London midday: Stocks turn positive as banks rally after hawkish Fed

London stocks had moved into the black by midday on Thursday, with banks pacing the advance after the US Federal Reserve struck a hawkish note overnight.

The FTSE 100 was up 0.4% at 7,496.63, reversing earlier losses.

Stocks had opened in the red after US Federal Reserve chair Jerome Powell made it clear on Wednesday that the central bank plans to hike rates in March and indicated that it could raise rates at every meeting, or even consider a 50 basis points increase if the need arose.

However, the FTSE 100 soon turned positive, boosted by a strong performance form the banking sector.

Victoria Scholar, head of investment at Interactive Investor, said: "UK financials are bucking the weakness, trading at the top of the UK index as beneficiaries of the Fed’s tightening path with Standard Chartered, NatWest and Barclays staging gains.

"This week’s price action has been characterised by sharp volatility and wild intraday swings. In this market mood, a lot can change throughout the course of a session with little correlation between where stocks open and close."

Away from the Fed, investors were digesting the latest survey from the Confederation of British Industry, which showed that retail sales slipped below seasonal norms in January as the rapid spread of Omicron hit trade.

According to the latest Distributive Trades Survey, the weighted balance for the volume of sales 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.

Sales grew at an above average pace in the year to January, at 28% compared to 8% last month. But the figure benefited from comparatives with January 2021, when the UK was in lockdown and non-essential retail was shut.

Ben Jones, lead economist at the CBI, said: "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.

"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."

In equity markets, banks rallied, while Diageo gained after the brewer and reported a rise in first-half sales and profits as people quaffed more spirits at home during the Covid pandemic, but warned of persistent headwinds from the virus and supply-chain constraints.

Outsourcer Mitie surged 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 after well-received interim results, while Britvic fizzed higher as the drinks maker reported better-than-expected first-quarter revenues, driven by growth in the GB segment.

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

Low-cost airline easyJet was a touch weaker after saying it halved 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.

In broker note action, HSBC was upgraded to ‘outperform’ at Exane, while Rentokil and Man Group were cut to ‘neutral’ by the same outfit.

Market Movers

FTSE 100 (UKX) 7,503.19 0.45%
FTSE 250 (MCX) 21,739.12 -0.61%
techMARK (TASX) 4,372.71 -0.27%

FTSE 100 - Risers

Standard Chartered (STAN) 546.20p 4.24%
HSBC Holdings (HSBA) 542.50p 3.79%
Barclays (BARC) 207.20p 2.47%
NATWEST GROUP PLC ORD 100P (NWG) 250.10p 2.42%
Admiral Group (ADM) 3,214.00p 2.03%
Lloyds Banking Group (LLOY) 53.06p 1.98%
Rio Tinto (RIO) 5,536.00p 1.88%
National Grid (NG.) 1,091.60p 1.62%
British Land Company (BLND) 548.00p 1.37%
BP (BP.) 399.35p 1.33%

FTSE 100 - Fallers

Intermediate Capital Group (ICP) 1,822.50p -4.38%
Fresnillo (FRES) 657.80p -4.36%
Sage Group (SGE) 684.20p -4.04%
Polymetal International (POLY) 1,111.00p -3.89%
Aveva Group (AVV) 2,751.00p -3.84%
Pershing Square Holdings Ltd NPV (PSH) 2,645.00p -3.29%
B&M European Value Retail S.A. (DI) (BME) 543.80p -3.03%
Spirax-Sarco Engineering (SPX) 12,510.00p -2.99%
London Stock Exchange Group (LSEG) 7,030.00p -2.69%
Halma (HLMA) 2,356.00p -2.68%

FTSE 250 - Risers

Mitie Group (MTO) 63.80p 7.05%
IG Group Holdings (IGG) 870.00p 5.84%
Capricorn Energy (CNE) 212.00p 3.92%
Euromoney Institutional Investor (ERM) 948.00p 3.72%
Rank Group (RNK) 153.80p 3.36%
Playtech (PTEC) 614.50p 2.85%
Tate & Lyle (TATE) 732.00p 2.43%
Quilter (QLT) 133.40p 2.42%
Just Group (JUST) 89.30p 2.41%
Hammerson (HMSO) 38.43p 2.29%

FTSE 250 - Fallers

Dr. Martens (DOCS) 284.60p -11.94%
Man Group (EMG) 192.30p -6.47%
Paragon Banking Group (PAG) 581.50p -5.83%
Victrex plc (VCT) 2,028.00p -5.50%
Baltic Classifieds Group (BCG) 166.50p -4.86%
JPMorgan Japanese Inv Trust (JFJ) 544.00p -4.39%
Hochschild Mining (HOC) 104.20p -4.14%
Airtel Africa (AAF) 142.90p -4.09%
Syncona Limited NPV (SYNC) 178.00p -3.78%
Network International Holdings (NETW) 256.20p -3.65%