London close: Stocks mixed after 'contradictory' US Fed

London stocks were in a mixed state at the close on Thursday, with banks pacing the top-flight index’s advance, after the US Federal Reserve struck a hawkish note overnight.

The FTSE 100 ended the session up 1.13% at 7,554.31, and the FTSE 250 was 0.09% weaker at 21,854.57.

Sterling was also going in different directions, last trading 0.58% weaker against the dollar at $1.3385, while it gained 0.28% on the euro to €1.2012.

“This week has seen morning optimism from European markets replaced by broader pessimism once US markets have begun trading,” said IG chief market analyst Chris Beauchamp.

“While a more guardedly-positive tone prevails than was the case in the wake of the Fed, this market does not yet look like it wants to rebound.”

The Fed was the catalyst for the day’s sentiment, after the central bank sprung no immediate surprises on investors overnight following its two-day policy meeting.

In his post-meeting comments, chairman Jerome Powell was overly cautious in his responses to journalists, leaving all of the Fed’s policy options open.

According to Powell, no decisions had been taken regarding the exact path for interest rates, with the chair adding that while the Fed would be guided by data, the risks were seen as two-sided.

"We will need to be nimble so that we can respond to the full range of plausible outcomes," Powell said.

"We will remain attentive to risks, including the risk that high inflation is more persistent than expected, and are prepared to respond as appropriate."

Chris Beauchamp at IG said the “surprisingly hawkish “tone from Powell sent shockwaves through markets overnight, as those that had bought following the statement were then blindsided by the “rather contradictory atmosphere” at the press conference.

“While some of the post-Fed selloff has been recouped, and markets are attempting to make headway, it is clear that this new hawkish Fed is still providing cause for volatility and sector rotation.”

Staying stateside, initial jobless claims fell for the first time in four weeks in the seven days ended 22 January, slipping 260,000 from the prior week's upwardly revised print of 290,000, according to the Labor Department.

The decline, which came after jobless claims hit a three-month high a week earlier, seemingly implies that some of the Covid-19 Omicron variant-related disruptions that had been weighing on the labour market's recovery may be fading.

Continuing claims for the week ended 15 January came to 1.67m, versus estimates for a print of 1.65m and the previous week's downwardly revised reading of 1.62m, while the four-week moving average of jobless claims came to 247,000, an increase of 15,000 week-on-week.

On home shores, UK retail sales slipped below seasonal norms in January according to an industry survey released earlier, as the rapid spread of Omicron hit trade.

According to the latest Distributive Trades Survey from the Confederation of British Industry, the weighted balance for the volume of sales expected at this time of the year was -23% in January, the weakest reading since March 2021 and down sharply on December’s balance of -2%.

A net balance of -17% expected sales to remain below seasonal norms in February too.

“It was not surprising that retail sales dropped back below seasonal normal in January, given the spread of Omicron, the reintroduction of restrictions late last year and increased consumer caution,” said Ben Jones, lead economist at the CBI.

“Even as cases fall and restrictions are rowed back, retailers will be looking to the year ahead with a degree of concern.

“The sector faces an inflation double whammy, as rising energy and transport costs erode households’ spending power and retailers’ own costs continue to mount.”

Finally on data, UK car production fell to its lowest level since 1956 last year, according to the Society of Motor Manufacturers and Traders, with just under 860,000 new cars leaving British factories in 2021.

Production was 6.7% lower than in 2020, when the first wave of Covid and associated lockdowns forced several factories to shutter, and a full 34% below its pre-pandemic level.

The drop in production was principally due to a global microchip shortage and disruptions caused by the ongoing Covid-19 pandemic.

Electric and hybrid car production rose almost 30% and made up nearly a quarter of all cars built in the year, while van production was also strong, with output recovering to just 3% shy of its pre-pandemic level.

In equity markets, banks rallied, while Diageo gained 2.5% after the distiller reported a rise in first-half sales and profits as people quaffed more spirits at home during the Covid pandemic.

The Don Julio tequila maker did warn of persistent headwinds from the virus and supply-chain constraints, however.

Outsourcer Mitie Group jumped 7.21% after it lifted its annual profit guidance again as it highlighted higher-than-expected revenue from Covid-related contracts in the third quarter.

Online trading platform IG Group rose 2.86% after well-received interim results, while Britvic effervesced 2.54% higher after the drinks maker reported better-than-expected first-quarter revenues, driven by growth in the GB segment.

Low-cost airline easyJet reversed earlier losses to manage gains of 0.06%, after it reported a halving of first-quarter losses as Covid-19 travel restrictions were eased, and reported a step-up in bookings after the UK government lifted pre-departure testing requirements.

