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London open: Stocks edge down after Fed’s ‘hawkish hold’
London stocks edged lower in early trade on Thursday after the US Federal Reserve left rates unchanged but signalled that two more hikes were on the way later this year.
At 0820 BST, the FTSE 100 was down 0.2% at 7,588.73.
Richard Hunter, head of markets at Interactive Investor, said any thoughts of rate cuts this year by the Fed have “finally evaporated”.
“Although rates were unchanged for the first time in many months, the Fed surprised investors with a suggestion that two further rises could be in the pipeline this year, depending on ongoing economic data. The accompanying comments led investors to dub the decision as a ‘hawkish hold’ as Chair Powell gave an overview of the latest thinking,” he said.
“With US growth and the labour market showing few signs of wilting, the groundwork is laid for an economy which at present can clearly withstand the hiking pressure it has been under. By the same token, the previously announced moderation of consumer prices was followed yesterday by a release which showed producer prices falling more than expected. The news prompted Chair Powell to observe that the conditions for slowing inflation were ‘coming into place’, but that the process would nonetheless ‘take some time’.”
A disappointing batch of Chinese data was also in focus, as it prompted the country’s central bank to cut its benchmark policy rate for the first time in almost a year.
The People’s Bank of China clipped its medium-term lending facility rate to 2.65% from 2.75% in an effort to stimulate the economy towards its growth target of 5%.
Official data showed retail sales and industrial production both came in lower than forecast, rising 12.7% and 3.5% respectively year-on-year last month but lower than the 18.4% and 5.6% recorded in April. The annual rise was distorted by a low base given Covid lockdowns in the second quarter of 2022.
Figures also showed that fixed asset investments rose 4% year-on-year in May, having grown 4.7% the month before, missing consensus expectations for a 4.4% jump.
Later on Thursday, eyes will be on the European Central Bank as it delivers its latest policy announcement.
In equity markets, Melrose Industries fell after chief executive officer Simon Peckham sold 2m shares in the company at 525p “as a result of a change in personal circumstances”.
Elsewhere, RS Group, Land Securities, Intermediate Capital, Pets at Home, Computacenter and 3i Infrastructure all lost ground as they traded without entitlement to the dividend.
Specialist international distribution and services group Bunzl fell after saying it expects underlying revenue growth in the first half of the year to be broadly flat and for group adjusted operating margin to be around the same as the first six months of 2022.
Legal & General was down as it appointed António Simões as chief executive officer. He joins from Banco Santander, where he has been regional head of Europe since September 2020.
Drinks company Diageo was knocked lower by a rating downgrade at Goldman Sachs.
Halma slumped as it posted a dip in full-year pre-tax profit, but lifted its dividend as revenues jumped 21%.
On the upside, events organiser Informa rallied after it lifted its full-year profit and revenue outlook, citing strong performances in all businesses, with revenue now expected to exceed pre-Covid levels.Pointing to “strong underlying performances combined with portfolio additions”, the company upped its adjusted operating profit guidance by 10% to between £750m and £790m, while revenue guidance was boosted 7% to between £2.95bn and £3.05bn.
Asos surged as the online fashion retailer hailed a return to profitability and reiterated its full-year guidance.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Informa Plc | +3.32% | +23.40 | 727.80 |
| 2 |  |
Ocado Group Plc | +3.08% | +12.60 | 421.70 |
| 3 |  |
Hikma Pharmaceuticals Plc | +1.45% | +27.50 | 1,927.50 |
| 4 |  |
Vodafone Group Plc | +1.15% | +0.84 | 73.68 |
| 5 |  |
British American Tobacco Plc | +1.09% | +28.00 | 2,598.00 |
| 6 |  |
Imperial Brands Plc | +1.03% | +18.00 | 1,760.50 |
| 7 |  |
Associated British Foods Plc | +1.01% | +19.00 | 1,898.50 |
| 8 |  |
Unilever Plc | +0.92% | +36.50 | 4,004.00 |
| 9 |  |
Persimmon Plc | +0.90% | +10.50 | 1,179.00 |
| 10 |  |
Rightmove Plc | +0.84% | +4.40 | 530.80 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Halma Plc | -5.56% | -135.00 | 2,294.00 |
| 2 |  |
Legal & General Group Plc | -2.73% | -6.50 | 231.50 |
| 3 |  |
Melrose Industries Plc | -2.67% | -14.00 | 510.40 |
| 4 |  |
Smurfit Kappa Group Plc | -2.46% | -72.00 | 2,860.00 |
| 5 |  |
Bunzl Plc | -1.93% | -60.00 | 3,046.00 |
| 6 |  |
Anglo American Plc | -1.88% | -48.50 | 2,534.00 |
| 7 |  |
Admiral Group Plc | -1.82% | -41.00 | 2,210.00 |
| 8 |  |
Land Securities Group Plc | -1.79% | -10.60 | 583.20 |
| 9 |  |
Johnson Matthey Plc | -1.76% | -31.00 | 1,729.50 |
| 10 |  |
Fresnillo Plc | -1.68% | -11.20 | 656.00 |
US close: Stocks mixed as Fed delivers pause with a caution
Wall Street demonstrated a mixed performance on Wednesday, as the US stock market reacted to the Federal Reserve’s decision to halt the cycle of interest rate hikes.
