Hawkish comments by central bankers attending the IMF and World Bank spring meetings sent share sliding around the world, while the dollar was on the rise on Friday.
The US Federal Reserve may opt to hike interest rates by larger-than-normal half a percentage point at its policy meeting next month in a bid to battle record US inflation, Chair Jerome Powell said Thursday.
‘It is appropriate, in my view, to be moving a little more quickly. And I also think there's something in the idea of front-end loading whatever accommodation one thinks is appropriate,’ Powell said during a debate on the global economy hosted by the International Monetary Fund on the sidelines of its spring meetings.
He noted a 50 basis points will be ‘on the table’ for the May meeting.
‘Overall the message from central bankers appeared to be that hikes are required regardless of the state of the real economy,’ analysts at Rabobank said. ‘Meanwhile they also appear to be willing to be less and less constrained by both their calendar [and the] size of previous rate hikes.’
The FTSE 100 index was down 33.66 points, or 0.4%, at 7,594.05 early Friday. The mid-cap FTSE 250 index was down 96.97 points, or 0.5%, at 21,062.71. The AIM All-Share index was down 5.80 points, or 0.6%, at 1,052.82.
The Cboe UK 100 index was down 0.5% at 755.83. The Cboe 250 was down 0.5% at 18,607.60, and the Cboe Small Companies down 0.1% at 15,431.94.
In mainland Europe, the CAC 40 in Paris was down 1.6% while the DAX 40 in Frankfurt was 1.3% lower early Friday.
The dollar was mostly higher early Friday due to the hawkish tone from the US central bank. Sterling was quoted at $1.2921, lower than $1.3040 at the London equities close on Thursday. The euro traded at $1.0815 early Friday, down against $1.0852 late Thursday.
Adding further pressure to sterling, UK March retail sales volumes dropped by 1.4% from the month before, worsening from February's revised 0.5% fall and missing market expectations. According to FXStreet, market consensus had tipped for just a 0.3% month-on-month fall in March.
The Office for National Statistics said the largest contribution to the fall came from non-store - meaning online - retailing, where sales volumes fell by 7.9% over the month following a fall of 6.9% in February.
Despite March's woeful performance, sales volumes were 20% above their pre-coronavirus February 2020 levels.
In London, variety goods store chain B&M European Value Retail was stuck to the bottom of the FTSE 100, after long-time Chief Executive Simon Arora announced he is stepping down next year.
B&M was down 5.2%.
Chair Peter Bamford has begun planning for Arora's successor, who has led the firm for 17 years, and who plans to retire in 12 months.
Simon Arora's brother, Bobby Arora, will remain with the company in his current role, as group trading director.
Anglo American was down 2.4% after RBC cut the mining giant to 'sector perform' from 'outperform'. On Thursday, Anglo downgraded its full-year production guidance for its major commodities and indicated that its first-quarter performance was ‘challenging’. The stock had lost 8.8% on Thursday, the worst FTSE 100 faller.
Housebuilder Berkeley was 3.2% higher after Jefferies upped the stock to 'buy' from 'hold'.
In the midcaps, Ferrexpo advanced 4.0%. The Ukraine-focused iron ore pellet producer said its production in 2021 - so before the Russian invasion of Ukraine - was flat, but its revenue saw a boost from higher prices.
Ferrexpo recorded a pretax profit of $1.07 billion, rising from $747.9 million in 2020.
Revenue rose to $2.52 billion from $1.70 billion.
Pellet production was flat at 11.2 million tonnes, while its sales volume dropped 6% to 11.4 million tonnes from 12.1 million tonnes.
Ferrexpo pointed out, however, that average Platts CFR 62% iron ore fines price rose to $160 per tonne from $109 per tonne in 2020. For higher grade iron, prices increased to $186 per tonne from $122.
Chief Executive Jim North said: ‘The events of early 2022 have changed Ukraine significantly, but our business model and our resolve remains unchanged. We continue to produce high grade iron ore pellets, and we are continuing to invest in growing our business for the future, which will help further support the Ukrainian economy to rebuild.’
On the other side of the war divide, Russian gold miner Petropavlovsk said its first-quarter production has increased, despite the fallout from the war in Ukraine, but it has seen sales fall as it looks for new buyers - after its main customer was placed on a European sanctions list.
It raced 35% higher at the open.
In the March-quarter, total gold production increased 8% on the year before to 103,000 ounces. Own-mined gold production dropped 3% to 82,400 ounces, owing to lower production at the Albyn and Malomir mines, but third-party concentrate gold production increased 73% to 22,800 ounces.
Total gold sales dropped to 89,800 ounces from 95,600 ounces, but the average realised gold price in the quarter improved to $1,871 per ounces from $1,789.
The Russian gold miner - which has been dumped from the FTSE 250 since the start of the war in Ukraine - said, at the moment, there are no direct sanctions on the company or any of its subsidiaries. It did, however, note it is prohibited from selling gold to Gazprombank, a lender to Petropavlovsk which had acted as the main off-taker for the company's production
‘The group continues to explore options for the sale of its gold, including to other potential buyers, and has applied for a new licence to export gold,’ it added.
Homeserve jumped to an 11% gain in early trading following an update late Thursday that it has entered talks with Brookfield Infrastructure over a potential takeover offer.
The home repairs and improvements noted it has received a number of proposals from Brookfield since the end of March.
‘The board has carefully considered the proposals, which are subject to a number of conditions,’ it explained.
Brookfield now has until May 19 to make firm offer, which was extended from Thursday as the pair enter discussions.
In Asia on Friday, the Japanese Nikkei 225 index closed down 1.6%. In China, the Shanghai Composite closed up 0.2%, while the Hang Seng index in Hong Kong was 0.4% lower in late trade. The S&P/ASX 200 in Sydney ended down 1.6%.
Japan's core consumer prices rose at the fastest rate in over two years in March, reflecting the soaring cost of energy and other products, official data showed Friday.
The core consumer price index, which excludes fresh food, edged up 0.8% year-on-year, in line with market expectations.
The index has marked increases for seven straight months, reflecting pandemic distortions including supply chain issues and, more recently, the effects of the war in Ukraine.
Japan also saw the sharpest rise in private sector output for four months, as the flash composite purchasing managers' index rose to 50.9 points in April, up from March's final figure of 50.3, according to Friday's preliminary figures from au Jibun Bank.
Activity in services companies increased for the first time since December, as output from manufacturers grew for the second month in a row.
Against the yen, the dollar was quoted at JP¥127.97, down from JP¥128.45.
Gold was quoted at $1,953.60 an ounce early Friday, higher than $1,945.88 on Thursday evening. Brent oil was trading at $107.37 a barrel, down from $108.22 late Thursday.
The economic events calendar on Friday has PMI readings from the eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST.
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