Hot Features
Premium
Level up your trading with our powerful tools and real-time insights all in one place.
London open: Stocks edge down after Fed minutes; Shell in the red
London stocks edged lower in early trade on Thursday as investors mulled hawkish minutes from the US Federal Reserve and a disappointing update from Shell.
At 0900 BST, the FTSE 100 was down 0.2% at 7,570.96.
Richard Hunter, head of markets at Interactive Investor, said: “More recent market rallies of both sides of the pond have tended to lack conviction, with any positive direction of travel seemingly unsustainable against a cocktail of concerns.
“Even though it was widely expected that the Federal Reserve minutes would confirm that the door was open to more aggressive monetary tightening if appropriate, the confirmation was enough to unsettle investors.
“Similarly, a raft of additional sanctions on Russia had been trailed and also came to pass. However, the lack of an obvious resolution to the current conflict is continuing to weigh on general sentiment, even before the true costs to the global economy become more measurable over the coming months.”
On home shores, the latest survey from Halifax showed that house prices rose in March at the fastest pace in six months. Prices jumped 1.4% on the month, taking the average property price to a new record high of £282,753. On the year, prices were up 11%.
Russell Galley, managing director at Halifax, said: “The story behind such strong house price inflation remains unchanged: limited supply and strong demand, despite the prospect of increasing pressure on households’ finances. Although there is some recent evidence of more homes coming onto the market, the fundamental issue remains that too many buyers are chasing too few properties.
“The effect on house prices makes it increasingly difficult for first-time buyers looking to make their first step onto the ladder, but also challenges home movers who face ever bigger leaps to move up the rungs to a larger property.”
In equity markets, Aviva was the worst performer on the FTSE 100 as it traded without entitlement to the dividend.
Shell gushed lower as the oil giant said it expected to book up to $5bn in post-tax write offs after its decision to exit Russia, adding that oil & gas earnings would be “significantly higher” on the back of surging prices.
Countryside Properties tumbled as it said annual profit would fall after the housebuilder published a damning review of its own operations. The company said it expanded too quickly and botched the acquisition of Westleigh in 2018. Project delays, poor workmanship and rising costs also affected the group at some sites.
On the upside, 888 Holding surged to the top of the FTSE 250 after it and Caesars Entertainment agreed a cut in the deal value of William Hill’s international assets due to tougher economic and regulatory conditions. 888 also unveiled plans to raise funds via a placing to help pay for its acquisition of the non-US operations.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Sainsbury (j) Plc | +2.11% | +5.10 | 246.30 |
| 2 |  |
Marks And Spencer Group Plc | +1.36% | +2.05 | 152.70 |
| 3 |  |
Easyjet Plc | +1.30% | +6.80 | 530.80 |
| 4 |  |
British Land Company Plc | +1.25% | +6.60 | 536.20 |
| 5 |  |
Astrazeneca Plc | +1.22% | +128.00 | 10,590.00 |
| 6 |  |
Scottish Mortgage Investment Trust Plc | +1.21% | +11.80 | 990.20 |
| 7 |  |
Centrica Plc | +1.19% | +0.96 | 81.54 |
| 8 |  |
Bt Group Plc | +1.02% | +1.90 | 188.05 |
| 9 |  |
Diageo Plc | +1.01% | +40.50 | 4,051.50 |
| 10 |  |
Land Securities Group Plc | +0.85% | +6.60 | 783.20 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Direct Line Insurance Group Plc | -5.28% | -14.70 | 263.80 |
| 2 |  |
Aviva Plc | -4.12% | -18.30 | 425.90 |
| 3 |  |
Smurfit Kappa Group Plc | -3.42% | -107.00 | 3,023.00 |
| 4 |  |
Mondi Plc | -3.15% | -46.00 | 1,414.50 |
| 5 |  |
Barratt Developments Plc | -2.19% | -11.60 | 518.80 |
| 6 |  |
Lloyds Banking Group Plc | -2.11% | -0.95 | 44.23 |
| 7 |  |
British American Tobacco Plc | -1.89% | -62.50 | 3,242.50 |
| 8 |  |
Bp Plc | -1.77% | -6.75 | 374.10 |
| 9 |  |
Shell Plc | -1.55% | -33.00 | 2,098.50 |
| 10 |  |
Bhp Group Limited | -1.52% | -45.00 | 2,912.00 |
Europe open: Shares rally despite hawkish Fed as eyes now on ECB
European shares rallied at the open on Thursday after the previous session’s fall, despite hawkish comments from the US Federal Reserve and an increase in sanctions against the Russian regime.
