The biggest single rate hike in the history of the European Central Bank and Liz Truss’s energy bill support package are the major areas of focus for traders today.

A rise of 0.75% took rates to their highest level since 2011 after the ECB ended eight years in negative territory with a 0.5% hike in July.

Sterling yesterday hit a 37-year low of $1.14 but has steadied since as traders focus on the huge public finances impact of the new prime minister’s plan for business subsidies and freezing of household bills at £2,500.

FTSE 100 Live Thursday

• Truss energy bill freeze: Oil majors stay prominent on FTSE 100 leaderboard but gains for utilities fade

• European Central Bank hikes eurozone interest rates by 0.75% to 1.25%

• Euro falls back under parity with dollar

• Primark warns over US dollar impact

• Brent crude fall aids inflation outlook

London’s FTSE 100 down as retailers tumble but rallying financial and resource stocks offset overall losses

15:29 , Michael Hunter

Retailers were queuing up at the bottom of the London stock market after the owner of the budget fashion chain Primark warned about the impact of the weak pound on its business model.

The conglomerate Associated British Foods slumped 8.5% to 1332p after it said margins would decline while the cost-of-living crisis also contstrained consumers’ spending power. The company which also makes Ovaltine and Twinings tea and is a major producer of yeast and sugar, books some costs in dollars and much of its revenue in sterling.

Next, the fashion chain, was down 5% at 5744p while budget household goods company B&M fell 5.9% to 341p. Sainsbury lost 4.2% to 198.3p.

Overall losses for the FTSE 100 reached 5 points at 7231.65, offset by gains for heavily weighted resource and financial stocks. Standard Chartered, the bank, was up 2.3% at 590.2p. Rio Tinto, the metals miner, gained 1.4% to 4698p.

Wall Street stocks ease back in early trade as monetary policy dominates sentiment

14:53 , Michael Hunter

New York stocks eased back in early trade after the chairman of the Federal Reserve, Jerome Powell, repeated his comittment to taming rising prices

Powell told the Cato Institute, a Washington think tank, that he was “strongly committed” to fighting inflation, remarks seen as a signal that further jumbo-sized rate hikes could be on the way in the US. It came on the same day the European Central Bank increased its interest rates by an unprecedented 0.75%, a size of hike already used by the Fed.

The S&P 500 slipped 9 points on the news to 3969.82, a fall of 0.3%.

Euro falls under parity with dollar as investors measure implications of jumbo ECB rate hike

14:32 , Michael Hunter

The euro fell back under parity with the dollar after the ECB hiked rates by 0.75%, a bigger-than-usual move, but one that had largely been expected by markets.

Having been sitting around $1.00 as the move was confirmed, it cooled as the president of the ECB’s governing council, Christine Lagarde spoke about the decision at press conference in Frankfurt, with a live feed available here.

In afternoon trade, the shared currency was down 0.5% at $0.9943. It fell below dollar parity for the first time in 20 years in July, as investors dumped the shared currency on the outlook for faster rate rises elsewhere and the grim outlook for the bloc’s economy.

Carsten Brzeski, global head of macro at Dutch bank ING pointed to the hike’s limitations, saying it “will not determine whether or not the eurozone economy slides into recession and will also not make the recession more or less severe.”

He added: “Any recession in the eurozone in the winter will be driven by energy prices and not by interest rates.”

Rupert Thompson, investment strategist at Kingswood, the wealth manager, said the ECB’s move “can only add to the pressure on the Bank of England to follow suit with a 0.75% rise next week, particularly with the news today of the Government’s large scale intervention to cap household and business energy bills.”

European Central Bank hikes eurozone interest rates by 0.75% to 1.25%

13:19 , Michael Hunter

The European Central Bank has intensified its fight against inflation with an unprecedented interest rate hike of 0.75%, taking its benchmark rate to 1.25%.

The euro was steady after the announcement, which had increasingly been expected, sitting on parity with the dollar at $1.00 .

It takes rates in the 19-nation bloc to their highest level since 2011 after the ECB ended eight years in negative territory with a 0.5% hike in July.

Claudia Fontanive-Wyss, portfolio manager, at Swiss fund Vontobel, said the 0.75% hike was “priced in” by markets.

“Remember that the ECB had dropped their previous forward guidance and rate hikes will take place on a meeting-by-meeting basis. We believe the data is in favor of moving bu 0.75% now rather than later.”

