ADVFN Morning London Market Report: Friday 17 June 2022

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London open: Stocks flat after Thursday’s selloff

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London stocks were flat in early trade on Friday following huge losses in the previous session.

At 0855 BST, the FTSE 100 was steady at 7,047.16, having closed down 3.1% on Thursday amid a global selloff. Sentiment took a hit after the US Federal Reserve lifted interest rates by 75 basis points – its biggest hike since 1994 – and after the Swiss National Bank surprised markets by increasing rates for the first time in 15 years.

Also on Thursday, the Bank of England lifted rates by 25 basis points to a 13-year high of 1.25%, although this was less aggressive than the 50 bps many had started to price in in recent days.

Richard Hunter, head of markets at Interactive Investor, said: “More central bank tightening and a re-evaluation of prospects for the US economy have put the skids under global markets, with the likelihood of recession apparently increasing.

“After a brief relief rally, US markets plunged once more as investors pondered the possibility of a policy mistake from the Federal Reserve. The tightening process may have come at a time when the economy was beginning to cool slightly, as opposed to a year ago when it would clearly have been able to withstand the hikes which are currently coming through.

“At the same time, the Bank of England also joined the throng of tightening banks with another hike, amid renewed forecasts of inflation rising as high as 11% later this year. There was also a surprise rise from the Swiss National Bank for the first time in 15 years.

“For the moment, the mood is clear. Investors globally are questioning whether any global growth is possible amid the current monetary shackles and are giving risk assets a wide berth at the slightest excuse. The impending quarterly reporting season will add further colour to trading conditions on the ground, and the company comments on the immediate outlook will have particular resonance.”

In equity markets, heavily-weighted miners were a drag, but Glencore bucked the trend following an upbeat trading update.

Supermarket chain Tesco fell after saying it was seeing early indications of changing customer behaviour as a result of the cost-of-living crisis and inflationary environment as it reported a fall in first quarter sales. The company said UK like-for-like sales for the three months to May 28 fell 1.5% to £9.8bn. On a group basis sales were up 2%, boosted by a strong performance at its Booker division, where revenue rose 19.4% to £2bn.

Future gained as the media company reiterated that it was on track to achieve full-year 2022 guidance.

Playtech was also in the black as the gambling software maker said the UK Takeover Panel had extended the deadline for Asia-based investment group TTB Partners to either make a firm intention to make an offer or walk away. Playtech said talks between the two were ongoing and progress was being made.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Tui Ag +5.73% +8.25 152.15
2 Ocado Group Plc +4.75% +37.40 824.80
3 Marks And Spencer Group Plc +3.77% +5.00 137.50
4 Scottish Mortgage Investment Trust Plc +3.52% +23.60 694.20
5 Next Plc +3.44% +198.00 5,962.00
6 Sage Group Plc +3.36% +20.00 615.60
7 Informa Plc +2.98% +15.40 533.00
8 Segro Plc +2.85% +27.80 1,003.00
9 St. James’s Place Plc +2.76% +30.50 1,134.50
10 Auto Trader Group Plc +2.74% +13.70 513.20

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Fresnillo Plc -2.64% -21.60 795.80
2 Bp Plc -1.05% -4.25 400.15
3 Rio Tinto Plc -0.96% -52.00 5,392.00
4 Shell Plc -0.89% -19.00 2,125.00
5 Bhp Group Limited -0.82% -20.00 2,419.00
6 British American Tobacco Plc -0.31% -10.50 3,429.50
7 Anglo American Plc -0.26% -9.00 3,438.00
8 Antofagasta Plc -0.11% -1.50 1,324.00
9 Rentokil Initial Plc -0.09% -0.40 448.20
10 Shell Plc -0.00% -0.00 1,894.60

 

US close: Stocks firmly negative one day after Fed hike

Wall Street stocks tumbled all the way to the close bell on Thursday, after the Federal Reserve hiked interest rates by 75 basis points overnight.