Despite the pause, however, investors were warned by the central bank that the tightening cycle was not completely off the table.
At the close, the Dow Jones Industrial Average was down 0.68% at 33,979.33 , while the S&P 500 managed gains of 0.08% to settle at 4,372.59.
The tech-heavy Nasdaq Composite posted gains of 0.39% to 13,626.48.
On the currency front, the dollar was last 0.11% stronger on sterling to trade at 79.05p, while it inched up 0.04% on the common currency to 92.37 euro cents.
Against the yen, the greenback was last ahead 0.39%, changing hands at JPY 140.64.
“Any lingering hope of a rate cut this year seems to have gone following this meeting,” said IG chief market analyst Chris Beauchamp.
“A higher terminal rate is now expected, with two more hikes now seen as likely by the end of the year.
“This may change, but for now the Fed is sending a message that they are certainly not going to stay on pause for ever.”
Fed stands pat on interest rates for the moment
In a much-anticipated announcement, the Federal Reserve opted to forego a rate hike in its latest decision earlier in the day, deciding instead to await further data before potentially enacting stricter monetary policy.
The Fed’s decision came despite it acknowledging the strength of job gains and the persistently high level of inflation in recent months.
Citing recent job growth as “robust,” the central bank recognised the sustained progress in the labour market.
On the flip side, the inflation rate, a critical determinant of interest rate decisions, was still described as “elevated”.
“Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” the policy statement read.
“In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
Meanwhile, a significant drop in wholesale prices last month was reported by the US Department of Labor.
Contrary to expectations, the final demand prices in May, on a seasonally adjusted basis, fell 0.3% month-on-month.
That decrease surpassed the consensus forecast of a 0.1% decline.
As a result, the annual rate of inflation fell from 2.3% in April to 1.1% in May.
Airlines ascend as summer kicks off, health insurers under pressure
In equities, Nvidia Corporation jumped 4.81% as it became the seventh public company in US history to end a trading day with a market capitalisation exceeding $1trn.
In the airline sector, the kick-off of a robust summer travel season drove gains for legacy carriers.
Delta Air Lines, American Airlines Group, and United Airlines Holdings closed the day with increases of 1.52%, 1.72%, and 0.3% respectively.
Delta’s performance was particularly noteworthy, as Wednesday marked its 14th consecutive session of gains.
On the downside, health insurers Cigna Group, Humana, and UnitedHealth Group saw their stock prices fall by 3.11%, 11.24%, and 6.4% respectively.
The downturn was triggered by a statement from UnitedHealth executives at a Goldman Sachs investor conference, suggesting that a backlog of Covid-delayed hip and knee surgeries could cause rising costs for the sector.
Thursday newspaper round-up: Women bosses, Swedish inflation, Odey
UK businesses have improved female representation on their boards, research shows, but two-fifths of FTSE 100 firms still do not have a woman in one of their top four executive roles. The proportion of women on the boards of the 585 FTSE all-share listed companies has risen over the past year from 36% to 40%, according to the analysis of Companies House data. – Guardian
Beyoncé has been blamed for keeping inflation stubbornly high in Sweden after more than 40,000 fans flocked to Stockholm last month to watch the singer begin her world tour. Economists said the artist, who launched her Renaissance tour in the Swedish capital with two sold-out concerts, helped to drive a surge in hotel and accommodation costs. – Telegraph
An influential group of MPs has ordered the City watchdog to reveal the extent of its investigation into Odey Asset Management following “deeply troubling” allegations made against the firm’s founder. In a letter to bosses at the Financial Conduct Authority (FCA), Harriett Baldwin, chairman of the Treasury committee, called for the regulator to disclose more information about its oversight of the scandal-hit hedge fund. – Telegraph
Dawood Pervez says tongue-in-cheek that Britain’s thousands of local convenience stores are as beloved as the country’s pubs and bridleways but he’s deadly serious in his commitment to promote and protect the wholesale network that supports them. The Old Etonian, and a lawyer by training, is the son of Sir Anwar Pervez, the immigrant founder of Bestway, Britain’s second-biggest wholesaler after Tesco’s Booker. – The Times
Equity finance provision for small and medium-sized companies fell sharply in the second half of last year as venture capital firms responded to economic strife and a sell-off in technology stocks, according to the government’s economic development agency. A report by the British Business Bank said that 2022 was a tale of “two halves”, with a record level of investment in businesses in the first two quarters. However, concerns about potential overvaluations, a lack of sale opportunities and rising interest rates and inflation caused a 47 per cent reduction in investment in the second half of the year compared with the first. – The Times
