London close: Stocks down ahead of key Fed rate decision

Wed 04 May 2022

LONDON (SHARECAST) - (Sharecast News) - London stocks closed in negative territory on Wednesday, as investors held their collective breath ahead of the latest policy announcement from the US Federal Reserve.
The FTSE 100 ended the session down 0.9% at 7,493.45, and the FTSE 250 was off 1.47% at 20,219.48.

Sterling was also weaker, last trading down 0.06% on the dollar at $1.2492, and losing 0.28% against the euro to €1.1846.

"It is not difficult to work out why stocks are edging down this afternoon," said IG chief market analyst Chris Beauchamp.

"The Fed's rate hike move might be broadly priced in, but markets are clearly nervous that an even more hawkish FOMC might prompt a surge in volatility that could push indices back below last week's lows."

Beauchamp said even a dovish press conference might not help, given the GDP contraction in the US last week had raised recession and stagflation concerns.

"Risk assets are still struggling to string together more than about two positive days in a row, and it seems unlikely that Powell can offer much in the way of good news."

The Fed is due to announce the outcome of its latest policy meeting at 1900 BST, with a rate hike of 50 basis points widely expected.

It would be the first hike of that size in more than two decades - in May 2000, it raised its target rate to 6.5%, which at the time was the highest level since 1991.

In economic news, private sector employment in the US rose less than expected in April.

According to the latest data from ADP, employment increased by 247,000 from March, versus expectations for a 390,000 jump.

The total number of jobs added in March, meanwhile, was revised from 455,000 to 479,000.

"In April, the labour market recovery showed signs of slowing as the economy approaches full employment," said Nela Richardson, chief economist at ADP.

"While hiring demand remains strong, labour supply shortages caused job gains to soften for both goods producers and services providers.

"As the labour market tightens, small companies, with fewer than 50 employees, struggle with competition for wages amid increased costs."

On home shores, the number of mortgage approvals in the United Kingdom - an indicator of future borrowing - was broadly flat month-on-month in March at 70,700, according to the Bank of England.

March's print, which was only slightly down from the 71,000 recorded in February and still above the 12-month pre-pandemic average, came as approvals for remortgaging rose to 48,800 and net borrowing of mortgage debt rose from 4.6bn in February to 7.0bn in March.

Individuals borrowed 1.3bn in consumer credit, while small and medium-sized non-financial businesses repaid 700.0m and large businesses borrowed 1.9bn from banks, down from 4.3bn in February.

Across the channel, eurozone business activity rose in April driven by activity in the services industry as Covi-19 restrictions were eased, offsetting a near-stall in manufacturing output growth, a key survey showed earlier.

S&P Global's final composite purchasing managers' index (PMI) rose to 55.8 in April from March's 54.9, matching a flash estimate.

A reading above 50 indicates growth.

"The eurozone economy has shown surprising resilience in the face of the Ukraine-Russia war, thanks to a renewed burst of service sector activity as virus containment measures were relaxed further during April," said S&P Global chief business economist Chris Williamson.

Still on European data, official data showed eurozone retail sales softening in March, missing forecasts, with Eurostat reporting that the volume of retail trade eased 0.4% compared to February, when it increased by 0.4%.

Most economists had been looking for a fall of just 0.1%.

Across the wider bloc, the volume fell 0.2% in March, compared to a 0.3% increase a month earlier.

In equities, B&Q Owner Kingfisher fell 4.99% after Sky News reported that it, along with grocers Tesco, J Sainsbury and Morrisons, had formed a coalition to petition the government for a permanent business rates cut funded by the introduction of a new online tax.

Direct Line Insurance Group slid 6.26% after it reported lower gross premiums for the first quarter as new rules on pricing practices impacted results.

Sector peer Admiral Group also slumped, closing down 2.66%.

JD Wetherspoon was in the red by 1.48% after the pub chain posted a dip in third-quarter sales and warned over rising costs, but said it expected to break even this year as sales improved slowly.

