that rates will need to stay high for longer – not only in the short term but also longer term. Leaving aside the weaker-than-expected CPI data for May, it did the same again yesterday: moving from signalling three cuts in 2024 to now only one and again raising its estimate of the long-run rate, this time to 2.8% from 2.6% in its March forecasts. We have long expected just one or two cuts this year – and with the Fed’s own updated forecasts showing inflation still above its 2% target at the end of 2025 and a U.S. election approaching, we think that is increasingly likely to be the case.

    “Second, yesterday’s CPI release was a positive surprise relative to consensus and the Fed outlook. Fed Chair Powell pointed out that only some members of the committee took the opportunity to change their forecasts in light of the CPI release. For the others, we don’t know if it didn’t change their view or if they didn’t have enough time to reassess. But there is no additional news here over what we learned from the CPI release itself.

    “Third, the Fed has changed its mind multiple times on its expected policy path, so we don’t put much weight on its new set of projections – and Powell himself said he didn’t “hold it with high confidence”, emphasising the Fed’s data-dependent approach. No matter the forward-looking statement from the Fed, incoming inflation surprises – in either direction – will likely continue to lead to large revisions to the policy outlook. And with little clarity from central banks on the path ahead, markets have become prone to reacting strongly to individual data points – as we saw again yesterday with the post-CPI jump in the S&P 500 and large drop in 10-year Treasury yields.”

  • Lucy Harley-McKeown

    US stocks in premarket

    Here's what's going on before market open Stateside:

  • Lucy Harley-McKeown

    Labour manifesto: due in at 11am

    In terms of what to look out for in the Labour party's manifesto roll out later on today, there have been rumblings of a tax lock.

    The flip side of that will mean big public spending cuts elsewhere, as Keir Starmer tries to balance the books.

    Other promises have amounted to a cap on corporation tax at 25%, the creation of a national wealth fund and a "new deal" for working people.

  • Lucy Harley-McKeown

    Overnight in Asia

    Stocks were also hitting a mixed tempo in Asia, with Japan's Nikkei (^N225) closing 0.4% lower and the Hang Seng (^HSI) up 0.7%.

    US inflation figures fuelled demand for tech stocks as capital flowed to riskier assets.

  • Lucy Harley-McKeown

    US stocks on Thursday

    With a raft of data to digest, US indices were mixed at the close on Thursday.

    The S&P 500 (^GSPC) closed 0.9% higher, alongside a 1.5% gain for the Nasdaq (^IXIC), while the Dow (^DJI) fell 0.1%.

  • Lucy Harley-McKeown

    Overnight in the US: Interest rate outlook

    The Federal Reserve held interest rates at a 23-year high on Wednesday, while scaling back its estimate of rate cuts this year to one from three previously.

    The central bank voted to keep its benchmark interest rate in a range of 5.25%-5.50% at the conclusion of its two-day policy meeting. The Fed funds rate has been in this range since July 2023.

    It was a close call on the revised median of rate cuts predicted for this year. Eight officials estimated two cuts this year, while seven officials predicted one cut. Four officials saw no cuts happening this year.

    At the same time Fed officials boosted their collective forecast for the number of cuts expected next year. They now see a median of four additional rate cuts happening in 2025. That is up from a prior forecast of three.

    Read more

  • Lucy Harley-McKeown

    Good morning!

    Hello from London. It's already been a big week for data here in the UK with the GDP read yesterday. On the slate for later today is US jobs data. We'll also have more news and analysis from the election campaigns.

    Let's get to it.

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