On Thursday, the UK's FTSE 100 index experienced an increase of 0.67% at the close, marking its second consecutive positive day. The upward movement was largely fueled by market optimism surrounding the European Central Bank's (ECB) decision to ease monetary policy as anticipated. Adding to the positive momentum, Rentokil Initial reported a notable increase of 8.77% by the closing bell, spurred by the disclosure of year-over-year growth in group revenue for the third quarter when adjusted for constant exchange rates.
However, when considering actual exchange rates, Rentokil observed that the annual change in its group revenue remained flat. In light of the recent trading updates, RBC Capital Markets has rated Rentokil Initial as outperform. They acknowledged that substantial information in the earnings statement and the 9 AM call will be pivotal for assessing market confidence.
They believe the situation is not detrimental, though the consensus forecasts for 2025 might decrease modestly due to the pushout of synergies. Despite existing operational challenges, RBC remains optimistic that these issues are addressable over time. With no new economic updates from the UK, market participants turned their focus on the ECB's interest rate decision.
The Monetary Policy Committee of the Bank of England is not scheduled to convene until November. Reflecting a revision in the inflation outlook, the ECB's Governing Council has taken action to lower its three primary interest rates by 25 basis points. This adjustment has brought the rates down to 3.25% for the deposit facility, 3.40% for the main refinancing operations, and 3.65% for the marginal lending facility. This recent decision to reduce rates, just five weeks after a previous cut with minimal new economic data in between, indicates a significant concern from the ECB regarding the eurozone's growth prospects and the potential for inflation to fall below the target.
Notably, the phrasing used in the ECB's decision remained virtually unchanged from the statements issued during the September meeting, as observed by ING..