FTSE 100 Live: Federal Reserve rates outlook feeds market caution

·10 min read
 (Evening Standard)
(Evening Standard)

Stock markets are under pressure amid signs that central banks will continue their aggressive stance on interest rate hikes.

Minutes of the US Federal Reserve’s July meeting appeared to dash Wall Street hopes of a pivot in the pace of monetary tightening, although inflation data published since then has been more encouraging.

US markets closed lower last night and European markets are under pressure today, with traders expecting more big UK rate rises after yesterday’s 10.1% inflation figure.

FTSE 100 Live Thursday

  • Rate rise expectations weaken markets

  • AO World posts £37m loss, shares rise

  • Angling Direct warns over heatwave impact

FTSE 100 marks time as investors keep wary watch on policy outlook at central banks

15:13 , Michael Hunter

London’s main stock index ticked up 10 points in afternoon trade to 7525.3 in afternoon trade, in line with a steady showing across global markets with the outlook for tighter monetary policy uppermost on investors’ watchlists.

“Last night’s Fed minutes showed that officials were concerned that there was a risk they might overtighten in their attempts to convince markets they were serious about keeping a lid on inflation,” said Michael Hewson, chief market analyst at CMC Markets UK.

“That said, there was a general consensus that rates might need to stay restrictive for some time to keep prices in check given a lack of confidence that inflation was likely to improve in the short term.”

Resource stocks provided support in London, with metals miner Antofagasta top of the leaderboard, up 2.4% at 1167p. BP gained 2.1% to 441p. Stocks trading without further rights to their latest dividends fell to the bottom of the market, with insurers Legal & General down 4.2% and Aviva off by 4% to 440p.

Wall Street stocks ease back as outlook for rate rises sets cautious tone

14:47 , Michael Hunter

The S&P 500 slipped back in opening US trade, as investors absorbed fresh jobs data that came as the latest indicator likely to encourage the Federal Reserve’s more hawkish policy makers.

New York’s broad stock index surrendered four points to 4270. 0 after weekly unemployment claims fell, a sign that the economy is coping with 0.75% rate hikes from the central bank as it fights inflation.

Global stock markets have been steady for much of the session, after minutes from the Fed’s last meeting were out overnight and showed no sign of a let-up in its battle with rising prices, or an intention to swiftly take rates back down once inflation eases.

US jobs data sounds reassuring note on world’s biggest economy

13:54 , Michael Hunter

Further signs that demand for labour in the US remains robust appeared during the run-up to Wall Street’s opening bell on Thursday.

The Labor Department reported a fall in the number of unemployment claims of 2000 for the week to August 13, taking them down to 250,000, the first fall in three weeks.

The data will play into the outlook for how fast the Federal Reserve will raise interest rates as it balances the fight against inflation with the danger that a tighter money supply poses to economic growth.

Futures trading was pointing to a modest opening rise of around 5 points for the S&P 500, with New York markets due to open at 2.30pm London time.

Rank Group points to return of high rolling London visitors but shares slip

13:01 , Michael Hunter

Shares in Rank Group, the FTSE 250 casino company, were down on Thursday after it said the return of Middle Eastern visitors to London was underway, but came later in the summer than usual.

Covid restrictions have kept gamblers from the far east out of the company’s nine London venues, but its middle eastern customers are now coming back, escaping the extreme summer heat at home and providing an important customer base for Rank.

John O’Reilly, chief executive, told the Standard that their return was “much later” than usual, after a “very tough April” and a “sluggish May”, for the business, but that “when we got toward the end of June, it picked up … they may have got a surprise when they got off the plane and it was 40 degrees at Heathrow!”

The recovery helped a 34% rise in visitor numbers in London venues in the first seven weeks of Rank’s new financial year after it reported an underlying operating profit of £40 million for the year to June 30, in line with expectations.

The stock slipped 2.5% to 85.80 pence.

Marshalls warns of ‘less certain’ outlook despite rising revenues

11:47 , Simon Hunt

Landscaping materials business Marshalls today warned of a “less certain” economic outlook as it revealed increased revenues in part due to its £535 million acquisition of roof supplier Marley Group this year.

Group turnover was boosted by 17% to £348.4 million for the half year ending 30 June, up from £298.1 million in the same period last year.

However, profit before tax dipped from £38.9 million to £23.7 million reflecting costs of £20.7 million, including those relating to the purchase.

Martyn Coffey, boss of Marshalls, said the board “acknowledges that the macro outlook is becoming less certain due to geopolitical events driving up inflation and adversely impacting consumer confidence. Notwithstanding this, the board’s expectations for the group as a whole remain in line with market expectations for the full year.”

Marshalls said construction of its £24 million dual block plant at St Ives, Cambridgeshire was progressing in line with plans and it was expected to start operating in the fourth quarter of the year.

The more positive backdrop in building products and the addition of the Marley pitched roof offering was “expected to balance the continuation of tougher trading conditions”.

PwC partners’ profits pass £1m mark for first time

11:08 , Simon Hunt

UK partners at accountancy and consulting firm PwC were paid an average of more than £1 million for the first time last year.