ECB gets ready for interest rate announcement amid calls for jumbo, 0.75% hike

12:48 , Michael Hunter

The European Central Bank will make its announcement on eurozone interest rates at 1.15 p.m. London time and in final run-up to the decision, there are repeated calls for a larger-than-usua rise to bolster its fight against runaway inflation.

Claudia Fontanive-Wyss, portfolio manager, at Vontobel, the Swiss invesment manager, said: “now is a good window of opportunity -- an maybe the only one -- for the ECB to hike rates by an unprecedented 0.75%.

“The near-term trend for CPI remains upward and given monetary policy takes time to be effective, not acting boldly now would be a mistake. The ECB needs to ensure that inflation expectations do not set in too high and the longer the Bank waits, the more challenging it will become to bring them down in the future, especially since it was late in starting to hike.”

Michael Hewson, chief market analyst at CMC Markets UK, noted a “narrative shift” over the last few days “after several governing council hawks got a lot louder in their pronouncements for much more aggressive rate moves.”

He added: “ Whether we get 0.75%s today or 0.50%, today’s move will follow in the footsteps of the 50bps we saw in July, a move which was higher than expected.”

Chris Turner, at Dutch Bank ING, said: “We expect the ECB to ‘only’ hike by 0.50%. This would be a compromise, keeping the door open for further rate hikes, 0.75% looks one bridge too far for the doves but cannot entirely be excluded.”

The euro was up 0.3% at $1.0024, having fallen under the $1.00 mark for the first time in 20 years in July, as investors dumped the shared currency on the outlook for faster rate rises elsewhere and the grim outlook for the bloc’s economy.

City Comment: Broadband big boys need more focus in capital

12:26 , Simon English

VERY best of luck to Vorboss, which as we report today, says it is going to radically improve the internet service to businesses in London.

It reckons this market has been sluggish for way too long, with companies large and small accepting slow broadband and frequent outages as just par for the course.

Pre-Covid perhaps that could be managed. Now that so many meetings happen online, a crashing broadband system is a business killer.

Your £10 million pitch goes nowhere if it looks like you can’t even navigate Zoom properly.

Vorboss thinks that BT and Virgin act as if London’s internet needs are sorted. So they focus on pushing into other cities and rural areas.

They also try to give businesses the least amount of broadband coverage they can get away with. Vorboss’s plan is to ensure firms have much more capacity than they are likely to ever need.

BT might say that this is all a bit harder than it looks. This is not the first time a telecom start-up has pledged to change the game, with others later discovering that costs are way higher than they expected.

Vorboss is surely right about the levels of customer service however. And the suspicion that the big boys don’t properly look after their networks is growing.

The broadband connecting box on my street in Zone 2 permanently looks like it has been vandalised. Even if it has, the owners don’t seem to be taking steps to mitigate that.

BT is a much better business than is used to be and is under pressure from the Government to get better broadband across the country. It can’t be seen to favour the capital, even if it knows that is where the majority of the demand comes from.

Even if Vorboss fails, it might succeed in giving BT a slap, and an incentive to improve what it does for firms in London.

They should go for it.

Truss energy bill freeze: Oil majors stay prominent on FTSE 100 leaderboard but gains for utilities fade

12:23 , Michael Hunter

Oil majors kept a prominent place on the FTSE 100’s leaderboard after Liz Truss outlined plans to freeze the typical UK household energy bill at £2,500 for two years from October.

The measures, which were broadly expected, came a day after Truss ruled out a windfall tax to pay for the new price limit at her first appearance at prime ministers’ questions.

BP was up 1.2% at 447p, with Shell up 0.8% at 2281p. Electricity and gas utility stocks eased back, having made notable gains over the previous session. SSE fell 1.1% to 1733p and Centrica was down 0.7% at 83p.

Overall, London’s main stock index was up 13 points at 7250.65, a gain of 0.2%.

Market mood improves, DCC rises on healthcare deal

10:18 , Graeme Evans

Tentative signs that inflation pressures are easing today lifted the mood for global markets.

The optimism came as Brent crude fell to $87a barrel, while natural gas futures are at a one-month low in Europe as policymakers pursue initiatives including price caps to tackle the energy crisis.

The slight softening in prices from this summer’s highs has boosted hopes that the US Federal Reserve might be able to step off the pace of interest rate hikes.

