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London open: FTSE nudges up ahead of Fed announcement; housebuilders rally
London stocks nudged higher in early trade on Wednesday, underpinned by strength in the housebuilding sector, as investors braced for another big rate hike by the US Federal Reserve.
At 0835 BST, the FTSE 100 was up 0.2% at 7,205.10.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “All eyes will be on the Federal Reserve’s latest inflation busting move today, as the price spiral continues to cause financial pain for consumers and companies. The US central bank is expected to go big and raise rates by 0.75% for the third time in a row, with some expectations that policymakers may decide to supersize the hike to 1%. There are worries that inflation is becoming dangerously entrenched in the economy, threatening financial stability.
“The Federal Reserve’s decision may be more imminent but investors are also now factoring in big rate rises from the European Central Bank, after president Christine Lagarde’s hawkish comments, warning that even though action has already been front loaded, more hikes will be needed. Bond markets are pricing in a 0.75% jump in the base rate to be voted in by policymakers at the Bank of England on Thursday, with further rises to come by the end of the year.
“The forecast now is for the monetary screws to be tightened much more than investors expected just a few months ago, with inflation staying stubbornly close to double digits, which is set to pile more pressure on the consumer discretionary sector.”
On the macro front, figures released earlier by the Office for National Statistics showed that UK government debt hit a fresh record in August. Interest payments rose by £1.5bn on the year to £8.2bn, marking the highest August figure since records began in 1997.
In equity markets, housebuilders were the standout gainers amid reports that Friday’s mini-Budget could include plans to cut stamp duty. Persimmon, Taylor Wimpey, Berkeley Group, Barratt, Redrow, Bellway, Vistry and Crest Nicholson all rallied.
Defence firm BAE Systems shot higher after Russian President Putin announced the partial mobilisation of forces in Russia.
Aveva was in the black after the software firm agreed to be bought by France’s Schneider Electric in a £9.5bn deal.
On the downside, Flutter Entertainment was knocked lower by a downgrade to ‘neutral’ at Citi.
Games Workshop also lost ground after it reported a year-on-year fall in pre-tax profit for the three months to August 28, in line with expectations.
JD Sports was weaker after saying it had agreed a truce with former CEO Peter Cowgill, including a non-compete and consultancy deal that will see him receive £5.5m in addition to his salary package up to his departure in May and a 12 month notice period.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Bae Systems Plc | +5.70% | +44.00 | 815.80 |
| 2 |  |
Persimmon Plc | +3.40% | +45.50 | 1,382.50 |
| 3 |  |
Barratt Developments Plc | +3.04% | +12.30 | 417.10 |
| 4 |  |
Taylor Wimpey Plc | +2.52% | +2.60 | 105.65 |
| 5 |  |
Shell Plc | +2.30% | +53.00 | 2,355.50 |
| 6 |  |
Hargreaves Lansdown Plc | +2.06% | +17.40 | 861.00 |
| 7 |  |
Glencore Plc | +1.99% | +9.55 | 490.45 |
| 8 |  |
Vodafone Group Plc | +1.96% | +2.08 | 108.46 |
| 9 |  |
Bp Plc | +1.92% | +8.70 | 461.20 |
| 10 |  |
Sainsbury (j) Plc | +1.80% | +3.50 | 197.70 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Carnival Plc | -5.86% | -48.20 | 773.80 |
| 2 |  |
Tui Ag | -3.96% | -5.50 | 133.35 |
| 3 |  |
Easyjet Plc | -3.72% | -13.10 | 339.50 |
| 4 |  |
Flutter Entertainment Plc | -3.24% | -334.00 | 9,976.00 |
| 5 |  |
Johnson Matthey Plc | -2.88% | -56.50 | 1,908.50 |
| 6 |  |
International Consolidated Airlines Group S.a. | -2.79% | -3.02 | 105.32 |
| 7 |  |
Ocado Group Plc | -2.08% | -12.60 | 593.80 |
| 8 |  |
Rentokil Initial Plc | -1.45% | -7.40 | 504.20 |
| 9 |  |
Wpp Plc | -1.19% | -9.20 | 766.20 |
| 10 |  |
Smurfit Kappa Group Plc | -1.14% | -31.00 | 2,683.00 |
US close: Stocks weaker ahead of Fed’s next move
Wall Street stocks finished below the waterline on Tuesday, as market participants turned their attention to the Fed’s looming interest rate decision.
