FTSE flat as Ofgem increases energy price cap, pound strengthens

The FTSE 100 fell 0.2% after the open, feeling pressure from further weakness in oil prices on the back of rising COVID cases in China. Photo: Vuk Valcic/SOPA Images/LightRocket via Getty

European stock markets lacked any real momentum on Thursday, as the London benchmark underperformed its peers thanks to a stronger pound (GBPUSD = X).

The FTSE 100 (^FTSE) ended 0.1% higher on the day, feeling pressure from further weakness in oil prices (BZ=F) on the back of rising COVID cases in China. Meanwhile, the CAC (^FCHI) rose 0.5% in Paris, and the DAX (^GDAXI) rose 0.8% in Frankfurt.

The British pound extended its gains against the US dollar, reaching $1.2126 at the time of writing – up 0.6% for the session. It hit $1.2131 earlier in the afternoon, the highest level since mid-August.

Meanwhile, energy regulator Ofgem revealed on Thursday that the cap on energy prices will rise from £3,549 to £4,279 from January.

This means the government will have to pay around £1,800 per household over the course of the year, after capping bills at £2,500 under the Energy Price Guarantee.

Ofgem said: “There is no immediate action consumers can take as a result of today’s announcement.”

It came as natural gas prices in Europe fell more than 6% as EU ministers aim to resolve their differences over pricing. A decision has been delayed until mid-December.

Read more: UK manufacturers are experiencing the worst drop in new orders for two years

Across the pond on Wall Street, US stock markets were closed for the Thanksgiving holiday.

On Wednesday night, the Federal Reserve’s meeting minutes indicated support for a slower pace of rate hikes, sending Wall Street higher.

The S&P 500 (^GSPC) rose 0.6%, while the Dow Jones Industrial Average (^DJI) rose 0.3%. The Nasdaq Composite (^IXIC) closed up 1%.

The Bank of England (BoE) is also expected to raise its interest rates by another 50 basis points in December, from 3% to 3.5%.

Watch: How does inflation affect interest rates?

Michael Hewson of CMC Markets said: “Last night’s Fed meeting minutes confirmed the market’s initial reaction to the Fed’s statement earlier this month with most officials supporting a slower pace of increases soon, with many seeing risks from more rapid hikes.

This tone reinforces the narrative that 50bps is coming in December and subsequent hikes are likely between 25 and 50bps.

“This is not to say that members have not hedged those bets with the expectation that rates may peak at a higher level than imagined, offsetting any misconception that the Fed may become weak, but for the time being markets seem to be heading for the smaller story stroll. , rather than Powell’s hard-line theme.”

Read more: Public borrowing rises in the UK as the energy bill subsidy takes effect

Bond yields fell on the news. The yield on benchmark 10-year US government debt, which affects mortgage rates, fell to 3.69% from 3.76%.

Elsewhere, Asian stocks were mostly higher on Thursday on news of fresh economic stimulus from China.

In Tokyo, the Nikkei (^N225) is up nearly 1% while the Hang Seng (^HSI) is up 0.8% in Hong Kong, and the Shanghai Composite (000001.SS) is down 0.3% on the day.

Watch: What is recession and how do we detect it?

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