At the close, the Dow Jones Industrial Average was down 2.42% at 29,927.07, as the S&P 500 lost 3.25% to 3,666.77 and the Nasdaq Composite was off 4.08% at 10,646.10.

The Dow closed 741.46 points lower on Thursday, more than erasing the games it recorded on Wednesday after the Fed implemented its largest interest rate hike since 1994.

Fed chairman Jerome Powell said Wednesday’s interest rate hike was “clearly” an “unusually large one” but added that he did not expect “moves of this size” to be common.

Stocks traded higher after Powell signalled that a 50 or 75-basis point increase “seems most likely” at the central bank’s next meeting in July, but cautioned that decisions would continue to be made on a “meeting by meeting” basis.

However, decisions by other central banks to adopt a more aggressive monetary policy stance weighed on sentiment at the open, with the Swiss National Bank raising rates for the first time in 15 years and the Bank of England raising rates for a fifth straight time.

On the macro front, the number of Americans filing for jobless claims for the first time was little changed last week.

According to the Department of Labor, in seasonally adjusted terms, initial unemployment claims dipped by 3,000 to reach 229,000 over the week ending on 11 June. Economists had forecast a decline to 220,000.

Elsewhere, manufacturing activity in the US mid-Atlantic region softened a tad in June as firms received fewer new orders, according to the Federal Reserve Bank of Philadelphia’s factory sector index, which slipped from a reading of 2.6 in May to -3.3.

Economists had pencilled in a reading of 5.0.

Finally, building permits in the US, a proxy for future construction, fell 7% to an annualised rate of 1.69m in May, according to the Census Bureau, the lowest reading since September 2021 and well below forecasts of 1.78m.

In the corporate space, grocery giant Kroger was down 2.08% despite beating expectations with its first-quarter earnings before the open, leading the group to raise full-year guidance.

Elsewhere, cosmetics giant Revlon plunged 13.33% after it announced it was voluntarily filing for bankruptcy, while Tesla skidded 8.54% as it raises its US list prices.

 

Friday newspaper round-up: Gatwick, Twitter, housebuilders

Gatwick airport will reduce its summer capacity to ward off potential chaos, after dozens of last-minute cancellations wrecked the travel plans of holidaymakers over the platinum jubilee and half-term holiday. London’s second busiest airport will limit the number of daily take-offs and landings to 850 in August – about 50 more than the average in early June, but more than 10% below its pre-pandemic maximum. – Guardian

Elon Musk met directly with employees at Twitter on Thursday for the first time since he reached a deal to acquire the company in April, focusing on “freedom of speech” in an online address. The billionaire had moved to purchase Twitter for $44bn in April but has since been critical of the company, threatening to put the deal on hold over concerns about bots, or fake accounts, that exist on the app. – Guardian

Housebuilders will need more than bullish rhetoric to budge investors – the sector is priced for catastrophe. A rise in interest rates yesterday to a 13-year high and warnings that inflation could reach an eye-watering 11 per cent this year has caused the market to dig in its heels. For Bellway, the prospect of home ownership being pushed further out of reach by a lack of affordability caused a sell-off that has left the shares trading at their lowest since September 2020. In fact, at just over five times forward earnings, the FTSE 250 constituent is priced almost as feebly as the day of the first lockdown and close to its cheapest in a decade. – The Times

Businesses should give greater opportunities to those “at the edges” of the labour market to help tackle inequality, a senior minister told leaders at The Times CEO Summit. Michael Gove, the secretary of state for levelling up, housing and communities, called on chief executives to “open up opportunities to those people who have been overlooked and undervalued in the past”. – The Times

Drivers should be spared road charges during rail strikes to prevent cities turning into “ghost towns”, the chairman of the AA has said. The UK’s biggest strikes in 30 years are expected to cut off entire towns and cities as they shut down 80 per cent of Britain’s rail services next week. Parking charges, congestion and clean air zones, as well as unnecessary road works, should be halted to ease the burden of thousands who will be forced to drive into work, Edmund King told The Telegraph. – Telegraph

 

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