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London open: Stocks rise ahead of BoE rate decision
London stocks rose in early trade on Thursday as investors eyed another rate hike by the Bank of England.
At 0830 GMT, the FTSE 100 was up 0.4% at 7,324.10.
Overnight, the US Federal Reserve lifted rates by 25 basis points as expected, marking the the first rate increase since 2018. The Fed also pencilled in a 25 basis points rate hike at each of the six remaining meetings this year.
On home shores, the BoE is expected to raise rates by a further 25 basis points.
CMC Markets analyst Michael Hewson said: “In some respects, despite its muddled guidance over the last few months, the Bank of England has been ahead of the game when it comes to rate rises.
“Two rate rises since December has put base rates back to 0.5%, still below the levels they were pre-pandemic. With unemployment still low, and average wages still subdued the central bank must be looking with some concern over how much further this run high in inflation is likely to go.”
Investors will also continue to keep an eye on any developments in the Russia-Ukraine conflict, after sentiment was lifted on Wednesday by hopes of progress in peace talks between the two.
In equity markets, specialist lending and retail savings group OSB surged to the top of the FTSE 250 after it reported record full-year profits and announced a £100m share buyback.
Trainline gained after it said that ticket sales and revenues improved in 2022 as it recovered from the impact of the pandemic.
Landscaping products manufacturer Marshalls rose after saying it had delivered record sales and adjusted profitability in 2021, reflecting sustained heightened demand post Covid lockdowns.
On the downside, NatWest, M&G, Anglo American, Hikma, Bellevue Healthcare Trust and Crest Nicholson were all on the back foot as they traded without entitlement to the dividend.
Online supermarket Ocado slid after it said retail revenue fell in the first quarter of 2022 and warned about uncertainty caused by the rising cost of living.
Cineworld was weaker despite saying it had narrowed full-year losses as Covid lockdowns eased globally and that it expected a strong return to trading in March after a hit from the Omicron strain of the virus at the start of 2022.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Informa Plc | +2.52% | +14.80 | 602.40 |
| 2 |  |
Coca-cola Hbc Ag | +2.38% | +40.00 | 1,724.00 |
| 3 |  |
Scottish Mortgage Investment Trust Plc | +2.18% | +21.00 | 982.20 |
| 4 |  |
Diageo Plc | +1.98% | +71.00 | 3,663.50 |
| 5 |  |
Standard Chartered Plc | +1.84% | +9.20 | 509.40 |
| 6 |  |
Spirax-sarco Engineering Plc | +1.76% | +220.00 | 12,745.00 |
| 7 |  |
Halma Plc | +1.70% | +41.00 | 2,458.00 |
| 8 |  |
Bp Plc | +1.64% | +5.90 | 366.55 |
| 9 |  |
Fresnillo Plc | +1.63% | +11.40 | 712.60 |
| 10 |  |
Antofagasta Plc | +1.56% | +25.50 | 1,658.00 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | -7.69% | -92.50 | 1,111.00 |
| 2 |  |
Marks And Spencer Group Plc | -2.96% | -4.95 | 162.00 |
| 3 |  |
Bae Systems Plc | -2.07% | -14.60 | 691.40 |
| 4 |  |
Anglo American Plc | -2.06% | -76.50 | 3,629.00 |
| 5 |  |
Rolls-royce Holdings Plc | -1.42% | -1.34 | 93.04 |
| 6 |  |
Ferguson Plc | -1.36% | -150.00 | 10,890.00 |
| 7 |  |
Hikma Pharmaceuticals Plc | -1.36% | -28.00 | 2,034.00 |
| 8 |  |
Admiral Group Plc | -1.14% | -30.00 | 2,601.00 |
| 9 |  |
Hargreaves Lansdown Plc | -0.85% | -9.00 | 1,051.00 |
| 10 |  |
Astrazeneca Plc | -0.76% | -72.00 | 9,344.00 |
Europe open: Shares edge ahead after US rate rise, eyes on BoE
European shares edged ahead at the opening as peace talks between Ukraine and Russia appeared to be making progress, the US raised interest rates and investors waited on Britain to make a similar decision on Thursday.
The pan-European Stoxx 600 index was up 0.62% in early deals with all major regional bourses also higher. Asian shares were up again after China’s promise of stimulus measures to support its economy. Hong Kong’s Hang Seng index surged 7%.
On the war front, the death toll of Ukrainian citizens continued to mount after air strikes in the besieged city of Mariupol hit a theatre where hundreds of people were believed to have been sheltering and a swimming pool where pregnant women and young children had gathered.
