FTSE 100 Suffers Sharp Decline Amid Global Market Pressures
Stocks in London experienced a significant downturn on Thursday, mirroring losses across US and European markets. Investors grappled with key interest rate decisions from central banks and the abrupt collapse of merger discussions between mining giants Glencore and Rio Tinto.
The FTSE 100 index closed down 93.12 points, or 0.9%, at 10,309.22. Similarly, the FTSE 250 ended lower by 229.80 points, 1.0%, at 23,103.35, while the AIM All-Share fell 11.45 points, 1.4%, to 802.90.
Bank of England Holds Rates with Dovish Signals
The Bank of England maintained the bank rate at 3.75% on Thursday, with a narrow 5-4 majority. Governor Andrew Bailey played a pivotal role in supporting the hold, having previously backed a rate cut in December.
In a post-decision press conference, Mr Bailey stated that "disinflation is on track and is running ahead of the schedule expected in November." However, he emphasised that service price inflation and wage growth must "fall further" for the Monetary Policy Committee to feel confident about returning to the inflation target.
The Monetary Policy Committee indicated that "bank rate is likely to be reduced further," though "judgments around further policy easing will become a closer call." Kallum Pickering, chief economist at Peel Hunt, noted that money markets now see a 60% chance of a cut in March, shifting from earlier expectations of April.
European Central Bank Maintains Hawkish Stance
In Europe, the European Central Bank also left rates unchanged, keeping the deposit facility rate at 2.00%. Analysts at Citi detected a "hawkish undertone" in the ECB's assessment, suggesting a high bar for future rate cuts.
European equities reflected the cautious sentiment, with the CAC 40 in Paris closing down 0.3% and the DAX 40 in Frankfurt falling 0.5%.
US Tech Stocks and Labour Data Weigh on Wall Street
Wall Street faced sharp declines, driven by ongoing weakness in technology stocks and a disappointing labour market report. The Dow Jones Industrial Average and S&P 500 both fell 1.1%, while the Nasdaq Composite dropped 1.4%.
According to the Bureau of Labour Statistics, job openings declined to 6.542 million in December from a revised 6.928 million in November, missing forecasts of a rise to around 7.2 million. Wells Fargo described the labour market as "precarious," with no immediate turnaround in hiring conditions.
Technology stocks continued to struggle, with Alphabet falling 4.2% despite strong results, and Qualcomm slumping 7.3% after disappointing earnings. Goldman Sachs warned that the collapse in software share prices reflects downside risks to profit margins and growth estimates.
London Market Highlights and Currency Movements
In London, some data providers and software stocks rebounded after recent losses. London Stock Exchange Group gained 5.5% following strong results from its majority-owned Tradeweb, with RBC Capital Markets highlighting its diversified revenue streams.
The dovish hold by the Bank of England pressured sterling, which was quoted lower at 1.3536 dollars compared to 1.3656 dollars on Wednesday. The euro stood slightly lower at 1.1791 dollars, while the dollar traded higher against the yen at 156.96 yen.
Glencore-Rio Tinto Merger Talks Collapse Again
Late drama unfolded as merger talks between Rio Tinto and Glencore collapsed once more. Rio Tinto stated it could not reach an agreement that would deliver value to shareholders, while Glencore argued that the proposed terms undervalued its contribution to the combined group.
Glencore shares sank 7.5%, and Rio Tinto eased 1.0%. This marks the second collapse of talks between the two firms, following previous discussions in late 2024.
Other Notable Movers and Commodities
On the FTSE 100, Vodafone fell 4.6% after missing third-quarter forecasts due to weak organic revenue growth in Germany. Entain gave back 6.2%, and Fresnillo dropped 6.3% amid a lower gold price and a downgrade from Berenberg.
Gold was quoted lower at 4,848.34 dollars an ounce, while silver plummeted 14% to 75.60 dollars an ounce after recent highs. Brent oil remained stable at 67.37 dollars a barrel.
The biggest risers on the FTSE 100 included London Stock Exchange Group, GSK, Sage, Experian, and Relx. The biggest fallers were Glencore, NatWest, Fresnillo, Lloyds Banking Group, and Hikma Pharmaceuticals.
Looking Ahead
Friday's global economic calendar features Canadian jobs data, French trade figures, and a Halifax house price index report in the UK. The UK corporate calendar includes a trading statement from Victrex.
