London’s FTSE 100 underperformed European peers on Wednesday morning, with wider sentiment taking a hit as investors re-think the Federal Reserve interest rate outlook in the face of robust US data.
The FTSE 100 index opened down 37.00 points, 0.5%, at 7,898.09. The FTSE 250 was down 72.68 points, 0.4%, at 19,641.21, and the AIM All-Share was down 0.83 of a point, 0.1%, at 741.57.
The Cboe UK 100 was down 0.5% at 789.58, the Cboe UK 250 was down 0.5% at 17,057.31, though the Cboe Small Companies was up 0.1% at 14,562.59.
In European equities on Wednesday, the CAC 40 in Paris was up 0.1%, while the DAX 40 in Frankfurt was up 0.2%.
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 boss 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’.
XTB analyst Kathleen Brooks commented: ‘It’s been an inauspicious start to the second quarter for global stocks, after a stunning rally in the first three months of the year. The markets are contending with high valuations, second thoughts about interest rate cuts, high commodity prices and some key economic data releases coming up later this week. These factors mean that equities are struggling to build on the strong gains of last quarter.
‘The near-term catalyst for markets will be comments from Fed chair Powell on Wednesday, which will give the market an update on his policy outlook, and the non-farm payrolls report for the US that will be released on Friday. As we lead up to Friday’s data, a strange dynamic is going on with interest rates. Market expectations for the first US rate cut have been pushed back to September, with less than 3 rate cuts priced in for 2024 as a whole. This is at odds with the Fed’s own view, the March Dot Plot showed the median expectation was for 3 rate cuts this year.’
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 1.0%, the S&P 500 down 0.7% and the Nasdaq Composite down 1.0%.
Sterling was quoted at $1.2568 early Wednesday, largely flat from $1.2564 at the London equities close on Tuesday. The euro traded at $1.0770 early Wednesday, barely budging from $1.0771 late Tuesday. Against the yen, the dollar was quoted at JP¥151.70 early Wednesday, higher from JP¥151.60 on Tuesday.
In London’s FTSE 100, Prudential lost 1.8% to 727 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, Hilton Food gained 1.0%, after the food packaging firm reported growth in annual profit and lifted 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 1.2% in Dublin.
Back in London, Alpha Group International gained 2.1%, after it said it intends to apply for admission of its shares onto the Main Market in London and, in turn, cancel its listing on AIM.
The financial services firm expects this to take place next month, no earlier than May 2.
Admission is not expected to be conditional on shareholder approval, while Alpha Group International said it will make a further announcement on the status of its application in ‘due course’.
‘Our business is growing in size, becoming more global, and gaining interest from increasingly larger clients. We believe that a Main Market premium listing will serve to further enhance our reputation and support our market penetration as we move into additional countries and engage larger clients,’ the company said.
In Asia on Wednesday, the Nikkei 225 index in Tokyo lost 1.0%. In China, the Shanghai Composite inched down 0.2%, while the Hang Seng index in Hong Kong lost 1.3%. The S&P/ASX 200 in Sydney closed down 1.3%
Brent oil was trading at $89.05 a barrel early Wednesday, higher than $88.11 late Tuesday.
Gold was quoted at $2,272.15 an ounce early Wednesday, higher than $2,266.55 on Tuesday.
Still to come on Wednesday’s economic calendar, there are eurozone consumer price inflation and unemployment readings at 1000 BST. The latest ADP US jobs report is released at 1315 BST, before a pair of US PMIs at 1445 BST and 1500.
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