The US Federal Reserve increased rates by a quarter point, as expected, and indicated rises at every meeting for the remainder of this year. The Bank of England will decide on domestic rates later Thursday.
Commodities were in focus again, with the London Metal Exchange’s (LME) three-month nickel contract hitting its lower trading limit of 8% when it opened on Thursday as traders sold on expectations of falling prices.
A wild spike in prices for the metal used to make stainless steel and electric vehicle batteries left traders facing billions of dollars in losses saw the LME suspending trades on Wednesday.
Oil prices were also showing volatility, whipsawing around the $100 level as supply disruption fears after Russia’s decision to wage war on Ukraine pushed Brent crude briefly to $139 a barrel.
Prices rose again overnight after the International Energy Agency said markets could lose three million barrels per day of Russian crude from April and UK Prime Minister Boris Johnson failed to persuade Saudi Arabia and the United Arab Emirates to lift production.
In equity news, shares in Germany’s Thyssenkrupp fell 7.6% after the company suspended its 2021/22 forecast for free cash flow before mergers and acquisitions due to the Ukraine crisis, and said it was unclear if it would still be able to spin off its steel division.
Ocado shares fell as the online grocer said retail revenue fell in the first quarter of 2022 and warned about uncertainty caused by the rising cost of living.
Deliveroo shares were up 7.85% despite a wider annual loss as spending on marketing and technology more than offset higher revenue at the food delivery group.
US close: Stocks finish firmer as Fed hikes rates
Wall Street stocks closed firmer on Wednesday, after the Federal Reserve sated market expectations by raising interest rates.
At the close, the Dow Jones Industrial Average was up 1.55% at 34,063.10, while the S&P 500 added 2.24% to 4,357.86 and the Nasdaq Composite rose 3.77% to 13,436.55.
The Dow closed 518.76 points higher on Wednesday, extending gains recorded on Tuesday even amid ongoing concern over Russia’s invasion of Ukraine, and a spike in Covid-19 cases in China.
“If there was ever any doubt, the Federal Reserve has today confirmed that the era of ‘transitory’ inflation is over,” said Giles Coghlan, chief analyst at HYCM.
“As many analysts had predicted, policymakers have opted to begin a long-anticipated cycle to hike rates, despite the many uncertainties that persist in the global economy.
“Last week’s consumer price index came in at 7.9% for the year through February – something that has no doubt been exacerbated by Russia’s invasion of Ukraine, which has triggered supply issues and a fresh surge in commodities.”
Coghlan asked if the Fed was being hawkish enough, however, adding that it had “a lot on its plate” in balancing the inflation narrative, alongside the risk of sending the US economy into a recession.
“Going forward, any further hiking action will come with caveats – we may see a more dovish approach to tightening, rather than the aggressive approach we have been primed for over the past year.
“But today, we traders and investors could see a ‘buy the rumour, sell the fact’ response to the announcement, which would favour upside in stocks, gains for gold and silver, as well as euro-dollar upside and a drop in US 10-year yields.”
The Federal Open Market Committee raised its benchmark lending rate target by 25 basis points after its two-day policy meeting, making for the first rate hike in four years.
It marked a significant shift away from two years of accommodative policy, amid inflation running at 40-year highs and many economies facing a cost-of-living crisis.
Looking ahead, the Fed now saw its main policy rate reaching 1.9% by the end of 2022, and increasing to 2.8% next year, with the bank’s number-crunching suggesting that was the level where interest would begin putting the kibosh on economic growth.
The Federal Reserve also said it now saw inflation averaging 4.3% by year-end, up from its previous forecast for a peak of 2.6%.
“We will take the necessary steps to ensure that high inflation does not become entrenched,” said Fed chair Jerome Powell after the meeting.
“We have the tools that we need and we are going to use them – we have a plan over the course of this year to raise interest rates steadily and also to run off the balance sheet.”
Powell said he expected inflation would remain high through the middle of the year, begin to come down towards the end of 2022, and then fall more sharply next year.
“Before the invasion of Ukraine by Russia, I would have said that the expectation was that inflation would peak sometime in the first quarter,” he added.
“Now we are already seeing a little bit of short-term upward pressure on inflation due to higher oil prices.
“We’ve had price stability for a long time and maybe come to have taken it for granted – now we see the pain; I am old enough to remember what high inflation is like.”