Hammerson rallied 4.79% after it upgraded its adjusted earnings expectations, while casino and bingo operator Rank Group advanced 6.18% after it swung to a first-half profit and tipped a recovery in trade with most pandemic curbs lifted.

Euromoney Institutional Investor rose 2.41% after it posted a jump in first-quarter revenue and announced the acquisition of Boardroom Insiders, a provider of people intelligence to technology companies and professional services, for $25m in cash.

On the downside, iconic boot maker Dr. Martens tumbled 9.03% after it reported a slowdown in third-quarter sales growth and a significant drop in sales across the Asia-Pacific region

Fresnillo was down 7.47%, falling for the second day running after RBC Capital Markets downgraded the precious metals miner to ‘sector perform’ from ‘outperform’ and slashed the price target to 575p from 1,025p.

The bank said Fresnillo’s fourth quarter was modestly better than it expected, but lower guidance on operational challenges - especially at Saucito - drove its 2022 financial year silver production estimate down 22.8%.

“This sees RBCe EBITDA fall by 49%,” RBC said, adding that: “free cash flow falls around $500m to -$21m.”

Premier Inn owner Whitbread was off 1.38% after it announced the appointment of Hemant Patel as chief financial officer from 21 March, as Nicholas Cadbury departed for British Airways owner IAG.

Paragon Banking Group lost 6.8% and Victrex closed down 6.24%, as both stocks traded without entitlement to the dividend.

In broker note action, HSBC closed up 2.98% after an upgrade to ‘outperform’ at Exane, while Rentokil Initial was ahead 0.55% and Man Group slid 8.46%, after both were cut to ‘neutral’ by the same outfit.

Market Movers

FTSE 100 (UKX) 7,554.31 1.13%
FTSE 250 (MCX) 21,854.57 -0.08%
techMARK (TASX) 4,429.51 1.03%

FTSE 100 - Risers

Standard Chartered (STAN) 546.20p 4.24%
AstraZeneca (AZN) 8,862.00p 4.19%
Ocado Group (OCDO) 1,560.00p 3.41%
Ashtead Group (AHT) 5,224.00p 3.40%
Smith (DS) (SMDS) 377.20p 3.12%
Evraz (EVR) 509.80p 3.09%
GlaxoSmithKline (GSK) 1,681.00p 3.02%
HSBC Holdings (HSBA) 538.30p 2.98%
Dechra Pharmaceuticals (DPH) 4,080.00p 2.67%
Diageo (DGE) 3,735.50p 2.50%

FTSE 100 - Fallers

Fresnillo (FRES) 636.40p -7.47%
Polymetal International (POLY) 1,094.50p -5.32%
London Stock Exchange Group (LSEG) 6,958.00p -3.68%
Scottish Mortgage Inv Trust (SMT) 1,045.50p -2.97%
InterContinental Hotels Group (IHG) 4,751.00p -1.98%
Rolls-Royce Holdings (RR.) 115.50p -1.85%
Intermediate Capital Group (ICP) 1,872.50p -1.76%
Sage Group (SGE) 701.00p -1.68%
Antofagasta (ANTO) 1,391.50p -1.42%
Whitbread (WTB) 2,988.00p -1.38%

FTSE 250 - Risers

Darktrace (DARK) 388.00p 8.20%
Mitie Group (MTO) 63.90p 7.21%
Rank Group (RNK) 158.00p 6.18%
Hammerson (HMSO) 39.37p 4.79%
Quilter (QLT) 135.65p 4.15%
Ferrexpo (FXPO) 244.00p 4.10%
PZ Cussons (PZC) 194.00p 3.52%
Contour Global (GLO) 189.80p 3.14%
Provident Financial (PFG) 336.80p 3.06%
IG Group Holdings (IGG) 848.00p 2.86%

FTSE 250 - Fallers

Hipgnosis Songs Fund Limited C Shs NPV (SONC) 112.50p -100.00%
Dr. Martens (DOCS) 294.00p -9.03%
Man Group (EMG) 188.20p -8.46%
Paragon Banking Group (PAG) 575.50p -6.80%
Victrex plc (VCT) 2,012.00p -6.24%
Hochschild Mining (HOC) 102.80p -5.43%
Baltic Classifieds Group (BCG) 166.00p -5.14%
JPMorgan Japanese Inv Trust (JFJ) 545.00p -4.22%
Baillie Gifford US Growth Trust (USA) 225.00p -4.05%
3i Infrastructure (3IN) 332.00p -3.35%