London close: Stocks fall on growing expectations of a Fed rate hike

London stocks declined on Thursday as expectations of an interest rate hike by the Federal Reserve this year rose and China trade data came in weaker than expected.

The FTSE 100 ended down 0.66% to 6,977.74 points while the pound rose 0.11% to $1.2217 as a three-day High Court hearing on formal Brexit negotiations began.

Lord Pannick QC, a barrister representing London businesswoman Gina Miller, argued in his opening remarks that the government does not have the legal power to trigger Article 50 without a vote in Parliament.

Meanwhile, oil prices wavered even as data from the Energy Information Administration reported that US crude supplies rose by 4.9 million barrels in the week ended 7 October. Brent crude rose 0.3% to $51.97 per barrel and West Texas Intermediate increased 0.4% to $50.40 per barrel at 1647 BST.

In the US, the minutes of the central bank’s 20-21 September meeting late on Wednesday suggested a December rate hike could be on the cards.

The minutes showed it was a close call to keep rates on hold in September, with policymakers generally of the view that a move higher could happen within months if the economy keeps on track.

Adding to bets of a hike this year, Philadelphia Fed President Patrick Harker on Thursday said the possibility of a rate increase in November should not be written off. Speaking in Dublin, he said he would have been comfortable with a 25 basis point interest rate rise at the September meeting.

He added the central bank will likely have enough data to back-up the need for a rate hike at its December policy meeting.

Harker is not on the voting committee this year but will be in 2017.

In other US news, the Labor Department revealed initial jobless claims remained at a four-decade low of 246,000 last week, compared to forecasts of 253,000.

In China, data showed the trade surplus came to $41.99bn in September, down from $52.05bn in August and compared to forecasts of $53bn.

Exports in dollar terms fell 10% year-on-year in September, far more than the 3.3% decline expected, following a 2.8% dip the previous month. Imports slid 1.9% in September, below estimates for a 0.7% increase and after a 1.5% rise in August.

Mining stocks, including Rio Tinto, BHP Billiton and Anglo American, were on the back foot following the data.

On this side of the Pond, the Royal Institution for Chartered Surveyors said surveyors reported an unexpected increase in house prices in the last three months as demand outstripped supply. The headline balance of firms reporting that house prices have risen over the last three months increased to +17% in September from +13% in August and beating the City consensus, which had predicted a slide to +12%.

The report gave housebuilder stocks a boost, including Persimmon, Taylor Wimpey and Barratt Developments.

Elsewhere, Prudential shares fell as Societe Generale lowered its rating on the stock to ‘sell’ from ‘hold’ and cut its target price to 1,250p from 1,400p.

United Utilities rallied as Societe Generale upgraded the stock to ‘buy’ from ‘hold’, noting that recent share price weakness now implies a total shareholder return of 18%.

Paper and packing group Mondi was lower despite posting a jump in third-quarter underlying operating profit compared to a year ago and saying it expects to benefit from higher selling prices as it moves into 2017.

Unilever took a hit as supermarkets pulled Marmite and several of its other brands from their shelves over a pricing dispute. The company posted forecast-beating underlying sales and a 28.9p dividend amid tough third-quarter conditions.

Tesco was also under the cosh after deciding to pull Marmite from its stores.

Market Movers

FTSE 100 (UKX) 6,977.74 -0.66%
FTSE 250 (MCX) 17,883.48 -0.41%
techMARK (TASX) 3,534.60 -0.03%

FTSE 100 - Risers

United Utilities Group (UU.) 940.50p 2.79%
Intu Properties (INTU) 290.20p 2.44%
British Land Company (BLND) 595.50p 2.32%
Hammerson (HMSO) 564.50p 2.17%
Polymetal International (POLY) 863.00p 2.13%
Barratt Developments (BDEV) 483.20p 1.94%
Severn Trent (SVT) 2,340.00p 1.92%
Persimmon (PSN) 1,723.00p 1.89%
Fresnillo (FRES) 1,666.00p 1.83%
Land Securities Group (LAND) 986.50p 1.81%

FTSE 100 - Fallers

Standard Life (SL.) 331.20p -5.07%
Rio Tinto (RIO) 2,576.00p -4.86%
Anglo American (AAL) 990.60p -4.80%
Prudential (PRU) 1,382.00p -4.66%
BHP Billiton (BLT) 1,184.00p -4.40%
Royal Bank of Scotland Group (RBS) 170.40p -3.67%
Mondi (MNDI) 1,598.00p -3.50%
Unilever (ULVR) 3,596.50p -3.41%
Antofagasta (ANTO) 539.50p -3.05%
Tesco (TSCO) 195.10p -3.03%

FTSE 250 - Risers

Booker Group (BOK) 185.10p 5.41%
Capital & Counties Properties (CAPC) 279.80p 4.68%
Great Portland Estates (GPOR) 613.00p 2.42%
Assura (AGR) 59.75p 2.31%
Savills (SVS) 721.50p 2.20%
G4S (GFS) 235.70p 2.08%
Unite Group (UTG) 602.00p 2.03%
Bellway (BWY) 2,310.00p 1.99%
Acacia Mining (ACA) 466.30p 1.86%
Workspace Group (WKP) 661.50p 1.85%

FTSE 250 - Fallers

Evraz (EVR) 201.00p -7.25%
Brown (N.) Group (BWNG) 187.40p -6.49%
Allied Minds (ALM) 348.10p -5.66%
Vedanta Resources (VED) 614.50p -5.61%
Close Brothers Group (CBG) 1,319.00p -5.04%
IP Group (IPO) 145.00p -4.73%
Riverstone Energy Limited (RSE) 1,158.00p -4.69%
Man Group (EMG) 108.70p -4.65%
Aberdeen Asset Management (ADN) 325.50p -3.70%
International Personal Finance (IPF) 263.60p -3.62%