The London-based giant said consulting revenues were up by a third reflecting “exceptional clients demands to challenges and opportunities on multiple fronts”.

Group profits grew 24% to £1.4 billion in the year to end June and profit per partner averaged £920,000, up 12%. This was topped up by an average of £105,000 per partner in the firm of a distribution from the sale proceeds of PwC’s global mobility and immigration arm, making a total of £1.025 million.

The bonus pool was up £10 million at £138 million.

Made.com shares fall again as it looks at cash injection

10:51 , Simon Hunt

Shares in beleaguered furniture retailer Made.com dropped a further 10% in early trading today as the company confirmed that it could seek a cash injection.

This follows last month’s dive of 40% as the markets reacted to a trading warning that included a strategic overhaul of its business and potential lay-offs. The shares have fallen nearly 95% in the past year.

In response to reports, Made — founded by Brent Hoberman and investor Ning Li — said it would consider “all options to allow it to strengthen its balance sheet”.

“Made confirms that these options include a potential equity capital raise… a further announcement will be made if and when appropriate.”

FTSE 100 lower, Angling Direct down 18%

10:23 , Graeme Evans

Angling Direct shares are down 18% after the fishing tackle retailer warned over the heatwave’s impact on sales in one of its peak trading months.

The recent poor fishing conditions have come on top of cost of living pressures as the chain lowered its revenues guidance and said it now expects 2023 earnings of between £3 million and £3.4 million, down from £4.3 million seen previously.

Angling Direct, which has 43 stores as well as online operations, said it continues to grow market share but shares dived 18% or 6.5p to 30p on AIM today. The stock had been above 80p in 2021 after interest in the sport was boosted during the Covid pandemic.

The London market’s bigger fish were also under pressure today after the FTSE 100 index fell 19.17 points to 7496.58. The decline came as sentiment weakened on the prospect of more big interest rate hikes in the UK and United States.

The top flight’s decline also reflected a large number of stocks now trading without the right to their most recent dividend award. They included Legal & General, Berkeley, GSK, Anglo American, Prudential, LSE, Aviva and HSBC.

Support in the FTSE 100 came from BP, Persimmon and Glencore after their shares rose more than 1%.

The UK-focused FTSE 250 was just 2.07 points lower at 20,024.97, but Balfour Beatty added a further 10.4p to 330p after UBS raised its price target to 400p following yesterday’s better-than-expected half-year results.

FTSE 100 slips, Balfour Beatty adds 2%

08:56 , Graeme Evans

The FTSE 100 index is down 12.57 points at 7503 as sentiment is impacted by the prospect of more big interest rate hikes in the UK and United States.

The top flight’s decline also reflected a large number of stocks trading without the right to their most recent dividend award. They included Legal & General, Berkeley, GSK, Anglo American, Prudential, LSE, Aviva and HSBC.

The biggest risers in the FTSE 100 were Ocado, Persimmon and Barratt Developments after gains of more than 1%.

The UK-focused FTSE 250 edged 49.35 points higher to 20,076.39, with construction and infrastructure group Balfour Beatty adding a further 2% on top of the 10% surge seen yesterday on the back of strong half-year results.

AO World posts £37m loss but shares rise

08:26 , Neil Hunter

Annual results from online electricals retailer AO World have highlighted the impact of supply chain disruption, labour shortages and a growing cost of living crisis for consumers.

Revenues of £1.37 billion in the UK were down by 4.6% from 2021’s strong performance during Covid lockdowns, but represented a 52% rise on a like-for-like pre-pandemic basis.

The various logistical challenges encountered during the year reduced underlying earnings to £8.5 million and meant the Bolton-based company recorded a bottom-line loss of £37 million, compared with £20 million profit the year before.

Shares have fallen from more than 230p in September to below 40p, but were up 10% to 44p today after AO said its estimate on the costs of closing its German business will be at the low end of its previous guidance at no more than £5 million.

Recent trading in the UK has been in line with AO’s expectations for the 2023 financial year, which is for revenues of between £1 billion and £1.25 billion and underlying earnings of between £20 million and £30 million.

Fed rate rise outlook hits US markets

07:58 , Graeme Evans

Evidence that Federal Reserve policymakers are not yet ready to alter their hawkish view on interest rates weighed on US markets yesterday.

Minutes of the Fed’s most recent meeting at the end of July showed little change in the commitment to get inflation back towards 2%, although members did raise concerns they might tighten too much given the lagging impact of rate hikes.

They said it would become “appropriate at some point to slow the pace of policy rate increases”, but there was little in the report to back up recent stock market optimism about the emergence of a “Fed pivot”.

Inflation data published since the meeting has been better-than-expected and policymakers will have a further set of price and jobs figures to digest before their next decision on 21 September.

US rates are currently in a target range of 2.25% to 2.5% but the comments from the Fed officials point to a further increase of 1.5% by the year end.

The Dow Jones Industrial Average fell 0.5% and the tech-focused Nasdaq Composite lost more than 1%, with disappointing earnings reports also a factor in the poor performance.

The FTSE 100 dropped 0.3% to 7515 yesterday after a three-day winning run and is expected to open slightly lower today.