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Late market roundup: Europe closes red following ECB rate cut

London remained broadly flat at Thursday’s close against red European markets, as investors digested a European Central Bank rate cut in line with expectations.

The FTSE 100 index rose just 0.06 points at 8,275.66. The FTSE 250 fell 15.80 points, 0.1%, at 19,250.01, and the AIM All-Share declined 0.94 of a point, 0.1%, at 668.94.

The Cboe UK 100 rose 0.1% at 824.58, the Cboe UK 250 nudged 0.1% higher at 16,844.11, while the Cboe Small Companies climbed 1.1% at 15,214.08.

In Paris, the CAC 40 ended down 0.6%, while Frankfurt’s DAX 40 dipped 0.5%.

Christine Lagarde said the European Central Bank needs to ready and agile as it faces up to the uncertain world caused by US tariffs.

The ECB president was speaking after the Frankfurt-based lender lowered interest rates, as expected, amid the ‘exceptional uncertainty’ caused by global trade worries.

The quarter point cut takes interest rates on the deposit facility, the main refinancing operations and the marginal lending facility to 2.25%, 2.40% and 2.65% respectively.

In a statement, the ECB warned the outlook for growth has ‘deteriorated owing to rising trade tensions’ and that ‘increased uncertainty’ is likely to reduce confidence among households and firms.

In addition, the ‘adverse and volatile market response to the trade tensions’ is likely to have a tightening impact on financing conditions, it said.

‘These factors may further weigh on the economic outlook for the euro area,’ the ECB added.

In March, ECB staff expected growth of 0.9%, 1.2% and 1.3% in 2025, 2026 and 2027.

Speaking to reporters, Lagarde said the economic outlook is clouded by ‘exceptional uncertainty’, although she still expects growth in the first quarter.

‘Euro-area exporters face new barriers to trade, although their scope remains unclear,’ she said, adding that ‘disruption to international commerce, financial market tensions and geopolitical uncertainty are weighing on business investment’.

The central bank requires ‘readiness and agility’ to face the new shocks facing European economy, she said.

Mark Wall, chief European economist at Deutsche Bank said: ‘The forwarding-looking view on the economy implies an expected shock from tariffs, and the characterisation of ’exceptional’ uncertainty, implies an openness to further monetary easing assuming the trade shock persists and is borne out in the data. We continue to expect another rate cut in June and a terminal rate of 1.5% by year-end.’

In response, the euro stood higher at $1.1374 on Thursday against $1.1363 on Wednesday.

The pound traded higher at $1.3259 late Thursday in London, compared to $1.3228 at the equities close on Wednesday.

Against the yen, the dollar was trading lower at JP¥142.19 compared to JP¥142.75.

On Wall Street, the Dow Jones Industrial Average traded 1.1% lower, the S&P 500 was up 0.4%, while the Nasdaq Composite declined 0.1%.

The DJIA was hit by a 22% fall in the share price of UnitedHealth Group after it revised down its earnings outlook for the year due to higher-than-expected care costs in its Medicare Advantage business.

The Minnesota-based healthcare and insurance firm now expects 2025 net profit of between $24.65 and $25.15 per share, and adjusted earnings between $26.00 and $26.50.

This is down from the company’s prior outlook of net earnings of $28.15 to $28.65 per share and adjusted profit of $29.50 to $30.

Supporting the S&P 500, a 15% jump in Eli Lilly after positive topline phase 3 trial results for its oral weight-loss treatment, orforglipron.

‘The data are pretty much a best-case scenario, in our view - on weight loss, blood sugar control, tolerability, safety,’ said analysts at Bank of America.

BofA said the trial was ‘arguably one of the biggest, most important, most closely-watched pipeline events in large cap biopharma’.

Leading the gainers on the FTSE 100, J Sainsbury and Rentokil Initial after well received trading updates.

Grocer Sainsbury reported slightly better-than-expected annual sales and profits, although guidance was a touch below consensus.

The London-based food retailer said it expects to deliver Retail underlying operating profit of around £1 billion in the current financial year, compared with £1.06 billion consensus, and Retail free cash flow of more than £500 million.

The forecast came as the UK’s second largest grocer said Retail underlying operating profit rose 7.2% to £1.04 billion in the financial year to March 1 from £966 million a year prior, and above the £1.03 billion company-compiled consensus.

The cautious guidance follows a similar statement from industry peer Tesco last week.

AJ Bell’s Russ Mould explained: ‘Like Tesco, Sainsbury’s wants to equip itself to protect its competitive position, hence its guidance for flat profit in the coming year as it looks to offer customers value for money.’

Both Tesco and Sainsbury are gearing up for a possible price war after Asda announced it was planning to invest in a bid to regain lost market share.

Mould said there is also a chance that Sainsbury’s and Tesco are being ‘overly conservative and Asda’s big talk doesn’t translate into anything meaningful so there is scope for both to surprise on the upside.’

Sainsbury rose 3.6%, while Tesco climbed 2.6% and Marks & Spencer climbed 2.1%.

Rentokil Initial, which has had a chequered recent trading history, firmed 5.0% after its trading update.

The pest control company said total revenue grew 1.5% to $1.64 billion in the three months that ended March 31 from $1.61 billion a year before. Taking into account one fewer trading day in the recent quarter, revenue growth was 1.8%.

In North America, revenue rose by 0.5% to $951 million from $946 million.

A drop in the gold price saw Fresnillo give up some recent gains, dropping 5.6%. Gold traded at $3,296.43 on Thursday an ounce against $3,324.19 on Wednesday.

In further good news for the retail sector, Dunelm jumped 12% on the FTSE 250 as it reported a rise in sales during the third quarter of its current financial year, boosted by a successful start to its spring and summer ranges, as well as ‘a successful winter sale at the beginning of the period’.

The Leicestershire, England-based company which provides homewares including furniture and kitchenware said sales in the three months that ended March 29 rose to £461.9 million, up 6.3% from £434.5 million the prior year.

Brent oil was quoted higher late in London on Thursday, at $67.52 a barrel from $65.73 late Wednesday.

UK financial markets are closed on Friday.

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