The pan-European Stoxx 600 index was up 0.5% in early deals after falling 1.5% on Wednesday. The UK’s commodity-heavy FTSE 100 fell as shares in energy giant Shell fell after the company said it would write down up to $5bn as a result of its decision to exit Russia after its invasion of Ukraine, higher than previously disclosed.
US and Asia markets were weaker overnight after minutes of the Fed’s March meeting showed officials last month “generally agreed” to cut up to $95bn a month from the central bank’s asset holdings as another tool in the fight against surging inflation.
Investors were also eyeing European Central Bank minutes due later on Thursday.
“While last nights Fed minutes were as hawkish as expected, today’s ECB minutes are likely to be somewhat of a contrast, even though it was announced that they would be tapering the asset purchase program steadily over the summer, with a view to ending it in Q3,” CMC Markets analyst Michael Hewson.
“Last month’s hawkish pivot merely serves to underline what a bind the European Central Bank finds itself in. We’ve subsequently seen government bond yields push higher across the bloc, however it’s difficult to really see what else the ECB can do at this point.”
“Recent comments from a few ECB policymakers suggest there is rising concern that the ECB is behind the curve, and today’s minutes are likely to offer insights as to how significant this concern is, with the potential that we could well see rate hikes as soon as Q3.”
In equity news, shares in housebuilder Countryside Partnerships slumped as it said annual profit would fall after publishing a damning review of its own operations.
The company said it expanded too quickly and botched the acquisition of Westleigh in 2018. Project delays, poor workmanship and rising costs also affected the group at some sites.
Shares in Italian airport and roads manager Atlantia spiked on a news that Global Infrastructure Partners and Brookfield Infrastructure said they had met with the firm’s main shareholder and made a preliminary non-binding proposal for a possible acquisition of the infrastructure group.
US close: Stocks weaker as Fed lays out wind-down plans
Wall Street stocks closed in negative territory on Wednesday, as traders sifted through the minutes from the latest Federal Reserve two-day policy meeting, released late in the session.
At the close, the Dow Jones Industrial Average was down 0.42% at 34,496.51, as the S&P 500 lost 0.97% to 4,481.15 and the Nasdaq Composite slid 2.22% to 13,888.82.
The Dow closed 144.67 points lower on Wednesday, extending losses recorded on Tuesday as market participants continued to digest a recession warning from the bond market and news on the Ukraine-Russia war.
Minutes from the Federal Open Market Committee’s (FOMC) March meeting were released on Wednesday afternoon, with the central bank laying out its much-anticipated plans to roll back its balance sheet.
While officials reiterated no decisions had been finalised, they said they were ready to start winding down the Fed’s $8.5trn balance sheet from as soon as May, taking three months to reach sell-downs of $95bn per month.
That would consist of $60bn in Treasury notes, and $30bn in mortgage bonds, the minutes said.
“No decision regarding the committee’s plan to reduce the Federal Reserve’s balance sheet was made at this meeting, but participants agreed they had made substantial progress on the plan and that the committee was well placed to begin the process of reducing the size of the balance sheet as early as after the conclusion of its upcoming meeting in May,” the FOMC minutes read.
The central bank’s balance sheet doubled through the Covid-19 pandemic, with the Fed needing to shrink it in a bid to put a lid on demand and reign in red-hot inflation.
Elsewhere in the minutes, the Federal Reserve left the prospect of a 50-basis point hike in interest rates on the table, if inflation continued to run as high as it has been.
“The minutes from the March policy meeting reflect policymakers’ great discomfort with the rapid pace of inflation, which continues to outpace expectations,” noted Oxford Economics.
“Many FOMC members are in favour of one or more 50 basis point rate increases in coming meetings, especially if inflation remains elevated.
