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FTSE and European stocks mixed amid interest rate hike slowdown

Federal Reserve Board Chairman Jerome Powell. FTSE was flat in afternoon trade
US Federal Reserve Board chairman Jerome Powell: The FTSE 100 was up on Thursday after Powell's speech last night. Photo: Kevin Lamarque/Reuters

European stock markets were mixed on Thursday after the US Federal Reserve said that the pace at which interest rates are rising will slow down in America.

In London, the FTSE 100 (^FTSE) was down 0.2% on the day, held back by a stronger pound (GBPUSD=X), which climbed to its highest level since August. The CAC (^FCHI) rose 0.2% in Paris, and the DAX (^GDAXI) was 0.5% higher in Frankfurt.

November was another strong month for Europe, with the DAX closing 8.6% higher, while the FTSE made gains of 6.74%. December is traditionally the best month for the FTSE, with the blue-chip delivering average returns of 2.4% in the final month of the year alone, according to eToro.

Meanwhile, UK house prices fell 1.4% in November, the biggest monthly drop since June 2020, mortgage lender Nationwide (NBS.L) revealed.

A Reuters poll of economists had pointed to a fall of 0.3% during the month. In annual terms, house price growth slowed to 4.4% in November from 7.2% in October.

The lender added the housing market looked set to "remain subdued" in the coming months.

Read more: Top 20 happiest places to live in the UK: Is your town on the list?

Across the pond, the S&P 500 (^GSPC) dipped 0.2% and the tech-heavy Nasdaq (^IXIC) was treading water at the time of the European close. The Dow Jones (^DJI) tumbled 0.9%.

It came after a mild easing in US inflation and solid consumer spending in October. The PCE index, which measures prices paid for domestic purchases of goods and services, rose by 6% in the 12 months to November, down from 6.3% in October.

Core PCE slowed to 5% from 5.2%, which may reassure central bank policymakers that recent interest rate rises are cooling inflationary pressures.

Meanwhile, there were 225,000 initial claims filed in the week to November 26th, down from 241,000 the previous seven days.

However, the number of people receiving support for at least two weeks jumped by over 110,000, to 1,337,838

The dollar continued to slide against the pound as investors shifted to riskier assets after Federal Reserve chair Jerome Powell opened the door to a slowdown in the pace of monetary tightening.

Watch: Stocks surge after Powell signals slower pace for rate hikes

In an eagerly-awaited speech, he said the central bank could scale back the pace of its interest rate hikes "as soon as December," but warned that the fight against soaring inflation was far from over.

Powell's comments at the Brookings Institution in Washington also sent Treasury yields lower. It comes after four consecutive 75-basis-point increases.

“For the first time in an age it feels like Federal Reserve chair Jerome Powell is telling markets what they want to hear,” said AJ Bell investment director Russ Mould.

“The message that an easing in the pace of rate hikes could come before the end of the year was just what investors were looking for and raises the prospect of a Santa Rally heading into Christmas."

Read more: Will Santa gift investors with a stock market rally?

Asian equities climbed higher overnight as markets were given a slither of hope on news that some of China’s zero-COVID policies were being relaxed in the southern city of Guangzhou.

Daily cases remain in the thousands, but vice-premier Sun Chunlan said yesterday that the pandemic fight was entering a new stage, with vaccination rates on the rise and current variants being less harmful.

The Nikkei (^N225) climbing 0.9% in Tokyo, while the Hang Seng (^HSI) gained almost 0.8%, and the Shanghai Composite (000001.SS) rose 0.5%.

MSCI's broadest index of Asia-Pacific shares outside Japan also ended 1.7% higher on the day – its biggest monthly gain in nearly 30 years in November. However, the index is still down around 18% on the year.

Watch: How does inflation affect interest rates?