London close: Earnings and ex-divs keep equities in the red

London equities closed in the red on Thursday after a series of disappointing earnings reports, with concerns about potential interest rate hikes dampening market sentiment.

The FTSE 100 lost 0.63% to end the day at 7,879.98, while the FTSE 250 fell 0.8% to close at 19,692.90.

Sentiment was dampened by US Federal Reserve chair Jerome Powell's congressional testimony over the last two days, which raised concerns about the possibility of higher interest rates in the near future.

Sterling strengthened against the US dollar, gaining 0.62% to last trade at $1.1918, while it also gained ground on the euro, rising 0.35% to €1.1272.

“While US markets have managed to make headway this afternoon, ex-dividends, a rising pound and broad-based weakness in a number of sectors have conspired to hold the FTSE 100 back,” said IG chief market analyst Chris Beauchamp.

“Rio Tinto’s ex-dividend status has not helped mining stocks, with others like Antofagasta down in sympathy despite a better showing for commodity prices in general.

“Good results from Informa and Aviva provided some relief, but overall the index continues to trade in the red, the outlier for the day.”

Housing market still in decline, worker shortages abound

In economic news, a survey from the Royal Institution of Chartered Surveyors (RICS) suggested that Britain's housing market was still in decline, but the negative outlook was improving due to lower interest rates and a return of optimism.

The survey showed a net balance of -29%, up from January's -45%, indicating a smaller decline than the previous month, although still the 10th consecutive negative reading.

Sales readings also improved slightly, but the time it was taking to complete a transaction continued to increase, now approaching 19 weeks.

Elsewhere, more than a quarter of UK businesses with more than 10 employees reported worker shortages in February, according to a survey by the Office for National Statistics (ONS).

The figure remained largely unchanged from early January, where 28% reported difficulties.

Hourly wages also increased, with 13% of respondents seeing an increase in January compared to December 2022.

That figure rose to 24% for businesses with more than ten staff.

“This latest snapshot from the ONS will do little to assuage concerns about the tight labour market, and could increase the likelihood that the Bank of England may be forced to raise interest rates further, to stop inflation becoming embedded in the economy,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“Even though the number of vacancies had shown signs of falling at the end of last year, it hasn’t done much to ease the labour crunch.”

Across the pond, US jobless claims unexpectedly rose last week, according to the Department of Labor.

The number of initial unemployment claims increased by 21,000 over the week ending 4 March, reaching 211,000, which was higher than the Dow Jones Newswires' prediction of 195,000.

The four-week moving average also increased by 4,000 to 197,000.

Secondary unemployment claims, which are not filed for the first time, and referencing the week ending 25 February, jumped by 69,000 to reach 1.718,000.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said it was the biggest rise since late November, but added that some of the rise was likely the result of "severe" weather in the upper Midwest and California - which would not last.

“The bigger picture here is that claims remain very low and range-bound,” he noted.

“That said, the latest data from Challenger, released earlier today, show that the number of layoffs announced in January and February was the highest since 2009, and nearly double the pre-Covid trend.

“This will take time to filter through to the claims data, but we expect to see a clear and sustained increase by the spring.”

Indeed, the number of layoffs announced in the US in February was 77,770 according to data from Challenger, Gray and Christmas, marking the highest level since 2009, although it was down 24% from January's figure.

However, year-to-date layoff announcements were running at 180,713, more than quadrupling the same two months in 2022.

Finally on data, Chinese consumer price inflation in February increased by 1%, lower than expected, according to the National Bureau of Statistics.

The increase followed a 2.1% rise in January and was attributed to cooling demand after the Lunar New Year holiday and abundant food supply conditions due to warm weather.

Producer price inflation fell 1.4% on the year, down from January's 0.8% decrease, with analysts predicting a 1.3% drop.

“Despite the release of pent-up demand post the unwind of Beijing’s strict anti-Covid measures, the inflation reading suggests that the economic outlook remains uncertain,” said Victoria Scholar, head of investment at Interactive Investor.

