US interest rate worries and rising bond yields hurt equity markets on Friday, amid a backdrop of continued investor trepidation due to developments in the Middle East.
The FTSE 100 index was down 67.73 points, 0.9%, at 7,431.68. The FTSE 250 was down 94.59 points, 0.6%, at 17,118.55, and the AIM All-Share was down 0.56 points, 0.1%, at 683.24.
The Cboe UK 100 was down 1.0% at 741.47, the Cboe UK 250 was down 0.9% at 14,801.87, and the Cboe Small Companies was down 0.4% at 12884.69.
In European equities on Friday, the CAC 40 in Paris was 1.2%, while the DAX 40 in Frankfurt was down 1.3%.
Stocks in New York were called lower. The Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite were all called down 0.3%
Words from Federal Reserve Chair Jerome Powell on Thursday are still fresh in the memory. The Fed chair said inflation is ‘still too high’ despite a recent slowdown.
Additional evidence of ‘persistently above-trend growth,’ or a reversal of the recent decline in job openings and softening of wage growth could cause the Fed to reconsider its current rate pause, he told a conference in New York.
US Treasury yields spiked overnight, with the 10-year only ever-so-slightly below the 5% threshold. It sat at 4.94% around midday in London on Friday.
Some Federal Reserve policymakers have recently hinted that rising yields could tighten financing conditions, taking some pressure off the central bank to lift interest rates again.
The next Federal Reserve decision is on November 1.
The pound was quoted at $1.2126 at midday on Friday in London, down against $1.2149 at the London equities close on Thursday. The euro stood at $1.0587, up against $1.0576. Against the yen, the dollar was trading at JP¥149.93, flat versus JP¥149.92.
UK retail sales were markedly weaker than expected last month, hurt by cost-of-living pressure and unseasonably warm weather, numbers showed.
According to the Office for National Statistics, retail sales volumes declined 1.0% year-on-year in September, easing from a 1.3% decline in August. However, retail sales had been expected to be flat on-year, according to FXStreet-cited consensus.
Retail sales declined 0.9% in September from August, falling short of consensus. A monthly decline of 0.1% was forecast, according to FXStreet. In August, retail sales had fallen 0.4% from July.
Consumer confidence data for October similarly underwhelmed. Morale has plunged in the run-up to the festive season as uncertainties posed by conflict in the Middle East add to accelerating energy, fuel and mortgage costs.
GfK’s long-running consumer confidence index fell nine points to minus 30 in October, taking it back to a level last seen in July last year.
Brent oil was quoted at $93.37 a barrel at midday in London on Friday, from $91.28 late Thursday.
‘Crude oil prices continue to move higher despite the US issuing a temporary six-month licence authorising transactions in Venezuela’s oil and gas sector after the Maduro Government agreed to political reforms,’ SP Angel analysts commented.
Fears over the situation in the Middle East are outweighing the development in Venezuela, SP noted.
US forces in the Middle East are facing increasing threats after a Navy warship shot down missiles appearing to head toward Israel on Thursday.
American bases in Iraq and Syria have also repeatedly been targeted by drone attacks and on Thursday a US official said there had been an attack near Baghdad’s airport, where US forces are hosted.
The official said one projectile was shot down and another struck, but according to early reports no one was injured. It was not clear what type of munition was fired.
In London, airline shares struggled as events in the Middle East continue to unsettle markets. Wizz Air fell 0.4%, while British Airways parent IAG declined 2.1%. Since the Hamas attack in Israel earlier in October, the stocks are down 17% and 11% respectively.
Defence BAE Systems was on the up, however, climbing 1.5%. Peer Rheinmetall was one of the few on Frankfurt’s blue-chip DAX 40 to rise, climbing 0.9%.
Gold was quoted at $1,982.98 an ounce at midday on Friday, up against $1,952.66 late Thursday.
In London, InterContinental Hotels Group fell 1.9%, as a warning on hotel development overshadowed an otherwise positive trading statement.
It said travel demand was ‘very healthy’ in the third-quarter of 2023, with a key performance marker topping pre-pandemic levels once again. The owner of the Holiday Inn and Crowne Plaza hotel brands said its revenue per available room in the third-quarter rose 11% year-on-year.
It included sharp 43% growth in Greater China alone.
‘Travel demand remained very healthy during the quarter, and I would like to thank all our teams for supporting another strong trading period,’ Chief Executive Elie Maalouf said. ‘Greater China continued its excellent rebound with RevPAR now above 2019, which the Americas achieved in the second quarter of last year and EMEAA in the fourth quarter. Group-wide occupancy was 72%, just one percentage point behind 2019 which further confirms the near-complete return to pre‑Covid levels of demand. Pricing remained very robust.’
There was a warning on a tough economic backdrop, however.
Maalouf said: ‘Looking further ahead, whilst there are macro-economic uncertainties and some short-term financing challenges holding back new hotel development, I am excited about the future for IHG and the attractive, long-term demand drivers for our markets.’
Elsewhere in London, ProCook slumped 12%. The pots and pans seller said it remains ‘cautious’ about its full-year outlook, despite feeling ‘well-prepared’ for the pivotal Christmas period.
ProCook said revenue in the second quarter ended October 15 fell 1.8% on-year to £15.7 million. However, revenue was 0.8% higher on a ‘continuing business basis’, excluding Amazon EU, where it discontinued sales last year.
ProCook said: ‘The second quarter results reflect a strong summer sale performance during July and August, aided by considerably more favourable weather year on year. Trading in September and into early October has been markedly softer, with lower footfall and traffic, and customers increasingly seeking out greater value and promotional offers.’
ProCook, which generates around 60% of its full-year sales in the second half of its financial year, said it is ‘well prepared for this peak trading period’.
It added: ‘However, the board remains cautious with regards to [financial 2024] outlook given the highly challenging market conditions which persist, and the current trading volatility and sales trends over recent weeks, with customers seeking more value and taking more time to research before committing to purchase. Whilst forecasting the specific timing and pace of the market recovery is challenging, the board is confident it will recover given the attractive market dynamics. When it does recover, the board believes ProCook is well positioned to deliver improved financial performance and further market share gains given the strength of the brand and operating model.’
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