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London open: Stocks fall amid rate hike worries; Lloyds fails to impress
London stocks fell in early trade on Wednesday, with investors eyeing the latest minutes from the FOMC as rate hike concerns dented sentiment.
At 0835 GMT, the FTSE 100 was down 0.6% at 7,926.60, taking its cue from weak US and Asian sessions.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Investors are waking up to a stark realisation that the Fed’s work is not done, and that interest rates may have to be hiked even higher to cool hot inflation.
“Waves of exuberance, which have propelled equities higher since the start of the year, have turned into tides of disappointment and apprehension about the difficulties that still may lie ahead for the mighty US economy. High hopes that the Federal Reserve could cut rates by the end of the year have been dashed, replaced by worries that up to three hikes in quick succession may be needed to tame the price spiral.
“The decision by the Reserve Bank of New Zealand to hike rates to a 14-year high of 4.75%, with warnings of more to come, highlights the extent to which inflation is still a thorn in the side of many economies across the world.”
The latest FOMC minutes will be released at 1900 GMT.
In equity markets, Lloyds Bank lost ground after reported flat annual profits with higher net income and lower costs were offset by impairment charges due to the worsening economic outlook. The bank said full year pre-tax profits came in at £6.9bn and added that it would start another £2bn share buyback.
Net income rose 14% to £18bn and impairment charges for potential bad debts surged to £1.5bn compared with a release in 2021 of £1.3bn. The dividend was lifted to 2.4p a share from 2p.
Rio Tinto was also in the red as the miner halved its dividend as profits slumped by more than a third due to weaker iron ore prices on the back of slowing demand from China and higher costs.
Miners more broadly were under pressure, with Anglo American, Glencore and Antofagasta among the worst performers on the FTSE 100.
Elsewhere, InterContinental Hotels was knocked lower by a downgrade to ‘hold’ at Deutsche Bank.
On the upside, WPP nudged higher after an upgrade to ‘outperform’ from ‘neutral’ at Credit Suisse.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
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|||||||
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Relx Plc | +0.40% | +10.00 | 2,501.00 |
| 2 |  |
Rentokil Initial Plc | +0.31% | +1.60 | 510.20 |
| 3 |  |
Bt Group Plc | +0.29% | +0.40 | 139.70 |
| 4 |  |
Coca-cola Hbc Ag | +0.14% | +3.00 | 2,111.00 |
| 5 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 6 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 7 |  |
Rsa Insurance Group Ld | +0.00% | +0.00 | 684.20 |
| 8 |  |
Royal Bank Of Scotland Group Plc | +0.00% | +0.00 | 120.90 |
| 9 |  |
Compass Group Plc | +0.00% | +0.00 | 1,924.50 |
| 10 |  |
Micro Focus International Plc | +0.00% | +0.00 | 532.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Bhp Group Limited | -2.76% | -76.00 | 2,675.00 |
| 2 |  |
Antofagasta Plc | -2.70% | -46.50 | 1,675.50 |
| 3 |  |
Lloyds Banking Group Plc | -2.39% | -1.22 | 49.75 |
| 4 |  |
Prudential Plc | -2.27% | -28.50 | 1,228.00 |
| 5 |  |
Glencore Plc | -2.25% | -11.30 | 492.00 |
| 6 |  |
Anglo American Plc | -2.19% | -69.00 | 3,085.00 |
| 7 |  |
Burberry Group Plc | -2.12% | -55.00 | 2,537.00 |
| 8 |  |
Rio Tinto Plc | -1.98% | -123.00 | 6,081.00 |
| 9 |  |
Marks And Spencer Group Plc | -1.84% | -2.80 | 149.75 |
| 10 |  |
Bp Plc | -1.78% | -9.80 | 540.50 |
US close: Stocks sharply lower as rising yields weigh on sentiment
Major indices were firmly in the red at the end of trading on Tuesday as Treasury yields continued to rise.
At the close, the Dow Jones Industrial Average was down 2.06% at 33,129.59, while the S&P 500 lost 2.0% to 3,997.34 and the Nasdaq Composite saw out the session 2.50% weaker at 11,492.30.
The Dow closed a whopping 697.10 points lower on Tuesday after Wall Street trading was suspended on Monday in observance of the Presidents Day long weekend.
In focus on Tuesday, the yield on the benchmark 10-year Treasury note climbed to 3.956%, while the two-year note advanced to 4.725% – building on gains recorded last week as traders digested hotter-than-expected inflation data that further exacerbated recession fears.
On the macro front, home selling activity in the US slowed for a twelfth straight month at the start of 2023. According to the National Association of Realtors, existing-home sales fell by 0.7% month-on-month in January to reach an annual rate of 4.0m – short of consensus estimates for a reading of 4.1m. In comparison to one year earlier, existing-home sales were down by 36.9%, while prices were up 1.3% at $359,000.
Elsewhere, output from America’s private sector unexpectedly swung back into expansion in February after a seven-month stretch of declines. S&P Global‘s Composite Output Index jumped from a reading of 46.8 in January to 50.2 for February as services led the way, with the Purchasing Managers’ Index for the sector increasing from 46.8 to 50.5 (consensus: 46.9). Meanwhile, the PMI for manufacturing improved from 46.9 to 47.8 (consensus: 47.0).
In the corporate space, brewer Molson Coors beat earnings per share estimates by $0.23 despite revealing that quarterly revenues had fallen, while retail giant Walmart beat on quarterly earnings as revenues topped estimates but sounded a cautious tone in regards to the economy and forecast softer-than-expected full-year earnings estimates.
Home Depot also reported revenues that fell short of estimates and issued a muted outlook, while Twinkies owner Hostess Brands posted strong quarterly sales and full-year earnings growth, and La-Z-Boy delivered an earnings beat, with third-quarter net income of $31.7m.
Wednesday newspaper round-up: Wizz Air, Google, JPMorgan
Wizz Air has been named the worst short-haul airline by UK passengers. Passengers surveyed by consumer group Which? gave the Hungary-based carrier one star out of five for boarding experience, cabin environment and seat comfort. – Guardian
Google could be forced to take responsibility for videos that YouTube recommends to its users if a landmark legal challenge against the internet giant succeeds in America’s top court. The company on Tuesday defended itself in a Supreme Court hearing, the culmination of a years-long legal campaign from the family of a victim of the 2015 Paris terrorist attacks who say that YouTube recommended extremist content to users. – Telegraph
JP Morgan has restricted traders’ use of ChatGPT as employers grow increasingly nervous over sensitive data being exposed. JP Morgan is among investment banks to have placed temporary curbs around access to the chatbot tools. Accenture, the tech consultancy which has more than 700,000 workers, has also warned staff over exposing client information to ChatGPT’s tools. – Telegraph
A government-backed review on female entrepreneurship has pledged to create three million places for women to access business support over the next three years. The Rose review, led by Dame Alison Rose, chief executive of NatWest Group, which was launched by the Treasury in 2019, said in its latest annual progress report that women had established 151,603 companies, up by 6,332 on the previous year. They represented 20 per cent of all incorporations, compared with 16.7 per cent in 2018. – The Times
