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London open: Stocks slump on hawkish Fed comments; payrolls eyed
London stocks fell sharply in early trade on Friday, taking their cue from heavy losses on Wall Street, following hawkish comments from Federal Reserve officials
At 0830 BST, the FTSE 100 was down 1% at 7,898.38.
Richard Hunter, head of markets at Interactive Investor, noted that Thursday’s US session began positively after the jobless claims reading came in higher than expected, which spoke to the narrative of a further reason for interest rate cuts.
“However, subsequent comments from several Federal Reserve officials cast aspersions on the current situation, with one suggesting that if inflation continues to track sideways the need for any rate cuts whatsoever this year could be called into question,” he said.
“Another quoted outsized price increases in housing services as being a major barrier in the fight against inflation, while in the background strong wage growth brings its own price pressure.”
Investors were also wary ahead of the release of the latest US non-farm payrolls report, which is due at 1330 BST, along with the unemployment rate and average earnings.
Kathleen Brooks, research director at XTB, said: “The market is expecting an increase of 214k for March. This is slightly lower than the 275k jobs growth for February. As always with payrolls, it is not just the payrolls figure that matters for the Fed. The unemployment rate and earnings data are also key.”
The unemployment rate is expected to decline slightly to 3.8% from 3.9% in February, and average hourly earnings are expected to rise by 0.3% last month and increase by 4.1% on an annual basis.
On home shores, figures from Halifax showed that house prices fell for the first time in six months in March as the drop in mortgage rates stalled.
House prices declined by 1% on the month in March, following five months of growth and a 0.3% increase in February.
On the year, house price growth eased to 0.3% in March from 1.6% a month earlier.
The average price of a home stood at £288,430, down from £291,338 in February.
Kim Kinnaird, director of Halifax Mortgages, said: “That a monthly fall should occur following five consecutive months of growth is not entirely unexpected, particularly in view of the reset the market has been going through since interest rates began to rise sharply in 2022. Despite this house prices have shown surprising resilience in the face of significantly higher borrowing costs.
“Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed-term deals are yet to feel the full effect of higher interest rates. This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly.
“Financial markets have also become less optimistic about the degree and timing of Base Rate cuts, as core inflation proves stickier than generally expected. This has stalled the decline in mortgage rates that had helped to drive market activity around the turn of the year.”
Imogen Pattison, assistant economist at Capital Economics, said: “Looking ahead, we expect mortgage rates to remain higher than in January and February and hover at just under 5% over the coming months, which will subdue demand and prevent further gains in house prices.
“But given public house price expectations are positive, we doubt prices will fall much either. And if we are right to think that Bank Rate will be cut further than most forecasters anticipate, mortgage rates will fall to below 4% by this time next year, giving house prices a fresh boost.”
In equity markets, travel stocks were under the cosh, with BA and Iberia owner IAG, easyJet, Carnival and Tui all down amid growing geopolitical tensions.
Elsewhere, Scottish Mortgage Investment Trust fell, likely due to its exposure to US technology.
Oil and gas giant Shell nudged higher as it raised its short-term production forecasts and said it expects an increase in margins as it updated its guidance for the first quarter.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ferguson Plc | +0.11% | +20.00 | 17,420.00 |
| 2 |  |
Smith & Nephew Plc | +0.06% | +0.60 | 966.40 |
| 3 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 4 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 5 |  |
Shell Plc | +0.00% | +0.00 | 2,764.00 |
| 6 |  |
Standard Life Aberdeen Plc | +0.00% | +0.00 | 274.10 |
| 7 |  |
Micro Focus International Plc | +0.00% | +0.00 | 532.00 |
| 8 |  |
Reckitt Benckiser Group Plc | +0.00% | +0.00 | 6,498.00 |
| 9 |  |
London Stock Exchange Group Plc | +0.00% | +0.00 | 8,620.00 |
| 10 |  |
Royal Bank Of Scotland Group Plc | +0.00% | +0.00 | 120.90 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | -3.40% | -14.20 | 403.00 |
| 2 |  |
Carnival Plc | -2.97% | -33.00 | 1,076.50 |
| 3 |  |
International Consolidated Airlines Group S.a. | -2.72% | -4.80 | 171.75 |
| 4 |  |
Marks And Spencer Group Plc | -2.67% | -7.10 | 258.80 |
| 5 |  |
Dcc Plc | -2.65% | -150.00 | 5,500.00 |
| 6 |  |
Scottish Mortgage Investment Trust Plc | -2.49% | -22.00 | 862.00 |
| 7 |  |
Halma Plc | -2.42% | -56.00 | 2,259.00 |
| 8 |  |
Tui Ag | -2.41% | -16.00 | 648.50 |
| 9 |  |
St. James’s Place Plc | -2.36% | -10.60 | 438.00 |
| 10 |  |
Kingfisher Plc | -2.28% | -5.70 | 243.80 |
US close: Fedspeak sinks shares ahead of jobs report
US stocks fell sharply on Thursday with the Dow falling for the fourth straight day after a late-afternoon slump on the back of hawkish comments from members of the Federal Reserve.