“However, with price pressures under control, this could embolden the authorities to carry out further stimulus as a way to boost demand.”

Earnings season continues to sour sentiment

On London’s equity markets, Endeavour Mining lost 3.96% after announcing a significant slump in full-year profits.

Packaging company DS Smith fell 4.75% despite reporting that third-quarter trading was in line with management expectations.

However, the company also cautioned that customers had been de-stocking.

Rio Tinto Group and Beazley both traded lower, down 4.53% and 3.14%, respectively, as they went without entitlement to the dividend.

Entain and Spirax-Sarco Engineering also fell, with Entain down 4.53% despite reporting a rise in revenues, and Spirax-Sarco sliding 5.05% despite posting an increase in full-year adjusted pre-tax profit.

National Express Group fell 5.61% after a downgrade to 'sell' at Liberum, while Hammerson, Domino's Pizza Group, and Network International Holdings were also weaker after their respective results.

On the upside, M&G rose 0.28% after reporting a second consecutive year of client inflows, despite a significant hit to its bottom line for 2022 due to market volatility.

Informa rallied 2.59% after announcing the acquisition of business-to-business events group Tarsus for $940m alongside its full-year results.

Aviva was up 2.73% after posting a better-than-expected 35% rise in annual operating profit and announcing a £300m share buyback, driven by a rise in life and general policy sales.

Volution Group saw a significant jump, up 14.65%, after reporting positive results.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,879.98 -0.63%
FTSE 250 (MCX) 19,692.90 -0.80%
techMARK (TASX) 4,657.42 0.03%

FTSE 100 - Risers

Aviva (AV.) 462.40p 2.73%
Informa (INF) 697.00p 2.59%
BAE Systems (BA.) 935.20p 2.19%
Frasers Group (FRAS) 784.50p 1.62%
Rentokil Initial (RTO) 532.00p 1.29%
Sage Group (SGE) 770.20p 1.29%
Centrica (CNA) 106.20p 1.00%
Bunzl (BNZL) 2,951.00p 0.92%
B&M European Value Retail S.A. (DI) (BME) 503.20p 0.90%
Schroders (SDR) 479.10p 0.88%

FTSE 100 - Fallers

Spirax-Sarco Engineering (SPX) 11,270.00p -5.05%
Smith (DS) (SMDS) 326.80p -4.75%
Rio Tinto (RIO) 5,690.00p -4.53%
Entain (ENT) 1,329.00p -4.53%
Antofagasta (ANTO) 1,559.50p -4.06%
Endeavour Mining (EDV) 1,624.00p -3.96%
Ocado Group (OCDO) 487.10p -3.43%
British Land Company (BLND) 419.20p -3.32%
Barclays (BARC) 163.42p -3.23%
Beazley (BEZ) 602.00p -3.14%

FTSE 250 - Risers

Volution Group (FAN) 407.00p 14.65%
Close Brothers Group (CBG) 1,080.00p 8.11%
Darktrace (DARK) 277.00p 5.77%
Hill and Smith (HILS) 1,378.00p 4.39%
Tullow Oil (TLW) 32.74p 3.94%
Coats Group (COA) 79.00p 2.86%
Wood Group (John) (WG.) 223.40p 2.57%
Jupiter Fund Management (JUP) 147.60p 2.50%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,225.00p 2.30%
Moonpig Group (MOON) 132.00p 2.25%

FTSE 250 - Fallers

Hammerson (HMSO) 25.94p -11.47%
Domino's Pizza Group (DOM) 260.00p -8.96%
Aston Martin Lagonda Global Holdings (AML) 265.00p -7.02%
Petershill Partners (PHLL) 162.80p -6.76%
National Express Group (NEX) 134.60p -5.61%
BlackRock World Mining Trust (BRWM) 678.00p -5.17%
Carnival (CCL) 774.00p -5.15%
Great Portland Estates (GPE) 529.50p -5.11%
CLS Holdings (CLI) 139.20p -4.92%
Warehouse Reit (WHR) 102.00p -4.49%