Josh White Sharecast News

28 Sep, 2023 17:34 28 Sep, 2023 17:34

London close: Stocks mixed as interest rate concerns simmer

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Phoenix Group Holdings

502.00p

15:45 15/11/24

1.46%

7.20p

London stocks finished with a varied performance on Thursday as investors pored over the latest US jobless claims data, with underlying anxieties regarding interest rates still bubbling away.

Household Goods & Home Construction

11,324.30

15:45 15/11/24

-0.77%

-87.44

Real Estate Investment & Services

2,344.34

15:45 15/11/24

-0.44%

-10.31

Travel & Leisure

8,607.27

15:45 15/11/24

-0.29%

-25.35

The FTSE 100 closed up 0.11% at 7,601.85 points, while the FTSE 250 fell 0.67%, ending the trading day at 18,098.68.

On the currency front, sterling was last up 0.65% on the dollar, trading at $1.2214, while its movement against the euro was more subdued, rising 0.01% to change hands at €1.1555.

“There’s been a slightly more positive bias for markets in Europe today, although the FTSE 100 is underperforming a touch, with housebuilders getting hit on the back of a surge in gilt yields across the board,” said CMC Markets chief market analyst Michael Hewson.

“It’s hard to explain why we’re seeing such a sharp rise in UK yields; perhaps the rise in oil prices and the weakness of the pound is prompting concerns about further rate hikes from the Bank of England or higher for longer inflation.

“This seems rather strange given that a rise in oil prices acts in a similar way to a rate hike, sucking demand out of the economy, so to compound that with further hikes would be dumb.”

Hewson said it was more likely that rates would need to stay higher for longer.

“Nonetheless, housebuilders and real estate stocks are bearing the brunt of the rise in yields, with Barratt Developments, Taylor Wimpey and Rightmove the worst performers on the UK benchmark.

“On the flip side, basic resources are helping to limit the underperformance in the UK with gains for Anglo American ... and Rio Tinto.”

Car production and house prices fall, US jobless claims stable

In economic news, fresh industry data showed a decline in UK car production for August, breaking the upward trajectory seen for the last six months.

The Society of Motor Manufacturers and Traders (SMMT) reported a 9.7% drop in production, equating to 45,052 units.

Domestic production took a significant hit, plunging by 25.2%, while export output saw a 5.5% reduction.

On a brighter note, the production of electrified vehicles experienced a modest increase of 2.8%, reaching 16,511 units.

“After six straight months of growth, a decline in UK car output in what is always the smallest and most variable volume month is not a cause for concern,” said Mike Hawes, chief executive of the trade body.

“With manufacturers taking advantage of the summer holiday season to upgrade their plants, this is part of an ongoing commitment to deliver the next generation of electric vehicles.

“To secure future investment, however, we need business certainty, not least a UK-EU agreement to delay tougher rules of origin that would damage the competitiveness of electric vehicles in both the European and British markets.”

In the housing sector, the UK saw its first annual house price reduction since June 2012, with the September House Price Index from Zoopla showing a 0.5% decrease in prices over the last year.

The dip in prices did not occur uniformly; while Scotland saw prices climb by 1.6%, the southeast and east of England experienced a decline of 1.5%.

However, even with the downward pricing trend, buyers' demand surged as inquiries to real estate agents escalated by 12% since the August bank holiday, returning to 2019 levels.

“The housing market continues to adjust to higher borrowing costs,” said Zoopla executive director of research Richard Donnell.

“Mortgage rates have more than doubled since 2021 which, together with increased costs of living, represents a big adjustment for home buyers and the wider housing market.

“The impact on house prices has been small compared to how much buyer power has been hit.”

On the continent, economic sentiment in the eurozone declined in September.

The Sentix economic sentiment gauge reflected a dip to 93.3, a slight decline from August's revised 93.6 figure.

That decline was marginally better than the expected 92.5.

Across the pond, jobless insurance claim numbers in the US remained relatively stable last week.

The Department of Labor revealed that initial unemployment claims saw a minor increase, rising 2,000 to 204,000 for the week of 23 September.

That was below the expected 215,000.

Furthermore, the four-week average declined by 6,250, settling at 211,000.

As for secondary unemployment claims for the week ended 16 September, there was a modest increase of 12,000, hovering around 1.67 million.

Ex-divs a drag while major miners post gains

In equities, Phoenix Group Holdings, British American Tobacco, Barratt Developments, M&G, and Rightmove saw declines as they traded without the dividend entitlement.

Phoenix Group fell 6.72% after announcing noteworthy first-half progress in its interim IFRS financial statements.

The company reported a more-than-twofold surge in its new business long-term cash generation, skyrocketing to £885m.

Gambling operator 888 Holdings plummeted 15.09% after it forecast a third-quarter revenue decline of 10%, anticipating it to touch £400m.

Entain, the parent company of Ladbrokes, also experienced a fall of 3.4%.

Digital9 Infrastructure took a massive hit of 39.53% after the company abandoned its second-quarter dividend after a challenging first half.

In its six-month report to 30 June, Digital9 reported a loss of 6.63p per share, contrasting starkly with earnings of 3.43p in the same period last year.

On the upside, miners Anglo American and Rio Tinto displayed resilience, with both holding onto their initial gains.

By the close, Anglo American was up by 3.62%, while Rio Tinto saw a rise of 2.9%.

Pub and restaurant operator Mitchells & Butlers gained 4.07% after it expressed optimism regarding its full-year earnings, which were expected to lean towards the higher end of predictions.

Finally, defence contractor Babcock International rallied 5.01% after it reaffirmed its full-year expectations, with the firm noting that trading activities since the start of the financial year had been quite "encouraging".

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,601.85 0.11%
FTSE 250 (MCX) 18,098.68 -0.67%
techMARK (TASX) 4,315.20 -0.26%

FTSE 100 - Risers

Smiths Group (SMIN) 1,622.00p 3.31%
Anglo American (AAL) 2,267.00p 3.23%
CRH (CDI) (CRH) 4,624.00p 2.89%
Antofagasta (ANTO) 1,417.50p 2.57%
Rentokil Initial (RTO) 600.00p 2.46%
Rio Tinto (RIO) 5,186.00p 2.21%
InterContinental Hotels Group (IHG) 6,114.00p 1.73%
Glencore (GLEN) 461.00p 1.64%
Diploma (DPLM) 3,002.00p 1.62%
Bunzl (BNZL) 2,908.00p 1.57%