Outside the FTSE 350, retailers Joules Group and Boohoo were sharply lower after disappointing updates, tumbling 25% and 12.4%, respectively.

On the upside, Flutter Entertainment rallied 5.14% after it reported growth in group revenues for the three months to 31 March, as the number of average monthly players rose by 15%.

Aston Martin Lagonda gained 6.74% after it reported a rise in adjusted core earnings amid strong retail demand and announced the appointment of former Ferrari boss Amedeo Felisa as chief executive.

HSBC managed gains of 0.51% after a report that executives from the bank and Ping An were planning to meet in mid-May to discuss the Chinese insurer's proposal that HSBC should explore a spin-off of its Asian business.

Reuters cited a source familiar with the matter as saying that Ping An - China's largest insurer and HSBC's biggest shareholder - called last week on the bank to look at ways to boost returns.

BP and Shell were among the gainers, adding a respective 0.4% and 0.41%, as oil prices rose after the EU said it would phase out Russian oil by the end of the year.

Elsewhere, Johnson Matthey was boosted 3.69% by an upgrade to 'buy' from 'hold' at Jefferies.

Market Movers

FTSE 100 (UKX) 7,493.45 -0.90%
FTSE 250 (MCX) 20,219.48 -1.47%
techMARK (TASX) 4,376.25 -0.48%

FTSE 100 - Risers

Flutter Entertainment (CDI) (FLTR) 8,740.00p 5.43%
Intertek Group (ITRK) 5,078.00p 1.52%
DCC (CDI) (DCC) 6,246.00p 1.26%
Aveva Group (AVV) 2,187.00p 1.06%
Croda International (CRDA) 7,496.00p 0.75%
Standard Chartered (STAN) 569.60p 0.64%
Smiths Group (SMIN) 1,504.00p 0.64%
BT Group (BT.A) 184.45p 0.63%
HSBC Holdings (HSBA) 515.40p 0.51%
ITV (ITV) 74.90p 0.40%

FTSE 100 - Fallers

Kingfisher (KGF) 241.60p -4.99%
JD Sports Fashion (JD.) 128.50p -4.71%
Avast (AVST) 508.40p -4.36%
Dechra Pharmaceuticals (DPH) 3,386.00p -3.97%
Intermediate Capital Group (ICP) 1,464.00p -3.91%
Howden Joinery Group (HWDN) 697.60p -3.73%
London Stock Exchange Group (LSEG) 7,508.00p -3.64%
SEGRO (SGRO) 1,162.50p -3.45%
Phoenix Group Holdings (PHNX) 595.80p -3.12%
Ocado Group (OCDO) 891.80p -3.00%

FTSE 250 - Risers

Aston Martin Lagonda Global Holdings (AML) 902.60p 6.74%
Johnson Matthey (JMAT) 2,322.00p 4.36%
TI Fluid Systems (TIFS) 169.40p 3.55%
Discoverie Group (DSCV) 737.00p 3.08%
Auction Technology Group (ATG) 978.00p 3.06%
Wood Group (John) (WG.) 231.60p 2.34%
Baltic Classifieds Group (BCG) 131.00p 2.18%
AJ Bell (AJB) 251.40p 2.11%
Polymetal International (POLY) 260.90p 1.99%
Chemring Group (CHG) 366.00p 1.81%

FTSE 250 - Fallers

Molten Ventures (GROW) 632.00p -6.51%
Direct Line Insurance Group (DLG) 239.50p -6.26%
Watches of Switzerland Group (WOSG) 956.00p -6.00%
Currys (CURY) 88.85p -5.43%
Bytes Technology Group (BYIT) 411.20p -5.30%
LondonMetric Property (LMP) 241.60p -5.18%
Unite Group (UTG) 1,048.00p -5.07%
Wizz Air Holdings (WIZZ) 3,060.00p -4.85%
Tritax Big Box Reit (BBOX) 212.20p -4.76%
IG Group Holdings (IGG) 765.50p -4.61%
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