Global stocks rally after US central bank slashes interest rates

Global stock markets have enjoyed a rally with investors in high spirits after interest rates in the US were cut for the first time since 2020, while the pound surged on the news that UK rates were staying the same.

The UK’s FTSE 100 index was given a lift on Thursday with miners among the biggest risers of the day.

It was up 75.04 points, or 0.91%, to end the day at 8,328.72.

It was a stronger showing elsewhere in Europe where top stock market indices were given a significant boost. In Paris, the Cac 40 soared 2.3% and in Frankfurt, the Dax climbed 1.54%.

Over in New York, trading got off to a strong start with the S&P 500 up about 1.7%, rising above its recent all-time highs.

The Dow Jones was also up 1% by the time European markets closed.

Spirits were high following an all-important rates decision from the world’s largest economy on Wednesday evening.

The Federal Reserve opted for a 0.5 percentage point reduction to their interest rate – greater than the 0.25 percentage point cut that many economists had been expecting.

It was the central bank’s first cut since March 2020, signalling that the economy could be turning a corner after a period of elevated borrowing costs.

Fawad Razaqzad, a market analyst for Forex.com, said the Fed’s decision was “largely welcomed by investors”.

“The move was seen as a bold but necessary step to ease economic concerns without sending panic signals reminiscent of the 2008 financial crisis,” he said.

“Fed chair Jerome Powell emphasised that the cuts are not part of a long-term strategy but rather a proactive measure aimed at stabilising growth, now that inflation appears to be on the path of returning to its target.”

Meanwhile, the pound strengthened after the Bank of England’s decision to hold interest rates at 5%.

It is in keeping with its “gradual” approach to rate-cutting, a message reiterated by the Bank on Thursday.

Sterling was up around 0.4% against the US dollar at 1.327, and up 0.2% against the euro at 1.19.

The price of Brent crude oil surged by 1.4% to 74.70 US dollars per barrel.

In company news, fashion retailer Next reported a 7% increase in underlying pre-tax profits to £452 million for its first half of the financial year, as total group sales lifted 8%.

It was a slightly weaker performance in the UK where sales rose by just 1%, with Next brand ranges acting as a drag on the total figure.

Overseas, sales surged nearly a quarter in the first half, compared with the same period last year. Shares in Next closed 0.5% higher.

Online grocer Ocado upped its sales guidance for the year after seeing a sharp rise in customers over the summer months.

The retailer said more than a million people shopped with it between June and August, with revenues rising 15.5% compared with the prior year. Shares in Ocado rose 2.8%.

The biggest risers on the FTSE 100 were Rolls-Royce, up 29p to 525p, Antofagasta, up 80.5p to 1,858p, Fresnillo, up 25.5p to 588.5p, Ashtead, up 240p to 5,780p, and JD Sports, up 6.3p to 156.5p.

The biggest fallers on the FTSE 100 were SSE, down 54.5p to 1,942p, National Grid, down 27.5p to 1,023p, Vodafone, down 1.92p to 76.16p, Reckitt, down 91p to 4,576p, and GSK, down 29.5p to 1,574.5p.