At the close, the Dow Jones Industrial Average was down 1.01% at 30,706.23, as the S&P 500 lost 1.13% at 3,855.93 and the Nasdaq Composite was off 0.95% at 11,425.05.
The Dow closed 313.45 points lower on Tuesday, erasing gains recorded in the previous session when major indices managed to snap a two-day losing streak.
“US markets have joined their European counterparts in the red today, with a belated start to the week in the UK bringing a fresh two-week low for the FTSE 100,” said IG senior market analyst Joshua Mahony.
“While futures had originally signalled a relatively upbeat start to the day, that never really got started, with selling pressure taking hold in anticipation of a week full of monetary tightening and warnings of stubbornly high inflation.”
Mahony said the prospect of hefty rate hikes and hawkish rhetoric from the US Fed on Wednesday, and the Bank of England on Thursday, gave little room for optimism, with Sweden’s central bank leading the charge after raising rates by a full percentage point earlier.
“Instead, traders have reverted to type, with stocks heading lower as the dollar comes into prominence once again.”
Stocks headed south from the opening bell, with the session’s primary focus on the Federal Reserve, which remained expected to raise interest rates by another 75 basis points following its two-day meeting on Wednesday.
Odds on a 100-point hike shortened after last week’s hot inflation reading.
Central banks across the globe were drawing investor attention generally this week, with policymakers at the Bank of England, as well as in Norway and Japan, also set to make decisions in the coming days.
Looking at energy, crude oil prices remained in negative territory at the end of the global day, with NYMEX futures for West Texas Intermediate last down 1.8% at $84.19 per barrel, and Brent 1.13% weaker at $90.96 on ICE.
The falls came after the US Department of Energy said it would release an additional 10 million barrels of oil from its strategic reserves.
On the macro front, building permits tumbled 10% in August to an annualised rate of 1.51 million – well below expectations for a reading of 1.61 million.
The Census Bureau said the drop last month was the biggest since April 2020.
Housing starts, meanwhile, surged 12.2% month-on-month to an annualised rate of 1.57 million, beating expectations for a print of 1.44 million.
In the corporate space, architectural services company Apogee Enterprises closed up 5.26% after it posted a second-quarter net income of $37.4m, bouncing back from a loss at the same time a year earlier, amid revenues of $372.1m.
Consumer technology behemoth Apple was 1.57% firmer after the firm announced app store price rises for a number of European and Asian markets.
On the downside, Ford Motor tumbled 12.32% after it said overnight that parts shortages and inflation would see it holding more unfinished vehicles than anticipated, with payments to suppliers set to balloon by another $1bn.
Wednesday newspaper round-up: Energy prices for businesses, millionaires, FCA
Jacob Rees-Mogg is expected to announce a cap on energy prices for businesses that would cut the rates they pay by up to half this winter. The business secretary will outline support on Wednesday for companies, charities and public sector organisations for six months from 1 October, after Liz Truss said they would receive equivalent help to households whose costs are being capped. – Guardian
Nearly 11 million people are now behind on their bills while more than 5 million have gone without food, according to new research that reveals Britons are skipping meals “just to keep the lights on”. An estimated 20% of UK adults, or 10.9 million people, are behind on one or more household bill – up by 3 million since March – according to the Money Advice Trust report. – Guardian
The number of millionaires in Britain surged ahead of those in France and Germany last year as a property boom and rebounding stock markets sent wealth levels surging. The UK is host to 2.85m people with a net wealth of more than $1m (£877,000), according to Credit Suisse’s annual Global Wealth Report, putting the country behind only US, China and Japan. – Telegraph
The City regulator is rejecting a greater number of applications from financial firms wanting to do business in Britain as it adopts a more rigorous approach after a series of scandals. The Financial Conduct Authority said its increased level of scrutiny meant a marked increase in businesses being blocked from authorisation. – The Times
MPs have demanded that the government’s first “mini budget” be accompanied by independent forecasts on the state of the public finances as the chancellor prepares to announce tens of billions in extra borrowing and tax cuts. The Treasury select committee has written to Kwasi Kwarteng asking that the Office for Budget Responsibility (OBR) be asked to provide an independent assessment of the debt and deficit in Friday’s “fiscal statement”, which will be made by the chancellor in the Commons. – The Times