Earlier in the session, sentiment was boosted by a report suggesting Russia and Ukraine had drawn up a neutrality plan to end the war, including a possible ceasefire and the withdrawal of Russian troops.
Under the terms of the 15-point plan, Kyiv would renounce joining the North Atlantic Treaty Organisation (NATO) in exchange for security guarantees, the Financial Times said.
Those guarantees would be provided by the likes of the United States, the UK and Turkey, while Kyiv would also pledge not to host foreign military bases or weaponry.
Russia was also looking like it was defaulting on its debts for the first time since the 1990s, as economic and financial sanctions began to bite.
Interest payments of $117.0m on two dollar-denominated sovereign bonds sold in 2013 were due on Wednesday – the first coupon payments to fall due since Russia invaded Ukraine, and the US, UK and European Union imposed economic and financial sanctions on Moscow in response.
On the macro front, mortgage applications fell 1.2% in the week ended 11 March, according to the Mortgage Bankers Association of America, following an 8.5% jump a week earlier.
Applications to refinance a home loan declined 2.8%, while those to purchase a home edged up 0.7% as the average fixed 30-year mortgage rate increased to 4.27% – the highest rate seen since May 2019.
Elsewhere, US retail sales came in far above economists’ forecasts thanks to upwards revisions to data for January.
According to the Department of Commerce, retail sales volumes grew at a month-on-month pace of 0.3% in February to reach $658.13bn.
The rate of the monthly increase was one-tenth of a percentage point less than what economists had pencilled-in.
Imported goods increased in cost a touch more slowly than anticipated last month, meanwhile, with the Department of Labor reporting import prices rose at a seasonally-adjusted month-on-month pace of 1.4% in February, just shy of consensus forecasts for a 1.6% rise.
Still on data, the National Association of Home Builders‘ housing market index fell to a six-month low of 79 in March, down from 81 in February and below market forecasts for a flat month-on-month reading.
Home sales over the next six months sub-index sank to 70 from 80 and the current single-family sub-index dropped to 86 from 89, while the gauge for prospective buyers increased to 67 from 65.
In equities, US listings of Chinese stocks were in focus after fresh regulatory concerns saw them sold off in recent days.
State media reports from Beijing earlier on Wednesday suggested authorities in China were keen to support companies with overseas listings, and hinted at a cooperation deal with Washington lawmakers on the matter.
Alibaba Group jumped 36.76% in New York, while JD.com surged 39.36% and Pinduoduo rocketed 56.06%.
Caffeine pusher Starbucks added 5.16% after the company announced founder Howard Schultz would return as interim chief executive, following the resignation of Kevin Johnson.
On the downside, cybersecurity software giant NortonLifeLock tumbled 13.3% after the UK Competition and Markets Authority raised concerns about its proposed acquisition of its London-listed Czech competitor Avast.
Thursday newspaper round-up: Debenhams, rail staff, high street premises
Nearly 90% of former Debenhams stores remain empty almost a year after the department store closed its doors for the last time, in a sign of the challenge to reinvent high streets across the country. The empty shops are among nearly 8,000 outlets left empty last year, according to a report by the high street analysts Local Data Company (LDC), as Covid lockdowns accelerated the shift towards shopping online and pummelled city centres. – Guardian
Former prime minister Gordon Brown has warned the chancellor, Rishi Sunak, that millions more people will be plunged into fuel poverty unless the government uses next week’s spring statement to ease the UK’s cost of living crisis. A letter to the chancellor, organised by Brown and signed by more than 70 Labour local government leaders, urged the chancellor to adopt a five-pronged approach to help those struggling to make ends meet. – Guardian
Michael Gove is preparing to use a legal loophole to help councils exit contracts with Russian energy giant Gazprom. The Communities Secretary is drawing up plans to use obscure legislation that says public bodies must favour contracts that represent good social value. Officials are hoping the laws under the Social Value Act will allow councils to walk away from Gazprom deals without having to pay huge exit fees. – Telegraph
Tens of thousands of railway staff are to be forced to work on weekends under Whitehall plans that threaten to spark a war with trade unions. Workers must “shift to today’s reality” as outdated weekday-only shift patterns come to an end, rail minister Wendy Morton told an industry conference in London. – Telegraph
The number of empty shops and restaurants in Britain has fallen for the first time since 2018, prompting hopes that a post-pandemic recovery may be under way. In the second half of last year the national vacancy rate declined by 0.1 per cent from the first half to reach 14.4 per cent of all shops, according to the Local Data Company. The drop is the first decline in national vacancy rates in three years. – The Times