The shift in rates sentiment weakened the US dollar last night, having surged by around 15% in the year to date against a basket of major currencies. Demand for the greenback and recession fears in the UK yesterday left the pound trading at its lowest since 1985 at just above $1.14, although it was closer to $1.15 today.

A stronger session for Wall Street overall, with the tech-focused Nasdaq up 2% after a long run of losses, helped set a positive tone for London shares today. The FTSE 100 index added 20.39 points to 7258.22, while the UK-focused FTSE 250 index improved 79.29 points to 18,890.77.

Among the top flight’s best performing stocks, British Airways owner IAG rose 1.7p to 111.4p thanks to the lower oil price and Rolls-Royce improved a penny to 77.8p.

DCC, the Dublin-based sales and support services conglomerate, rallied 72p to 4874p after its largest ever acquisition in healthcare with the addition of medical devices business Medi-Globe for an enterprise value of £213 million.

Analysts at UBS have a price target of 7900p and said today’s deal was “a strong reminder of DCC's high-quality M&A roll-up strategy”.

Among smaller stocks, Restaurant Group rose by a penny to 44p after half-year profits of £10.2 million were driven by market-beating 11% underlying sales growth at Wagamama. Chief executive Andy Hornby, the former HBOS boss, called the results a “robust financial performance in a challenging market”.

FTSE 100 rallies, Darktrace down 30%

08:53 , Graeme Evans

Last night’s rebound for US markets has set the tone for an improved session in London, with the FTSE 100 index up 30.74 points at 7268.57 and the FTSE 250 index 67.13 points higher at 18,878.61.

The improved sentiment comes with the Brent crude price now at $88 a barrel, boosting hopes that the Federal Reserve might be able to ease the pace of interest rate hikes.

Hargreaves Lansdown senior analyst Susannah Streeter said: “Although the Fed’s next moves may be hard and fast, there are signs that inflationary pressures may be easing more quickly, which would mean higher rates won’t linger for longer.”

The biggest risers in the FTSE 100 index included warehouse technology business Ocado, which improved 6.2p to 740p, while catering giant Compass added 18p to 1885p.

In the FTSE 250, Darktrace shares lost 30% of their value after private equity firm Thoma Bravo said it was no longer interested in bidding for the cyber security specialist. The stock returned to where it was in mid-August, falling 154.4p to 360.4p.

Primark costs warning hits ABF shares

08:14 , Graeme Evans

Shares in Associated British Foods have fallen 8% after the FTSE 100-listed conglomerate highlighted the impact of a strong dollar on costs in its Primark retail division.

In addition, the squeeze on disposable consumer incomes means it is not planning to implement further price increases next year beyond those already actioned.

With Primark margins set to be weaker in the year ahead, ABF’s shares fell 123p to 1332p. The company’s operations also span sugar, ingredients and grocery brands including Twinings Ovaltine.

Other retail stocks under pressure after the Primark update included Marks & Spencer, which dropped 3%, and Next after a decline of 210p to 5838p.

US markets boost sentiment, ECB rates decision

07:46 , Graeme Evans

The best session for US shares since mid-August means the FTSE 100 index and other European markets are poised to open higher today.

The tech-focused Nasdaq led the way by ending a run of seven negative sessions with a 2% improvement, while the S&P 500 index added 1.8% and Dow Jones Industrial Average rose 1.4%.

CMC Markets expects the FTSE 100, which finished lower yesterday on weakness for energy and commodity stocks, to improve 23 points at 7260.

The Dax in Frankfurt is forecast to add 76 points to 12,992 but with the focus on whether the European Central Bank will raise interest rates by 0.5% or 0.75% later today.

MIchael Hewson, CMC’s chief market analyst, said: “Whatever decision is made today, ECB President Christine Lagarde will need to ensure that her messaging is clear.”

A weaker US dollar overnight meant the pound recovered from the 37-year low of just above $1.14 yesterday to stand above $1.15 today as attention turns to how new prime minister Liz Truss intends to fund her energy bill support package.

Deutsche Bank yesterday estimated the cost at £200 billion, which is half the sum spent during the pandemic and equivalent to 8% of GDP.

Brent crude stood at $88 a barrel today, having fallen 5% yesterday on the weaker demand outlook after China reported disappointing trade figures.