“We look for a 50 basis point hike at each of the May and June policy meetings.”
Oxford said policymakers saw that, with the economy strong and the labour market running hot, it was appropriate to “move the stance of monetary policy towards a neutral posture” rapidly.
“The Fed estimates the neutral fed funds rate is 2.4% – we see it lower at 2%.
“And there is a good chance the policy rate needs to rise higher to a restrictive level.”
Oxford Economics said it saw policymakers raising the fed funds rate another 175 basis points this year, as the year-on-year pace for PCE prices remained “well above” 4% in the fourth quarter, and wage growth “buoyant”.
Market participants also had one eye fixed on the latest headlines coming out of Eastern Europe, with Russia’s invasion of neighbouring Ukraine raging on.
Both the European Union and the US were hitting Moscow with another round of sanctions, after evidence of war crimes allegedly committed by Russian forces was leaked.
Energy prices, which had surged since the war in Ukraine broke out, were in the red at the end of the day.
West Texas Intermediate futures were below the $100 level on NYMEX, falling 4.92% to $96.94 per barrel, and the Brent crude quote on ICE was 4.59% lower at $101.74.
On the macro front, US mortgage applications fell 6.3% in the week ended 1 April, according to the Mortgage Bankers Association of America, pushing the index to its lowest since March of 2019, as interest rates continued to march higher.
April’s decline followed a 6.8% slump in the previous month and marks the fourth straight week of falls.
The refinancing index sank 9.9% and applications to purchase a home went down 3.4% as the average contract interest rate for 30-year fixed-rate mortgages increased to 4.9% from 4.8%, the highest since December 2018.
In the corporate space, jeans giant Levi Strauss closed down 1.52%, but was in the green in after-hours trading as it released its latest numbers after the closing bell.
Twitter slipped 0.4%, although its weekly gains so far were still sitting just under 30%, after it emerged Tesla chief Elon Musk had taken a 9.2% stake in the social network, as well as a board seat.
Low-cost airlines were in focus after JetBlue Airways announced its interest in Spirit Airlines, describing its bid as the “most compelling” for the no-frills airline.
Spirit announced plans to merge with similarly ultra-low cost domestic carrier Frontier Group earlier this year.
JetBlue shares descended 8.72%, while Spirit was off 2.38% and Frontier tumbled 10.99%.
Thursday newspaper round-up: Nuclear energy, NI rise, Crispin Odey
Boris Johnson is to put nuclear energy at the heart of the UK’s new energy strategy, but ministers have refused to set targets for onshore wind and vowed to continue the exploitation of North Sea oil and gas. Amid deep divisions among senior Conservatives, the strategy will enrage environmentalists, who say the government’s plans are in defiance of its own net-zero targets and neglect alternative measures that experts say would provide much quicker relief from high energy bills. – Guardian
Britain’s employers are being forced to shoulder a £9bn tax rise after the government pushed ahead with raising national insurance on Wednesday despite stiff opposition. Company bosses said the 1.25-percentage-point rise in national insurance contributions (NICs), which is paid by workers and their employers, would add to already severe pressure from runaway inflation and soaring business costs this year linked to Covid, Brexit and Russia’s war in Ukraine. – Guardian
Returns for one of Crispin Odey’s funds have soared after his short bet on government bonds paid off. The financier’s Odey European Inc hedge fund jumped by about 15pc in March after he shorted government bonds that mature in 2050 and 2061. The short bet has lifted the fund’s return to 53pc for the year to date, Bloomberg reported. – Telegraph
The Russian government has been accused of effectively defaulting on its foreign debts for the first time since the Bolshevik Revolution after being forced to use roubles to make payments to creditors. Insurance on Russia debt signalled a record 99pc chance of default after foreign banks rejected payments in dollars for two bonds following the tightening of sanctions by the US. – Telegraph
America’s senior financial regulator has increased pressure on Amazon to be more open over its global tax affairs by rejecting the technology group’s move to block a shareholder vote on greater transparency. The ecommerce powerhouse was accused of being “out of step” with investors and regulators after seeking to quash a campaign for it to share more information about where and how it pays taxes. – The Times
