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London open: Stocks fall ahead of BoE rate announcement; Ocado surges
London stocks fell sharply in early trade on Thursday as investors eyed another rate hike by the Bank of England.
At 0905 BST, the FTSE 100 was down 1.3% at 7,460.37.
Expectations have grown that the BoE could hike rates by as much as 50 basis points later, after data released on Tuesday by the Office for National Statistics showed that consumer price inflation was steady at 8.7% in May versus expectations for a decline to 8.4%. Meanwhile, core inflation rose to a 31-year high of 7.1% from 6.8% in April. Analysts were expecting it to be unchanged.
Victoria Scholar, head of investment at Interactive Investor, said: “European markets are under pressure following a sell-off on Wall Street. Fed Chair Jay Powell suggested that further rate hikes could be on the cards stateside. Almost every stock on the FTSE 100 is in the red with banks like Barclays, Standard Chartered and HSBC near the bottom of the index.
“The Bank of England is expected to raise interest rates again for the thirteenth consecutive time to the highest level since 2008. However, the market is divided over whether the central bank will carry out a 25-basis point move to 4.5% or whether it will opt for a more aggressive 50 basis point increase to 4.75% in light of yesterday’s sticky inflation data and recent hefty wage growth figures. Ex-Bank of England policymaker Sir Charlie Bean told the BBC’s Today programme that Brexit is pushing up inflation and he would vote for a half a percentage point hike today.”
In equity markets, Airtel Africa, United Utilities, 3i Group, British Land, Mitie, Tate & Lyle and Discoverie all fell as they traded without entitlement to the dividend.
Premier Inn owner Whitbread also lost ground even as it posted a jump in first-quarter sales and said consumer demand in the UK has remained strong.
On the upside, online supermarket Ocado surged amid speculation it could be takeover target for Amazon.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | +41.12% | +176.80 | 606.80 |
| 2 |  |
Antofagasta Plc | +1.56% | +23.00 | 1,498.50 |
| 3 |  |
Berkeley Group Holdings (the) Plc | +1.45% | +56.00 | 3,907.00 |
| 4 |  |
Marks And Spencer Group Plc | +1.39% | +2.60 | 190.25 |
| 5 |  |
Croda International Plc | +1.02% | +54.00 | 5,372.00 |
| 6 |  |
Carnival Plc | +1.00% | +11.00 | 1,112.00 |
| 7 |  |
Smurfit Kappa Group Plc | +0.68% | +18.00 | 2,682.00 |
| 8 |  |
Hargreaves Lansdown Plc | +0.62% | +4.80 | 781.00 |
| 9 |  |
Sainsbury (j) Plc | +0.62% | +1.60 | 261.70 |
| 10 |  |
Kingfisher Plc | +0.40% | +0.90 | 227.50 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
British Land Company Plc | -4.16% | -13.70 | 315.50 |
| 2 |  |
United Utilities Group Plc | -3.54% | -36.70 | 999.80 |
| 3 |  |
Auto Trader Group Plc | -2.69% | -16.40 | 593.20 |
| 4 |  |
3i Group Plc | -2.48% | -48.50 | 1,908.50 |
| 5 |  |
Flutter Entertainment Plc | -2.31% | -370.00 | 15,630.00 |
| 6 |  |
Fresnillo Plc | -2.24% | -14.00 | 610.40 |
| 7 |  |
Experian Plc | -2.16% | -63.00 | 2,853.00 |
| 8 |  |
Whitbread Plc | -2.09% | -71.00 | 3,321.00 |
| 9 |  |
Dcc Plc | -1.83% | -83.00 | 4,455.00 |
| 10 |  |
Scottish Mortgage Investment Trust Plc | -1.76% | -11.80 | 657.80 |
US close: Stocks fall for third day as Powell warns of further hikes
Wall Street stocks experienced their third consecutive day in the red on Wednesday, after Federal Reserve chair Jerome Powell warned Congress that further rate hikes would be needed this year to combat inflation.
The comments stirred investor anxiety about the potential consequences on economic growth and profitability, leading to a broad sell-off.
