Stocks in London closed in the red on Tuesday after comments from US Federal Reserve Chair Jerome Powell appeared to suggest that interest rates in the US would remain higher for longer.
‘Jerome Powell’s testimony shows that opinion has shifted again with the strength in data suggesting the need for a higher ultimate policy rate and potentially faster rate hikes. Given long and varied lags the odds of a hard landing and an eventual policy reversal are rising,’ ING Economic said.
The FTSE 100 index closed down 10.31 points, 0.1%, at 7,919.48. The FTSE 250 ended down 107.50 points, 0.5%, at 19,956.61, and the AIM All-Share closed down 0.6%, or 5.25 points, at 860.06.
The Cboe UK 100 ended down 0.1% at 792.47, the Cboe UK 250 closed down 0.5% at 17,485.27, and the Cboe Small Companies ended down 0.5% at 14,089.55.
US interest rates will likely peak at a higher level than previously anticipated due to economic data that came in stronger than recent trends suggested, Fed Chair Powell said Tuesday.
He noted that January figures for employment, consumer spending, manufacturing production and inflation pointed to a partial reversal of earlier softening trends.
Powell will continue to present his semi-annual monetary policy report on Wednesday, speaking to the House of Representatives. On Friday, there will also be a key US jobs report, making the week a consequential one for US economic data and monetary policy guidance.
Markets expect a jump of between 200,000 and 240,0000 new jobs in February, down from a massive increase of 517,000 in January.
Powell’s comments come two weeks before the US central bank’s next policy decision. The next Federal Open Market Committee meeting is on March 21 and 22.
Powell’s remarks put pressure on US stocks, pushing them lower at the London equities close. The DJIA was down 1.0%, the S&P 500 index down 1.1%, and the Nasdaq Composite down 0.8%.
In European equities on Tuesday, the CAC 40 in Paris ended down 0.4%, while the DAX 40 in Frankfurt ended down 0.6%.
The pound was quoted at $1.1861 at the London equities close Tuesday, down sharply compared to $1.2031 at the close on Monday. The euro stood at $1.0577, down against $1.0678. Against the yen, the dollar was trading at JP¥136.87, up compared to JP¥135.98 late Monday.
In the FTSE 100, Fresnillo lost 6.9%, after it halved its annual dividend.
The Mexican miner said silver production edged up 1.2% to 53.7 million ounces from 53.1 million a year ago, but gold production fell 15% to 635,926 ounces from 751,203. Both were in line with company guidance, however.
Total revenue fell 10% to $2.43 billion from $2.70 billion due to the lower adjusted revenue combined with ‘higher treatment and refining charges’, it said.
Pretax profit slumped 59% to $248.6 million from $611.5 million. Adjusted production costs rose 15% to $1.45 billion from $1.26 billion.
UBS had predicted pretax profit to drop to $192 million, and revenue to fall to $2.52 billion.
Ashtead was up 2.5% as it reported third quarter profit growth, citing markets as benefiting from current US legislative policies and mega-projects.
The US-focused industrial equipment rental company said pretax profit in the three months to January 31 climbed 29% to $505 million from $393 million a year prior.
Revenue grew 23% to $2.43 billion from $2.00 billion, while rental revenue increased 22% to $2.19 billion from $1.82 billion.
Consequently, Ashtead said it anticipates results for financial year 2023, ending April 30, to be ahead of previous expectations.
It now expects annual rental revenue growth of 21% to 23%, up from a previous range of 18% to 21%.
In the FTSE 250, John Wood climbed 12% to 217.30 pence, making it the best performer on the index on Tuesday, as it rebuffed a fourth proposal for a takeover by Apollo Global Management.
John Wood said US private equity firm Apollo Global submitted a fourth proposal, which would be an offer of 237p per share in cash.
John Wood said: ‘The board believes this latest proposal continues to undervalue the group and is therefore minded to reject. The board will continue to engage with its shareholders and intends to engage further, on a limited basis, with Apollo.’
The company had already rejected three proposals by Apollo, the most recent in January for 230p, or around £1.59 billion in total.
Premier Foods jumped 11%, after the St Albans, Hertfordshire-based food manufacturer upped its profit expectations for financial 2023.
Premier Foods now anticipates trading profit of around £155 million for financial year 2023, up from £141.2 million a year prior, after software amortisation.
On the other side of the FTSE 250 index, Spirent Communications shed 15%.
The Crawley-based provider of testing, analytics and security for telecommunications networks said pretax profit in 2022 grew by 11% to $114.6 million from $103.6 million in 2021. Revenue increased by 5.5% to $607.5 million from $576.0 million.
However, the company noted that there were delays to some of its customers’ decision-making in the fourth quarter of 2022. In addition, Spirent expects revenue to fall slightly in 2023.
On AIM, In The Style plummeted 79%, after it announced the planned sale of its only subsidiary, In The Style Fashion Ltd, and said it plans to become a cash shell named Itsum.
The Manchester-based digital fashion brand said it completed its strategic review, saying that it will sell In The Style Fashion, for £1.2 million cash to Baaj Capital, a UK-based private family office.
In The Style now plans to change its name to Itsum, and become a cash shell. The firm said it also wants to cancel its shares on AIM after the completion of the sale. Shareholders will be able to vote on all this at a general meeting to be called by the company.
Calnex Solutions plunged 31%, after it issued a warning on its future performance in financial 2024.
The telecommunications equipment company, based in Linlithgow, Scotland, said it expects to deliver double-digit growth in annual revenue and profit in financial 2023.
However, looking ahead, Calnex says its macroeconomic outlook remains ‘challenging’ with growth slowing globally in the telecoms sector as a result of a general softening of demand for products and services. This has meant that Calnex customers are being more cautious with investments, meaning the timing of orders is unclear for the company, it explained.
Calnex added that market-driven delays are likely to have an impact on the group’s performance in the following financial year, with its financial 2024 performance expected to be lower than that achieved in financial 2023.
Brent oil was quoted at $83.83 a barrel at the London equities close Tuesday, down from $85.90 late Monday. Gold was quoted at $1,818.73 an ounce at the London equities close Tuesday, down against $1,850.32 at the close on Monday.
In Wednesday’s UK corporate calendar, there are full-year results for Admiral Group and Legal & General.
The economic calendar for Wednesday has EU gross domestic product and employment figures. Bank of England Monetary Policy Committee member Swati Dhingra will also speak at 0930 GMT.
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