London close: Stocks weaker ahead of key central bank decisions

London stocks closed in negative territory on Tuesday, unable to hold on to earlier gains amid worries about inflation as investors grew jittery ahead of rate announcements by the US Federal Reserve and the Bank of England.

The FTSE 100 ended the session down 0.25% at 7,187.46, and the FTSE 250 was off 0.6% at 19,045.03.

Sterling was also weaker, last trading down 1.13% on the dollar at $1.1997, and weakening 1.17% against the euro to €1.1522.

“An anaemic and now rapidly disappearing bounce in markets shows us that investors are very cautious about going bargain hunting ahead of tomorrow’s momentous Fed decision,” said IG chief market analyst Chris Beauchamp.

“Not just 75 basis points, but even 100 basis points are being viewed as a possibility on Wednesday evening, as the committee looks to try and steal a march on inflation.

“At the moment it is quite tough to gauge the kind of decision that will keep markets from selling off yet further, and whether hints at more dramatic tightening will counter any optimism if the Fed sticks to 50 basis points.

“But hopes of a summer pause are certainly entirely dashed now.”

A rate announcement from the Fed is due on Wednesday, while the Bank of England will make its policy announcement on Thursday.

Investors were also digesting the latest figures from the Office for National Statistics, which showed the unemployment rate unexpectedly rose in the three months to April for the first time in a year, while vacancies remained at record levels and wages fell at the fastest rate in a decade.

The unemployment rate ticked up to 3.8% from 3.7% in the three months to March and versus expectations for a decline to 3.6%. Still, it remained close to 50-year lows.

It said the number of people on payrolls rose by 90,000 in May to a fresh record high of 29.6m and the number of job vacancies in March to May hit a new record high of 1.3m.

The data also showed that before inflation, total pay including bonuses grew 6.8% in the year to February-April and regular pay excluding bonuses was up 4.2%.

However, real wages adjusted for inflation running at around 9% fell 2.2% on the year - the biggest decline since 2011.

“Today's figures continue to show a mixed picture for the labour market,” said Sam Beckett, ONS head of economic statistics.

“While the number of people in employment is up again in the three months to April, the figure remains below pre-pandemic levels.

“Moreover, although the number of people neither in work nor looking for a job has fallen slightly in the latest period, that remains well up on where it was before Covid-19 struck.”

Elsewhere, thousands more railway workers are to vote on possible industrial action, it was confirmed earlier, further compounding fears the UK is facing a summer of severe travel disruption.

The Transport Salaried Staff Association (TSSA) is to ballot its 6,000 members at Network Rail over pay, conditions and job security.

It said the vote, on both strike action and action short of strike, would open on 20 June and close on 11 July, with strike action able to go ahead from 25 July should a majority of members vote in favour.

The row between TSSA and Network Rail, which manages the UK’s rail infrastructure, is the latest in a series of industrial disputes to hit the railways.

On the energy front, OPEC left its forecasts for world oil demand unchanged, but warned that the global economy was "fraught" with uncertainty.

The cartel, publishing its latest monthly report, forecast world oil demand growth for 2022 would be 3.4m barrels per day (bpd), with demand projected to average 100.29m bpd, unchanged on May’s estimates.

Demand was expected to exceed pre-pandemic levels by 0.09m bpd.

Within that, it revised down its forecast for the second quarter to reflect the lockdowns in China but upgraded expectations for the third, on likely strong demand during the summer holiday and driving season.

"Lower production from Russia was likely to be offset by higher output in other regions like Latin America," it said.

"However, the second half of the year remains highly uncertain due to the geopolitical developments in eastern Europe."

In equity markets, equipment rental firm Ashtead Group fell 4.02% despite saying it had delivered a record full year, with both revenue and profits up following a solid fourth-quarter.

Gene and cell therapy group Oxford Biomedica lost 4.77% even after saying that the US Food and Drug Administration had notified Homology Medicines that the clinical hold on its pheNIX gene therapy trial of HMI-102 in adults with phenylketonuria had been lifted.

PureTech Health stumbled 4.97% after announcing disappointing results from a study into long Covid.

