London’s FTSE 100 lost more ground on Thursday, with investors digesting hawkish words from US lawmakers to Federal Reserve Chair Jerome Powell.
Market attention is now squarely on Friday’s US jobs report. Another red-hot reading of the US labour market could spook stocks further and give the Fed the leeway to lift rates even more.
Among individual shares, miner Endeavour and Ladbrokes owner Entain sat towards the bottom of the FTSE 100. Volution was among the best mid-cap performers, meanwhile.
The FTSE 100 index closed down 49.94 points, 0.6%, at 7,879.98. It was the blue-chip index’s third-successive daily decline.
The FTSE 250 ended down 159.07 points, 0.8%, at 19,692.90, and the AIM All-Share closed down 5.06 points, 0.6%, at 849.67.
The Cboe UK 100 ended down 0.6% at 788.89, the Cboe UK 250 closed down 0.6% at 17,290.13, and the Cboe Small Companies ended down 0.4% at 13,945.96.
‘The FTSE 100 took another step back on Thursday as a second day of testimony in front of Washington lawmakers by Federal Reserve Chair Jerome Powell largely stuck to the hawkish tone of the previous day,’ AJ Bell analyst Russ Mould commented.
‘While Powell softened things a little by saying nothing is decided yet, the clear message is future rate decisions will be dependent on the data and for now that seems to be tilting things more towards a 50 basis point rather than 25 basis point rate rise later this month.’
Market nerves on this week contrast with a positive start to the year for equities. Investors at the time were hopeful that a pause in rate hikes would occur sooner rather than later.
US data since, and now hawkish comments from Powell, have poured cold water on that idea.
On Tuesday, Fed Chair Powell warned that US interest rates will likely peak at a higher level than was previously anticipated due to January data that came in stronger than recent trends expected.
During his second day of testimony on Wednesday, Powell reiterated that the Fed would be prepared to increase the pace of rate hikes if needed but clarified that ‘no decision has been made’.
According to the CME FedWatch tool, markets think there is a 76% chance that the US central bank will lift rates by 50 basis points at its March meeting, with just a 24% chance of a smaller 25 basis point hike again.
Eyes now turn to the US jobs report on Friday at 1330 GMT.
According to FXStreet-cited expectations, the US economy is expected to have added 205,000 jobs in the last month. In January, 517,000 jobs were added.
Stocks in New York were higher at the London equities close, with the Dow Jones Industrial Average and the S&P 500 index up 0.1%, while the Nasdaq Composite was up 0.3%.
In European equities on Thursday, the CAC 40 in Paris ended down 0.1%, while the DAX 40 in Frankfurt ended up marginally.
The dollar surrendered some gains on Thursday.
The pound was quoted at $1.1926 at the London equities close Thursday, higher compared to $1.1840 at the close on Wednesday. The euro stood at $1.0580 at the European equities close Thursday, up against $1.0553 at the same time on Wednesday. Against the yen, the dollar was trading at JP¥136.29, down compared to JP¥137.14 late Wednesday.
In the FTSE 100, Ladbrokes owner Entain lost 3.4% after posting a dip in profit.
The gambling firm reported a pretax profit of £102.9 million, down sharply from £393.2 million in 2021.
Revenue rose 12% to £4.30 billion from £3.83 billion.
The company declared a second interim dividend of 8.5 pence per share, bringing its total dividend to 17p, compared to nothing paid for 2021.
Looking forward, Entain said it continues to face some regulatory headwinds, but nonetheless remains ‘excited’ by the opportunities ahead. It added that it has started 2023 with positive underlying momentum, giving it confidence in its long-term prospects.
Endeavour Mining lost 5.2%.
The gold miner reported a steep fall in annual profit for 2022, amid lower gold sales and higher operating costs.
In 2022, Endeavour’s pretax profit fell to $145 million from $448 million the previous year. This sharply missed UBS analyst forecasts of a rise to $610 million.
Also putting pressure on the FTSE 100, miners Rio Tinto, Antofagasta and Glencore lost 3.0%, 4.3% and 0.2%, respectively.
In the FTSE 250, Volution jumped 13%, after the manufacturer of energy-efficient indoor air quality products lifted its interim dividend.
For the six months ended on January 31, revenue rose 8.5% to £162.3 million from £149.6 million a year before. Pretax profit rose by 5.6% to £22.6 million from £21.4 million.
Volution declared an interim dividend of 2.5p pence per share, up 8.7% from 2.30p a year prior.
Property development and investment company Hammerson shed 11%.
Hammerson said its pretax loss in 2022 narrowed to £164.0 million in the year ending 2022, from £408.0 million.
However, revenue dropped 4.2% to £131.4 million from £137.2 million.
Hammerson paid 0.2 pence in cash dividends over the course of 2022, halved from 0.4p a year prior. The firm is not recommending further dividend payments for 2022, but anticipates to reinstate cash dividends in 2023.
On AIM, Atlantic Lithium gained 15%.
The company was restored to trading on AIM in London after a temporary suspension following a report published on its partner on Wednesday.
The Africa-focused lithium exploration and development company said it ‘outrightly refute[d]’ allegations of impropriety made by a report from Blue Orca Capital regarding its partner Piedmont Lithium.
It labelled the report as ‘false and misleading’, arguing it holds valid prospecting licences, with operating permits for all of its current activities, in accordance with the Ghanaian government and the Minerals Commission’s requirements.
It stressed the company has a ‘zero-tolerance policy’ on bribery and corruption, operating in accordance with the ‘most stringent levels of corporate governance’ internationally.
It also warned investors against making decisions based on the report.
Brent oil was quoted at $83.15 a barrel at the London equities close Thursday, up from $82.60 late Wednesday. Gold was quoted at $1,827.92 an ounce at the London equities close Thursday, higher against $1,818.62 at the close on Wednesday.
In Friday’s UK corporate calendar, there is a trading statement from housebuilder Berkeley Group.
Aside from the nonfarms, Friday’s economic calendar has a Bank of Japan interest rate decision overnight, before a UK gross domestic product reading and German inflation data at 0700 GMT.
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