Stocks in London were lower on Wednesday midday, as investor sentiment suffered with a persistently resilient US economy dampening expectations that US interest rates cuts will come sooner rather than later.
The FTSE 100 index was down 30.55 points, 0.4%, at 7,904.54. The FTSE 250 was down 35.35 points, 0.2%, at 19,678.54, and the AIM All-Share was down 0.62 of a point, 0.1%, at 741.78.
The Cboe UK 100 was down 0.4% at 790.22, the Cboe UK 250 was down 0.3% at 17,094.50, and the Cboe Small Companies was down 0.3% at 14,511.38.
In European equities on Wednesday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both up 0.3%.
A senior Federal Reserve official confirmed that she recently raised her prediction for interest rates over the longer term due to the enduring strength of the US economy.
At the most recent rate meeting in March, Fed policymakers voted to hold interest rates at their current elevated levels, while pencilling in three rate cuts this year and lifting their expectation for where rates will settle over the long run to 2.6%.
Cleveland Fed president Loretta Mester, who is one of 12 policymakers with a vote on US monetary policy this year, said that she had hiked her own forecast, to 3.0% from 2.5%.
San Francisco head Mary Daly said that three cuts was ‘a very reasonable baseline’ but added that economic growth ‘is going strong, so there’s really no urgency to adjust the rate’.
AJ Bell said the market has been ‘remarkably sanguine’ about expectations on when the Fed will first cut rates ‘constantly being pushed back’, but that investors’ patience ‘may finally be running thin’.
‘Recent releases from the US suggest both that inflation is proving stubborn but also that the economy is proving remarkably resilient. This is creating a situation where central bankers can arguably afford to keep policy tight to ensure they really have slain the inflation dragon,’ said AJ Bell analyst Russ Mould.
‘However, the Federal Reserve has to balance that with the inevitable lagged impact of the sharp rise in interest rate hikes since 2021, with companies and individuals still in the process of rolling over on to higher interest costs. Employment data today and on Friday, a reading from the US services sector and a scheduled talk at Stanford by Jerome Powell may all help clarify in people‘s minds what the Fed is thinking and whether there is still hope for a June rate cut.’
The latest ADP US jobs report is released this afternoon at 1315 BST, before a pair of US PMIs at 1445 BST and 1500.
Sterling was quoted at $1.2573 at midday on Wednesday, up from $1.2564 at the London equities close on Tuesday. The euro traded at $1.0773 early Wednesday, barely budging from $1.0771 late Tuesday. Against the yen, the dollar was quoted at JP¥151.73 early Wednesday, higher from JP¥151.60 on Tuesday.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 index down 0.2%, and the Nasdaq Composite down 0.3%.
In London’s FTSE 100, Prudential lost 1.9% to 726 pence, after Barclays cut the insurer’s price target to 1,390p per share from 1,640p, while Barclays rates the stock at ’overweight’.
In the FTSE 250, International Distributions Services gained 2.8%, after it said Royal Mail on proposed a change to its UK letter delivery offering, as it grapples with weaker volumes, in a move which could see ‘fewer than 1,000 voluntary redundancies’.
The measures could trim the net cost of the UK postal universal service operation by £300 million per year. IDS owns Royal Mail.
Following consultation with customers, businesses and shareholders, Royal Mail proposes to deliver all non-first class letters every other weekday, as letter volumes have fallen sharply over the last two decades.
The company, in a response to Ofcom’s call for input into the universal service, said this would make the offering more efficient and financially sustainable.
IDS said it will maintain the six day per week first class letter delivery service, in recognition of the ‘importance of next day and Saturday deliveries, especially for the NHS, publishers and senders of greeting cards’.
Hilton Food lost 3.0%, despite the food packaging firm reporting growth in annual profit and lifting its dividend, hailing a ‘successful turnaround’.
Pretax profit in 2023 surged 64% to £48.6 million from £29.6 million in 2022, while revenue rose 3.7% to £3.99 billion from £3.85 billion.
It proposed a final dividend of 23.0 pence per share, up 1.8% from 22.6p, taking the total annual dividend to 32.0p, a rise of 7.7% from 29.7p.
Looking ahead, Hilton Food said 2024 trading has started in line with board expectations. ‘The group’s financial position remains strong, with improving leverage and headroom at comfortable levels, and we continue to explore new growth opportunities with existing partners, wider geographic expansion and complementary M&A,’ the company said.
Wizz Air ticked up 0.2%. The budget airline saying it carried 4.8 million passengers in March, up 12% from 4.3 million a year earlier, with a load factor of 90.8%, down from 92.2%.
Wizz Air said the load factor was impacted by one-directional visual flight rules traffic during the Easter period.
On a rolling 12-month basis, passenger numbers were up 21% to 62.0 million from 58.2 million, with a load factor of 90.1% versus 87.8%.
Fellow budget airline Ryanair said it carried 13.6 million passengers in March, up 7.9% from 12.6 million a year earlier, with an unchanged load factor of 93%. On a rolling 12-month basis, it carried 183.7 million passengers, up 9.0% from 168.6 million, with an increased load factor of 94% from 93%.
Ryanair climbed 0.4% in Dublin.
‘Wizz Air and Ryanair reported a material increase in passenger numbers in March with the former helped by flights to Israel restarting despite the ongoing conflict in Gaza. The company also expects a boost from the Euros football tournament kicking off in Germany this summer,’ said AJ Bell’s Mould.
‘The travel sector has enjoyed an impressive recovery post-Covid with airlines boosted by some capacity coming out of the market as less financially robust companies were forced to exit. The key question now is: how long will travellers continue to stomach higher prices in order to jet away?’
Elsewhere in London, Pantheon Infrastructure rose 3.8%.
The investment fund focused on infrastructure assets said net asset value per share at December 31 rose 7.8% to 106.6p from a year earlier.
It declared an interim dividend of 2p per share, taking its total 2023 dividend to 4p, up from 2p a year earlier.
Pantheon Infrastructure also completed £5.8 million in share buybacks in 2023, with a £2.6 million after the year-end and planning a further programme of up to £10 million.
Brent oil was trading at $89.31 a barrel at midday on Wednesday, higher than $88.11 late Tuesday.
Gold was quoted at $2,272.51 an ounce at midday on Wednesday, higher than $2,266.55 on Tuesday.
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