Sector movers: Hawkish Fed, French politics trigger bout of risk aversion

Risk aversion picked up on Thursday after policymakers at the US central bank signalled a slower pace of interest rate cuts overnight.

The Federal Reserve signalled that markets should now expect just one rate cut before the end of 2024, instead of the three envisaged by policymakers in March.

However, while it also nudged up its forecast for 2024 PCE inflation, four additional rate cuts were still anticipated for over the course of 2025.

Political uncertainty in France was also on traders' minds, as evidenced by the relatively poor performance of euro area periphery and French sovereign debt, particularly versus US and German bonds and even when compared with similarly-dated UK Gilts.

Combined, those two factors more than offset a surprisingly benign reading on US producer prices during the month of May.

Regarding the latter, IG chief market analyst, Chris Beauchamp, told clients: "It has been a week to forget for Europe. Snap French elections have sent investors scurrying from European stocks, just as those markets began to hit their stride after a decade and more of underperformance versus the US.

"Compared to the prospect of hard-right members sitting in the National Assembly, the UK seems an island of stability, though the FTSE 100 and 250 have not been able to escape the general risk-off move today."

One of the session's strongest performers was telecoms, on news that Mexican billionaire Carlos Slim had taken out a 3.2% stake in BT Group.

Utilities meanwhile played their traditional defensive role.

But the standout gainer was Halma with its shares surging on the back of another set of record full-year profits and sales.

Going the other way, homebuilders' shares were among the weakest areas of the market after Crest Nicholson cut its interim dividend and scaled back its full-year profit guidance.

Exerting a further drag on the sector, RICS's new buyer enquiries gauge fell to -8 in May from -1 in April.

Top performing sectors so far today

Electronic & Electrical Equipment 10,570.22 +3.59%

Telecommunications Service Providers 1,982.31 +0.90%

Personal Care, Drug and Grocery Stores 4,165.30 +0.54%

Gas, Water & Multiutilities 5,611.61 +0.26%

Electricity 10,617.10 +0.24%

Bottom performing sectors so far today

Industrial Transportation 4,078.75 -3.94%

Chemicals 8,259.03 -2.93%

Household Goods & Home Construction 13,809.20 -2.80%

Real Estate Investment & Services 2,267.07 -2.12%

Life Insurance 5,599.55 -2.07%