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London open: Stocks flat amid interest rate worries
London stocks were flat in early trade on Thursday, as interest rate worries dented sentiment.
At 0840 BST, the FTSE 100 was unchanged at 7,625.87.
Richard Hunter, head of markets at Interactive Investor, pointed out that markets in Asia came under some pressure following an unexpected interest rate hike from Canada on Wednesday, “which added to the previous Australian surprise, and which refocused concerns over the Federal Reserve’s next move, alongside the length of time which rates could remain elevated”.
He continued: “UK markets opened in similarly reflective mood, with the interest rate increases from elsewhere providing an unwelcome reminder that the Bank of England is more than likely to follow suit, heaping further pressure on an economy which is already struggling to find meaningful growth.
“The gains were marginal in early exchanges, with every possibility of similarly sideways moves until such time as the US inflation number and Fed interest rate decision are revealed next week.”
In equity markets, Rio Tinto was a high riser after an upgrade to ‘buy’ from ‘neutral’ at Citi, while NatWest was up as JPMorgan put the shares on ‘positive catalyst’ watch.
Budget airline Wizz Air flew higher after saying it expects to post a net profit this year after it reported a net annual loss due to higher fuel prices and the war in Ukraine. The company posted an operating loss of €535m, narrower than the €642m a year earlier.
Revenue more than doubled to €3.9bn, while passenger numbers were up 88% to 51 million. Wizz said it expects a net profit of €350 – 450 million in the current financial year, subject to the absence of adverse events such as an incremental impact from the war in Ukraine or delivery delays.
FirstGroup surged after the transport operator reported a better-than-expected full-year operating profit and extended its buyback programme.
On the downside, Crest Nicholson lost ground after the housebuilder warned that more interest rate rises would hit the property market, as it posted a slump in half-year profits.
Vodafone, Sainsbury, WPP, Johnson Matthey, AJ Bell, Dr Martens, RHI Magnesita and C&C Group all fell as they traded without entitlement to the dividend.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ashtead Group Plc | +1.32% | +70.00 | 5,356.00 |
| 2 |  |
3i Group Plc | +1.21% | +24.00 | 2,006.00 |
| 3 |  |
Kingfisher Plc | +1.21% | +2.90 | 242.40 |
| 4 |  |
Bhp Group Limited | +1.12% | +26.50 | 2,386.50 |
| 5 |  |
Anglo American Plc | +1.04% | +25.50 | 2,481.50 |
| 6 |  |
Rio Tinto Plc | +1.00% | +51.00 | 5,154.00 |
| 7 |  |
Hargreaves Lansdown Plc | +0.89% | +7.40 | 839.20 |
| 8 |  |
Mondi Plc | +0.87% | +11.00 | 1,268.50 |
| 9 |  |
Hikma Pharmaceuticals Plc | +0.80% | +14.50 | 1,828.00 |
| 10 |  |
Crh Plc | +0.75% | +29.00 | 3,914.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Vodafone Group Plc | -5.03% | -3.95 | 74.53 |
| 2 |  |
Sainsbury (j) Plc | -3.74% | -10.40 | 267.60 |
| 3 |  |
Wpp Plc | -3.00% | -26.60 | 860.00 |
| 4 |  |
Johnson Matthey Plc | -2.28% | -41.00 | 1,756.00 |
| 5 |  |
Ocado Group Plc | -2.15% | -8.00 | 363.30 |
| 6 |  |
Centrica Plc | -1.82% | -2.15 | 115.70 |
| 7 |  |
Auto Trader Group Plc | -1.36% | -8.40 | 610.60 |
| 8 |  |
Scottish Mortgage Investment Trust Plc | -1.18% | -8.20 | 687.80 |
| 9 |  |
Carnival Plc | -1.12% | -10.20 | 900.00 |
| 10 |  |
Halma Plc | -1.05% | -26.00 | 2,447.00 |
US close: Stocks mixed after Canada’s rate hike surprise
Wall Street closed in a mixed state on Wednesday, as market indicators reacted to the Bank of Canada’s unexpected decision to increase interest rates.
At the close, the Dow Jones Industrial Average was up 0.27% at 33,665.02, while the S&P 500 slipped 0.38% to finish at 4,267.52.
The tech-heavy Nasdaq Composite took a more significant hit, dropping 1.29% to settle at 13,104.89.
Canada’s surprise decision echoed the unexpected move by the Reserve Bank of Australia earlier in the week, making Ottawa the second central bank to increase rates against market expectations.
In the currency market, the dollar was last down 0.02% on sterling to trade at 80.38p, while it slipped 0.01% against the common currency to 93.46 euro cents.
