London close: Stocks mixed amid interest rate concern

London stock markets saw mixed performances by the close on Wednesday, as investors sifted through several corporate news releases as well as the latest US jobs data.

The FTSE 100 managed to edge up by 0.13% to close at 7,929.92, while the FTSE 250 index saw a decline of 0.52% to finish at 19,851.97.

Sterling meanwhile remained stable against the US dollar, remaining unchanged at $1.1830, while it gained 0.05% on the euro, reaching €1.1217.

“Jerome Powell has once again grabbed the limelight, as the Federal Reserve chair sought to limit the losses associated with yesterday’s hawkish comments in Washington,” said IG senior market analyst Joshua Mahony.

“As is often the case, the second day of testimony from Powell provided a chance to fine-tune market expectations after an initial appearance which drew equity bulls back into their shells.

“The recent stutter in US inflation has undoubtedly raised concern amongst equity bulls, although record highs for the FTSE 100 and CAC signal a recent willingness to overlook that risk in Europe.”

Mahony said Powell had done “a good job” of waking up markets to the real risk that rates could end up higher for longer in a bid to drive down inflation.

“While we have seen stocks stabilise somewhat today, the data-dependent nature of the Fed could mean a 50-basis point hike if inflation fails to head lower next week.”

Euro area growth stagnates, US jobs data mixed

Eurozone growth remained stagnant in the fourth quarter of 2022, according to new data released by Eurostat.

The previous estimate of 0.1% growth was revised down to 0.0% quarter-on-quarter, following a strong performance in the third quarter, which saw growth of 0.4%.

The new estimate for the same period in 2021 showed growth of 1.8%, a marginal decrease from the previous estimate of 1.9%.

However, Eurostat data also revealed that employment in the eurozone grew by 0.3% in the final quarter of 2022.

Pantheon Macroeconomics said today's GDP figures would add to the European Central Bank’s conviction of relative economic resilience.

“Eurozone GDP in the fourth quarter still came in better than the -0.2% fall the ECB expected in December, so it does more for ECB hawks’ calls to continue on a steep tightening path than for the doves’ call for prudence," said senior Europe economist Melanie Debono.

“We look for the ECB to raise interest rates by 50-basis points next week, and then again in May, before a 25-basis point hike in June, taking the deposit rate to 3.75% by the middle of the year.”

German industrial production meanwhile exceeded expectations, rising by 3.5% in January compared to the previous month's revised fall of 2.4%, according to data from the federal statistical office.

Forecasts had predicted a rise of between 1.4% and 1.5%.

In the US, job openings declined at the start of 2023, but by less than predicted, with 10.824 million vacancies recorded by the Department of Labor, down 3.6% from the previous month.

Economists had anticipated a more substantial drop to 10.3 million.

The revised figures for December showed an increase in job openings from 11.012 million to 11.234 million.

However, private sector employment in February exceeded expectations according to separate data from ADP, with 242,000 jobs added, versus an anticipated 200,000.

The service sector created 190,000 jobs, while the goods-producing sector saw an increase of 52,000.

“There is a trade-off in the labour market right now,” said Nela Richardson, chief economist at ADP.

“We're seeing robust hiring, which is good for the economy and workers, but pay growth is still quite elevated.

“The modest slowdown in pay increases, on its own, is unlikely to drive down inflation rapidly in the near term.”

In addition, America's trade deficit with the rest of the world widened by 1.6% to -$68.3 billion in January, with economists predicting a deficit of -$69 billion.

Exports increased by 3.4% to $257.5 billion, while imports grew by 3.0% to $325.8 billion.

Mixed equity performance after another earnings dump

On London’s equity markets, Hiscox saw a surge in its stock price, rising by 5.17%, following the announcement of better-than-expected financial results.

The company reported a full-year pre-tax profit of $44.7m, which exceeded expectations as analysts had predicted a loss of $69.2m.

Wealth manager Quilter also saw a rise in its stock price, up 3.35%, after reporting higher-than-expected full-year profits and predicting a recovery in investor sentiment.

Rolls-Royce Holdings saw a modest increase of 2.4% after receiving a "buy" rating from UBS, which nearly doubled its price target.

Despite concerns over the impact of the Covid-19 pandemic on the aviation industry, the bank noted the potential for a rebound in the market, particularly in Asia and China, which could bring valuations back to historical norms.

On the downside, Admiral Group saw a decline of 4.07% following its decision to cut its full-year dividend due to a challenging market environment.

Legal & General Group also faced a drop of 1.62%, despite reporting a jump in full-year operating profit and raising its dividend.

Tullow Oil faced a significant decline of 8.06%, despite announcing that its annual profits had nearly doubled due to higher oil and gas prices.

Hill & Smith reported a rise in underlying profit before tax and earnings per share, but still saw a decline of 6.65%.

Finally, outside of the FTSE 350, Wagamama owner Restaurant Group tumbled by 15.36% after announcing plans to cut its leisure estate by around 30% and reporting widening full-year losses.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,929.92 0.13%
FTSE 250 (MCX) 19,851.97 -0.52%
techMARK (TASX) 4,656.07 -0.24%

FTSE 100 - Risers

Hiscox Limited (DI) (HSX) 1,128.50p 5.17%
Rolls-Royce Holdings (RR.) 156.70p 2.40%
Antofagasta (ANTO) 1,625.50p 2.17%
Smith (DS) (SMDS) 343.10p 2.02%
Glencore (GLEN) 486.85p 1.53%
Smurfit Kappa Group (CDI) (SKG) 3,217.00p 1.39%
Haleon (HLN) 324.15p 1.28%
National Grid (NG.) 1,044.00p 1.26%
NATWEST GROUP (NWG) 292.00p 1.25%
Mondi (MNDI) 1,400.50p 1.23%

FTSE 100 - Fallers

Admiral Group (ADM) 2,003.00p -4.07%
Land Securities Group (LAND) 653.40p -2.42%
British Land Company (BLND) 433.60p -2.41%
St James's Place (STJ) 1,250.00p -2.15%
Schroders (SDR) 474.90p -2.08%
Legal & General Group (LGEN) 261.50p -1.62%
Frasers Group (FRAS) 772.00p -1.53%
Unite Group (UTG) 953.00p -1.50%
SEGRO (SGRO) 797.00p -1.48%
GSK (GSK) 1,422.40p -1.35%

FTSE 250 - Risers

Clarkson (CKN) 3,375.00p 5.80%
Just Group (JUST) 95.30p 4.73%
Quilter (QLT) 91.94p 3.35%
Ibstock (IBST) 167.60p 3.27%
CLS Holdings (CLI) 146.40p 2.38%
Babcock International Group (BAB) 324.20p 2.34%
Baltic Classifieds Group (BCG) 153.20p 2.27%
Spirent Communications (SPT) 183.90p 1.88%
Diversified Energy Company (DEC) 100.20p 1.62%
Helios Towers (HTWS) 106.00p 1.53%

FTSE 250 - Fallers

Tullow Oil (TLW) 31.50p -8.06%
Hill and Smith (HILS) 1,320.00p -6.65%
Bank of Georgia Group (BGEO) 2,760.00p -5.48%
IP Group (IPO) 58.65p -4.79%
Aston Martin Lagonda Global Holdings (AML) 285.00p -4.04%
Urban Logistics Reit (SHED) 138.00p -3.83%
Currys (CURY) 77.70p -3.54%
JTC (JTC) 690.00p -3.50%
Jupiter Fund Management (JUP) 144.00p -3.29%
QinetiQ Group (QQ.) 329.40p -3.17%