On the upside, banks were among the top gainers, with Standard Chartered rising 3.49%, HSBC ahead 3.48%, Lloyds Banking Group gaining 1.27%, and NatWest Group adding 1.1% amid the prospect of higher interest rates.

Housebuilder Crest Nicholson surged 11.22% after it upgraded its 2022 earnings guidance, while Paragon Banking Group jumped 6.81% after it posted record half-year profits and upgraded its full-year guidance.

Rail and bus operator FirstGroup was 1.43% firmer after it reported higher full-year adjusted operating profits as travel recovered from the Covid pandemic.

Sector peer Go-Ahead Group racked up gains of 16.18% amid the possibility of a takeover battle, as Kelsian said it was still interested in making an offer even after the London-listed transport operator accepted a £647.7m offer from Australian bus firm Kinetic and Spanish infrastructure investor Globalvia Inversiones.

ITV was in the black by 1.69% after the broadcaster said it had agreed to buy a majority interest in Plimsoll Productions, the largest independent producer of natural history programmes in the world, for £103.5m in cash.

Industrial electronics manufacturer DiscoverIE Group rose 3.23% after it reported a 25% improvement in revenue in its preliminary results, to £379.2m, amid record growth in its orders and sales.

The company said its underlying operating profit was 34% firmer in the 12 months ended 31 March, to £41.4m, while its underlying operating margin expanded by 0.7 percentage points to 10.9%.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Abigail Townsend.

Market Movers

FTSE 100 (UKX) 7,187.46 -0.25%
FTSE 250 (MCX) 19,045.03 -0.60%
techMARK (TASX) 4,202.65 -0.31%

FTSE 100 - Risers

Standard Chartered (STAN) 599.60p 3.49%
HSBC Holdings (HSBA) 520.40p 3.48%
Barratt Developments (BDEV) 487.20p 2.42%
Harbour Energy (HBR) 363.40p 2.31%
Taylor Wimpey (TW.) 124.70p 2.09%
Rolls-Royce Holdings (RR.) 87.92p 2.03%
BP (BP.) 434.95p 2.03%
ITV (ITV) 68.52p 1.69%
Whitbread (WTB) 2,566.00p 1.58%
B&M European Value Retail S.A. (DI) (BME) 361.20p 1.52%

FTSE 100 - Fallers

Ocado Group (OCDO) 787.00p -10.57%
Kingfisher (KGF) 234.80p -4.40%
Rentokil Initial (RTO) 452.40p -4.23%
Ashtead Group (AHT) 3,651.00p -4.02%
SSE (SSE) 1,641.50p -3.92%
Auto Trader Group (AUTO) 513.40p -3.68%
Croda International (CRDA) 5,966.00p -3.65%
Intermediate Capital Group (ICP) 1,405.50p -3.34%
Halma (HLMA) 1,936.50p -3.27%
Endeavour Mining (EDV) 1,740.00p -3.23%

FTSE 250 - Risers

Crest Nicholson Holdings (CRST) 283.60p 11.22%
Paragon Banking Group (PAG) 502.00p 6.81%
OSB Group (OSB) 499.60p 4.43%
Beazley (BEZ) 493.40p 4.01%
Bellway (BWY) 2,282.00p 3.30%
Close Brothers Group (CBG) 1,046.00p 3.26%
Discoverie Group (DSCV) 704.00p 3.23%
Tullow Oil (TLW) 54.80p 3.10%
CMC Markets (CMCX) 267.50p 3.08%
Vistry Group (VTY) 896.50p 2.81%

FTSE 250 - Fallers

Centamin (DI) (CEY) 75.78p -6.88%
Spire Healthcare Group (SPI) 212.50p -6.39%
Wood Group (John) (WG.) 195.00p -6.30%
Baltic Classifieds Group (BCG) 133.80p -5.11%
Games Workshop Group (GAW) 6,090.00p -5.07%
Auction Technology Group (ATG) 854.00p -5.01%
PureTech Health (PRTC) 156.80p -4.97%
Aston Martin Lagonda Global Holdings (AML) 514.00p -4.81%
Oxford Biomedica (OXB) 429.50p -4.77%
Future (FUTR) 1,561.00p -4.47%