Against the yen, it retreated 0.02% to change hands at JPY 140.10.
“Risk appetite had looked wobbly earlier today following poor Chinese trade data and disappointing German industrial output numbers, but a second hawkish central bank in as many days has resulted in stocks turning lower once again,” said IG chief market analyst Chris Beauchamp.
“In a week devoid of heavyweight events the decisions from the RBA and BoC have commanded more attention than usual, particularly since they act as a prelude to the big movers of the Fed, ECB and BoJ next week.”
Bank of Canada surprises with hike, OECD releases latest forecast
On the economic front, the Bank of Canada raised its benchmark interest rate to 4.75% – a decent increase from the previous rate of 4.5%.
It marked the bank’s ninth rate hike, and positioned the interest rate at a 22-year high, following steady rates since January.
The BoC’s decision came amidst concerns of inflation possibly escalating beyond its 2% target, with recent data indicating a more robust than anticipated economic demand.
Contributing factors such as strong consumer spending, renewed demand for services, an increase in housing activity, and a tight labour market were leading to excess demand, according to the BoC.
Despite inflation having increased in April with core inflation measures reaching up to 4% for several consecutive months, the BoC said it expected inflation slowing to 3% over the summer.
However, it refrained from reiterating its earlier prediction that inflation would return to the 2% target by the end of next year.
Meanwhile, the Organisation for Economic Co-operation and Development (OECD) forecast moderate global growth this year, although the recovery remained a considerable distance away.
In its latest report, the Paris-based organisation revised its global growth prediction to 2.7% from 2.6%, with economic improvements expected for the US, China, and the eurozone.
The growth forecasts for both the US and China have been nudged up by 0.1% to 1.6% and 5.4% respectively.
The eurozone’s growth forecast also received a 0.1% boost, bringing it to 0.9%.
The UK’s growth forecast was adjusted to 0.3% to avoid a projected recession, whereas Germany saw its growth forecast lowered to a flat zero.
Finally on data, the world’s second-largest economy – China – was seeing some deceleration in its economic recovery, as indicated by a recent drop in exports.
Customs data showed a sharp drop of 7.5% in May’s exports, valued at $283.5bn – a significant reversal from the 8.5% increase in April.
That was a substantial underperformance against the projected 0.1% fall.
Imports also took a hit, declining 4.5% to $217.7bn, a slower fall compared to 7.9% in April, and significantly better than the predicted fall of 6.8%.
As a result, China’s trade surplus in May shrank to $65.8bn from $90.2bn in the previous month.
Tech plays maintain some gains, Campbell Soup tumbles
In equities, streaming platform Netflix managed gains of 0.12% on the back of positive broker commentary, while semiconductor player Marvell Technology edged up 0.32% after news of a contract with Amazon for the supply of artificial intelligence chips broke.
On the downside, and despite reporting better-than-expected earnings for its third quarter and revenue figures aligning closely with expectations, Campbell Soup Company tumbled 8.91%.
Thursday newspaper round-up: Crypto firms, jobs market, John Lewis
Crypto firms must warn customers they should not expect protection if their investment goes wrong and introduce a “cooling off” period for first-time investors, under new rules imposed by the UK financial watchdog. The Financial Conduct Authority said that from 8 October firms promoting crypto products or services would need to carry a clear risk warning in their adverts. – Guardian
Sadiq Khan has vowed to block plans to house hundreds of asylum seekers on a barge on the docks next to London City Airport’s runway. The London mayor and Metropolitan Police are understood to be among a coalition of public and private sector organisations opposing the Home Secretary’s plans on safety grounds, The Telegraph can disclose. – Telegraph
High taxes are deterring Britain from working, the boss of one of the UK’s biggest recruitment agencies has said. James Reed, the chairman of Reed, said Jeremy Hunt should cut taxes to encourage more people back to the labour market following an exodus of workers during the pandemic. – Telegraph
The UK’s red-hot labour market is showing signs of cooling, with falling vacancies and higher availability of candidates reported last month. A closely watched survey of the jobs market, carried out for KPMG and the Recruitment and Employment Confederation, found that wage inflation slowed and there was a drop in permanent staff employment in May. – The Times
Dame Sharon White has pledged to get the John Lewis Partnership back to “sustainable” profit before 2026, although this may require outside investment. White said that she had “a clear plan” for the partnership, which reported a loss of £234 million and scrapped its annual bonus this year. The five-year plan aims for “a broadly based business with brilliant retail at the core, built on excellent customer service, quality and ethics”, she said. – The Times
