European stocks were hit by concerns over hostility between Israel and its Middle Eastern neighbours, with UK Prime Minister Rishi Sunak the latest Western leader to head to the region to try to defuse tensions.
A bond sell-off in the US is also weighing on equities, with the 10-year Treasury yield nearing 5%.
The FTSE 100 index traded down 50.13 points, 0.7%, at 7,537.87. The FTSE 250 was down 11.17 points, 0.1%, at 17,392.29, and the AIM All-Share was up 0.78 of a point, 0.1%, at 685.58.
The Cboe UK 100 was down 0.7% at 751.96, the Cboe UK 250 was up 0.1% at 15,082.29, while the Cboe Small Companies was down 0.5% at 12,939.23.
In European equities on Thursday, the CAC 40 in Paris was down 0.4%, while the DAX 40 in Frankfurt edged down 0.1%.
‘Worries about an escalation of violence in the Middle East weighed on stocks around the world. US markets experienced a troubled session last night and negativity spread across Europe and Asia on Thursday,’ AJ Bell analyst Russ Mould commented.
The UK prime minister has arrived in Israel to meet leaders in the Middle East and call for any escalation of the conflict to be avoided.
Sunak will hold talks with the country’s prime minister, Benjamin Netanyahu, and President Isaac Herzog as he starts a two-day trip that is expected to take in a number of capitals in the region
He will urge Middle East leaders to ‘avoid further dangerous escalation’, saying that ‘too many lives have been lost’ already in the Israeli-Hamas war.
Sunak’s visit follows one from US President Joe Biden. The president’s trip appeared to herald a breakthrough, with Netanyahu’s office announcing it had approved a request from Biden to allow Egypt to deliver limited quantities of humanitarian aid to the Gaza Strip.
The first crack in a punishing 10-day siege on the territory came a day after a deadly blast at a Gaza City hospital killed hundreds.
Hamas blamed Israel for the strike, while Tel Aviv pointed the finger at a rocket misfire by Islamic Jihad, another militant group operating in Gaza. Islamic Jihad has dismissed the claim.
Worries about an escalation in the conflict, after the strike at the Gaza hospital upped the ante, has hurt equities but helped oil and gold prices this week.
‘Unsurprisingly, investors are flocking to supposed safe-haven or defensive assets including insurers and gold which neared a two-month-high,’ AJ Bell’s Mould added.
Gold was quoted at $1,951.01 an ounce early Thursday afternoon, higher than $1,941.78 on Wednesday. It had spiked to $1,962.58 on Wednesday, its best level since early-August.
Insurer Admiral rose 2.3% in London, while Direct Line added 3.8%.
Also helping the insurance sector, Sabre added 3.3% as the motor insurer said gross written premiums rose 20% year-on-year to £162.2 million in the nine months to September 30.
‘Our success so far this year is evident in the high premium levels and very strong solvency position which will allow sufficient headroom for further growth whilst allowing the board flexibility in determining an appropriate dividend distribution at year-end in-line with our policy,’ said Chief Executive Officer Geoff Carter.
Brent oil was trading at $90.19 a barrel on Thursday afternoon, down from $91.10 late Wednesday.
SPI Asset Management analyst Stephen Innes commented: ‘The ongoing conflict between Israel and Hamas contributes to a higher level of market risk but hasn’t caused any significant safe-haven inflows on the day. While oil prices are still high, they haven’t reached an economically detrimental level. Nonetheless, negative headlines introduce some moderate upside risk.
‘At the same time, ongoing diplomatic efforts appear to be taking some of the heat out of the rally, which could help stabilize risk if Brent prices can move deeper into the $80s per barrel.’
BP and Shell fell 1.4% and 1.0%, tracking Brent lower.
A bond market sell-off is also doing little to improve equity market sentiment. The US 10-year Treasury yield is currently sitting not far off the 5% handle at 4.95%. It had spiked as high as 4.98% earlier.
Analysts at Deutsche Bank commented: ‘Whilst some haven assets benefited from the geopolitical risk premium, sovereign bonds continued to sell off sharply across the world. US Treasuries were at the forefront of that, with yields rising to new cycle highs across the curve.’
Back in London, Rentokil tumbled 16%.
The pest control and hygiene firm warned that tricky market conditions in North America mean its full-year outturn in the region will be worse than expected.
It now predicts a North America adjusted operating margin range of 18.5% to 19.0%, lowered from its 19.5% expectation.
At group level, however, it maintained its adjusted operating margin guide of 16.5%.
Rightmove slumped 12%, with the stock rocked by M&A developments elsewhere in the online property portal market.
New York-listed property group CoStar has struck a deal to acquire Rightmove’s AIM-listed property portal rival, OnTheMarket.
The offer is for 110 pence for each OTM share, valuing the firm at around £99 million. The price is a premium of 56% to OTM’s closing price of 70.50p on Wednesday. Shares in OTM jumped 53% to 107.52p in early dealings on Thursday.
For CoStar, the deal is an ‘attractive strategic entry point’ to enter the UK residential property market, the release said.
Stocks in New York are called to open mixed. The Dow Jones Industrial Average is called to open slightly lower, the S&P 500 a touch higher and the Nasdaq Composite up 0.2%.
Sterling was quoted at $1.2116 early Thursday afternoon, lower than $1.2151 at the London equities close on Wednesday. The euro traded at $1.0550, up from $1.0533. Against the yen, the dollar was quoted at JP¥149.80, down versus JP¥149.86.
Still to come on Thursday’s economic calendar is the latest US jobless claims data at 1330 BST. Speeches from a number of Federal Reserve central bankers are on the docket, including one from Chair Jerome Powell at 1700 BST.
Capex.com analyst George Pavel commented: ‘The Federal Reserve is still expected to keep its interest rates at elevated levels well into next year. However, some risks remain as the institution could adopt an even tighter stance. As a result, today’s data and comments could fuel volatility.’
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