At the close, the Dow Jones Industrial Average was down 0.3% at 33,951.52, while the S&P 500 lost 0.52% to finish at 4,365.69.
The tech-heavy Nasdaq Composite saw a more significant decline, tumbling 1.21% to conclude the day at 13,502.20.
On the currency front, the dollar was last down 0.01% on sterling to trade at 78.3p, while it dropped 0.05% against the common currency at 90.97 euro cents.
Against the yen, the greenback was last 0.05%, changing hands at JPY 141.81.
“Powell’s testimony has bolstered the dollar slightly, but the main pressure on the pound appears to be the worry about how the UK economy will cope as the BoE tightens the screw with higher rates,” said IG chief market analyst Chris Beauchamp earlier.
“Sterling looked overstretched at $1.28 last week, and has been due a pullback, so now it’s up to the BoE to deliver a supportive message tomorrow.”
Fed maintaining focus on job growth and price stability amid pressures, says Powell
Federal Reserve chair Jerome Powell confirmed in his semi-annual congressional address earlier that the central bank was continuing to prioritise its dual objectives of fostering optimal employment and maintaining price stability.
Powell’s address to the House of Representatives’ Financial Services Committee emphasised that almost all members of the Federal Open Market Committee anticipated the need to further increment interest rates before the end of 2023.
Despite the expectations, Powell noted that the FOMC decided to keep the target range steady at their latest meeting.
The decision was taken to provide policymakers with additional time to assess new information and consider its implications on monetary policy.
Powell a picture of a labour market stretched thin, with an average monthly hiring increase of 314,000 year-to-date.
The demand for labour currently outpaced the available supply of workers, which remained a significant economic challenge.
As for inflation, Powell conceded that the struggle to restrain surging price pressures was far from over.
He acknowledged that inflation was continuing to exceed the comfort level, adding that the journey towards returning to the two percent target still had considerable distance to cover.
Equities underperform amid corporate and regulatory developments
In equities, shipping titan FedEx Corporation saw a 2.51% drop in its stock value in the wake of disappointing quarterly revenues and guidance, both of which fell short of market expectations.
Meanwhile, recreational vehicle manufacturer Winnebago Industries also suffered a blow with a 1.28% decrease in its stock price.
The fall followed the release of third-quarter results that failed to inspire confidence among investors.
E-commerce behemoth Amazon.com didn’t fare much better, with its shares slipping by 0.76%.
The downturn came after the Federal Trade Commission announced it was suing the company over allegations of deceptive practices to enrol customers in its Amazon Prime service.
Thursday newspaper round-up: Milk prices, mortgages, Amazon
The UK’s largest dairy cooperative has said there could be further increases in the price of milk and other dairy products if the government does not urgently tackle labour shortages in farming. The lack of workers is fuelling food price inflation, Arla said, warning that without action this could also lead to a crisis in milk production. – Guardian
More than 1 million households across Britain are expected to lose at least 20% of their disposable incomes thanks to the surge in mortgage costs expected before the next election, the UK’s leading economics thinktank has warned. Sounding the alarm as mortgage costs reach the highest levels since the 2008 financial crisis, the Institute for Fiscal Studies (IFS) said that almost 1.4m mortgage holders would see at least a fifth of their disposable income erased. – Guardian
A recession is inevitable owing to the Bank of England’s failure to control rampant inflation, former interest rate setters have warned. Adam Posen, who served on the Bank’s Monetary Policy Committee (MPC) in the wake of the financial crisis, predicted interest rates will have to rise to 6.5pc or higher to tame soaring prices, which would likely tip the economy into recession. – Telegraph
America’s competition watchdog has sued Amazon, accusing the world’s largest retailer of having tricked millions of customers into signing up for its Prime membership service. The Federal Trade Commission alleged that the company had “knowingly duped” users into enrolling for and automatically renewing subscriptions and had deliberately complicated the cancellation process. – The Times
A senior Australian politician has called for an international investigation into PwC’s leaking of confidential government tax plans. Besides a handful of British PwC staff who are said to have been privy to the information, the scandal largely has been contained to Australia, despite its threat to the firm’s global reputation. – The Times