The all-important non-farm payrolls number for March is due out on Friday and was dominating newsflow during the trading session, in light of recent upside surprises to economic data.
Investors are concerned that any pick-up in economic activity could lead to price pressures reigniting and delay a potential interest-rate cut by the Federal Reserve. Market forecasts are still pointing to a June rate cut, but resilient data this week has cast that prediction into doubt.
The Dow and Nasdaq both dropped 1.4% while the S&P 500 fell 1.2%. This 3.04% slump on the Dow over the past four sessions was the worst four-day losing streak since October last year.
Data and Fedspeak
Six members of the Fed took part in scheduled speeches on Thursday, as investors continued to watch comments closely for any hint at future adjustments to monetary policy. Among them was Richmond Fed president Thomas Barkin, who said it would be “smart for the Fed to take [its] time” before cutting rates. “No one wants inflation to reemerge,” he said.
Meanwhile, head of the Chicago Fed Austan Goolsbee warned that the biggest “danger” to the inflation outlook was continued price increases in the housing services sector.
“Investors must feel they’re stuck in some kind of Groundhog Day waiting for central bankers to finally let the clock run down and cut rates,” said Danni Hewson, head of financial analysis at AJ Bell. “Will rate cuts come before the summer? Will we get one, two or even three by the end of the year, or will conflicting economic data throw a spanner in the already gummed up works?”
In economic data on Thursday, jobless claims rose to 221,000 in the week to 29 March, up from a revised 212,000 the week before and ahead of the 214,000 expected by economists.
Meanwhile, the number of layoff announcements in the US continued to rise in March, the results of a survey revealed. According to consultancy Challenger, Gray & Christmas, the number of announcements increased by 7% versus February to reach 90,039.
Market movers
Boeing shares were lower after the aircraft manufacturer said it would pay $160m to Alaska Air Group to make up for lost profit following the midair disaster on an Alaska flight in January. It is thought that the amount is just an initial part of a bigger compensation package for Alaska.
Hardware group Dell‘s stock rose to a record high, which market chatter put down to the ongoing hype around AI server demand.
Goldman Sachs declined after proxy adviser ISS recommended the bank separate its chairman and chief executive roles – both held by David Solomon – which would give the board “more independent oversight”.
Paramount plunged nearly 9%, pulling back after a strong performance on Wednesday following the news that Skydance is launching a bid to take over the media and entertainment group.
Friday newspaper round-up: Energy bills, working from home, music industry
The number of households seeking help to deal with court action over their unpaid energy bills has doubled in the last year, according to Citizens Advice. The charity said suppliers were increasingly opting to take their customers to court to recover their energy debts, which could ruin household finances for years. It said the use of legal action to pursue unpaid bills appeared to have increased since the industry regulator, Ofgem, introduced strict restrictions on the forced installation of prepayment meters. – Guardian
Small businesses such as care homes, and enterprises including charities and faith groups, will be granted new protections to guard against rogue energy brokers using rip-off deals to secure hidden commission fees. The measures mark the first big step by the government and the industry regulator to bring unregulated energy brokers to heel after a growing outcry over aggressive sales tactics and undisclosed commissions, which have inflated costs for small businesses. – Guardian
Men who work entirely from home are more likely to get overlooked for promotions and pay rises than women who do the same, academics have found. A survey of 937 UK managers by the University of Warsaw found that bosses were 15pc less likely to promote men who worked from home full-time compared with their peers who were entirely office-based, and 10pc less likely to increase pay. They are much more likely than their female colleagues to be overlooked, with bosses saying they were 7pc less likely to promote home-working women than those in the office and 8pc less likely to give pay rises. – Telegraph
The global music industry is fighting back against the use of artists’ work by technology companies to power artificial intelligence. Companies, including Sony and Universal, have launched a website that will both allow labels to protect their copyright and also warn technology businesses that are trawling their content not to use or distribute their work illegally. – The Times
A former senior executive at Accenture is suing the consulting giant and several of his former colleagues, including the firm’s chief executive, for unfair dismissal and disability discrimination in a claim valued by experts at up to £100 million. Peter Lacy, 45, had been with Accenture for 15 years and worked as its chief responsibility officer and global sustainability services lead when his lawyers claim he was “abruptly” dismissed from the £4.3 million-a-year role in March last year. – The Times
