London close: Stocks slip ahead of Fed rate decision

London stocks registered slight losses on Tuesday as investors grew jittery ahead of the latest rate decision from the US Federal Reserve scheduled for the next day and after the International Monetary Fund downgraded its UK growth forecast.

The FTSE 100 was down 0.17% at 7,771.70, while the FTSE 250 slipped0.42% to 19.853.45.

"Investor sentiment remains uncertain in Europe, with the FTSE 250 particularly coming under pressure in the wake of an IMF report that forecast the UK to be the only nation they covered to contract in 2023," said IG senior market analyst Josh Mahony.

"The decision to revise the UK growth outlook in favour of a negative figure comes amid warnings of energy-fuelled inflationary pressures, pre-pandemic employment levels, and tight fiscal policies.

"For the UK, the difficulty bringing inflation under control cannot be understated as a concern going forward, with the current 10.5% headline CPI figure standing in stark contrast to the US figure of 6.5%."

The IMF said that UK GDP was set to shrink 0.6% this year, down 0.9 percentage point from October’s forecast and the worst outlook for any G7 country this year.

Elsewhere on the macro front, data out earlier from the Bank of England showed that mortgage approvals fell sharply in December as higher borrowing costs weighed heavily.

According to the latest Money and Credit report, mortgage approvals for house purchases fell to 35,600 in December from 46,200 in November. The lowest since May 2020, when the UK was still in lockdown at the start of the pandemic, it was also well below consensus expectations of 42,500.

Net borrowing of mortgage debt by individuals also decreased, to £3.2bn from £4.3bn, while the effective interest rates - the actual rate paid - on newly-drawn mortgages increased 32 basis points to 3.67%.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "House purchase mortgages continue fall sharply, despite more lenders returning to the market after they ran scared in the immediate aftermath of the mini-budget.

"Don’t forget, however, that mortgage applications can take many months to go through, and the lending in December will have been based on mortgage offers three months ago, largely before the mini-budget. We expect the effective interest rate on new mortgages to soar in January, three months on from the peak in quoted rates."

In equity markets, Pets at Home surged as it lifted its full-year profit guidance following record third-quarter consumer revenues. The pet retailer now expects FY23 group underlying pre-tax profit to be towards the upper end of the consensus range of £126m to £136m, up from previous guidance of around £131m.

Irn-Bru and Rubicon maker AG Barr was also a high riser after saying it was set to deliver full-year profit "slightly ahead" of current market expectations following a strong second-half sales performance.

In broker note action, drinks company Diageo was a standout gainer after an upgrade to 'buy' at Investec, while caterer Compass Group was boosted by an upgrade to ‘buy’ at HSBC. JD Wetherspoon was knocked lower by a downgrade to ‘hold’ at HSBC.

Market Movers

FTSE 100 (UKX) 7,771.70 -0.17%
FTSE 250 (MCX) 19,853.45 -0.42%
techMARK (TASX) 4,465.95 0.15%

FTSE 100 - Risers

Johnson Matthey (JMAT) 2,256.00p 4.06%
Diageo (DGE) 3,520.00p 3.21%
Compass Group (CPG) 1,931.00p 1.29%
Haleon (HLN) 324.25p 1.08%
Coca-Cola HBC AG (CDI) (CCH) 1,958.50p 1.03%
British American Tobacco (BATS) 3,096.00p 0.95%
Auto Trader Group (AUTO) 626.20p 0.93%
Unilever (ULVR) 4,125.50p 0.90%
Phoenix Group Holdings (PHNX) 640.80p 0.88%
Abrdn (ABDN) 212.60p 0.81%

FTSE 100 - Fallers

Ocado Group (OCDO) 649.60p -5.33%
Rolls-Royce Holdings (RR.) 105.74p -3.10%
BT Group (BT.A) 124.65p -2.62%
M&G (MNG) 202.80p -2.46%
Weir Group (WEIR) 1,784.50p -2.28%
Fresnillo (FRES) 821.40p -1.79%
United Utilities Group (UU.) 1,058.00p -1.76%
Smiths Group (SMIN) 1,727.00p -1.65%
Anglo American (AAL) 3,466.50p -1.53%
Rentokil Initial (RTO) 490.70p -1.51%

FTSE 250 - Risers

Pets at Home Group (PETS) 352.40p 6.34%
Barr (A.G.) (BAG) 550.00p 4.36%
QinetiQ Group (QQ.) 362.80p 4.13%
FDM Group (Holdings) (FDM) 785.00p 3.29%
Oxford Instruments (OXIG) 2,345.00p 2.85%
Drax Group (DRX) 646.00p 2.70%
Crest Nicholson Holdings (CRST) 243.00p 2.44%
Moonpig Group (MOON) 120.50p 2.38%
Moneysupermarket.com Group (MONY) 238.80p 2.31%
Hunting (HTG) 348.50p 2.20%

FTSE 250 - Fallers

Hochschild Mining (HOC) 68.35p -13.81%
Helios Towers (HTWS) 107.00p -7.60%
Serco Group (SRP) 145.90p -4.64%
Darktrace (DARK) 210.20p -4.45%
TP Icap Group (TCAP) 176.60p -4.33%
Balanced Commercial Property Trust Limited (BCPT) 79.40p -3.99%
888 Holdings (DI) (888) 71.95p -3.87%
Jupiter Fund Management (JUP) 140.00p -3.78%
IntegraFin Holding (IHP) 312.80p -3.75%
UK Commercial Property Reit Limited (UKCM) 58.10p -3.18%