London midday: Stocks fall on US interest rate hike worries

Speculation of a rate increase by the US central bank at the 20-21 September policy meeting has grown following a batch of hawkish remarks from policymakers.

Last Friday Boston Fed President Eric Rosengren and Dallas Fed President Robert Kaplan both argued that the case for an interest rate rise has strengthened.

Investors are now looking ahead to a speech by leading dove Lael Brainard later on Monday. The Fed’s Neel Kashkari and Dennis Lockhart are also scheduled to speak. Their remarks come a day ahead of the September policy meeting blackout.

“Should we continue to get a consistent hawkish message from policy makers ahead of the blackout period, we could see the implied probability of a hike in September ramp up considerably which based on the moves since Friday, would be bad news for equity markets,” said Oanda's Craig Erlam.

“Brainard’s comments will be of particular interest as she is the only voter on the FOMC this year.”

Concerns over an interest rate increase hit the commodity sector, sending metal prices lower. Shares in Anglo American, BHP Billiton and Antofagasta declined.

Primark owner Associated British Food was FTSE 100’s biggest faller after posting an ill-received trading update. The company said it anticipated full year earnings to be slightly ahead of last year's, although like-for-sales at Primark are expected to have deteriorated and news of a sizeable pension deficit set off alarm bells with investors.

Lloyds Banking Group was also under pressure amid calls by several top shareholders to put in place a succession plan for chief executive Antonio Horta Osorio.

Going the other way, Astrazeneca rallied after Jefferies upgraded the stock to ‘buy’ from ‘hold’ and lifted the price target to 5,800p from 5,400p. The broker said it sees a much higher probability of success and larger market opportunity from the MYSTIC study than consensus implies. Fellow pharmaceutical stocks Shire and Hikma Pharmaceutical were also in the black.

SABMiller shares gained after Reuters reported that Anheuser-Busch InBev could find itself party to other smaller deals after it seals its £79bn takeover of the company.

Vodafone advanced after a Barron’s report which suggested the telecommunications company’s shares could rise 33% as it benefits from a merger with Liberty Global.

Market Movers

FTSE 100 (UKX) 6,680.14 -1.43%
FTSE 250 (MCX) 17,629.45 -1.48%
techMARK (TASX) 3,429.22 -0.58%

FTSE 100 - Risers

AstraZeneca (AZN) 4,851.00p 0.66%
Reckitt Benckiser Group (RB.) 7,200.00p 0.26%
Vodafone Group (VOD) 221.85p 0.25%
Shire Plc (SHP) 4,708.00p 0.11%
SABMiller (SAB) 4,383.50p 0.00%
United Utilities Group (UU.) 978.50p 0.00%
CRH (CRH) 2,448.00p -0.04%
Sage Group (SGE) 723.50p -0.14%
Hikma Pharmaceuticals (HIK) 2,103.00p -0.24%
Morrison (Wm) Supermarkets (MRW) 192.00p -0.26%

FTSE 100 - Fallers

Associated British Foods (ABF) 2,877.00p -8.84%
Anglo American (AAL) 798.10p -5.73%
BHP Billiton (BLT) 963.60p -5.30%
Royal Bank of Scotland Group (RBS) 198.10p -4.16%
Marks & Spencer Group (MKS) 329.80p -4.02%
Lloyds Banking Group (LLOY) 57.00p -3.89%
Glencore (GLEN) 177.80p -3.81%
Antofagasta (ANTO) 481.40p -3.72%
Barclays (BARC) 168.45p -3.61%
Rio Tinto (RIO) 2,265.50p -3.60%

FTSE 250 - Risers

SVG Capital (SVI) 650.00p 14.74%
HarbourVest Global Private Equity Limited A Shs (HVPE) 960.00p 2.35%
Genus (GNS) 1,871.00p 1.68%
Dechra Pharmaceuticals (DPH) 1,355.00p 1.57%
Euromoney Institutional Investor (ERM) 1,056.00p 1.44%
IP Group (IPO) 184.00p 1.10%
Riverstone Energy Limited (RSE) 1,096.00p 0.92%
Redefine International (RDI) 41.07p 0.88%
JD Sports Fashion (JD.) 1,323.00p 0.84%
Electra Private Equity (ELTA) 3,974.00p 0.79%

FTSE 250 - Fallers

Evraz (EVR) 131.00p -6.09%
Amec Foster Wheeler (AMFW) 547.50p -4.95%
Centamin (DI) (CEY) 144.20p -4.63%
Aldermore Group (ALD) 168.10p -4.38%
Halfords Group (HFD) 347.80p -4.35%
Brown (N.) Group (BWNG) 196.40p -4.20%
Kaz Minerals (KAZ) 181.50p -4.12%
Henderson Group (HGG) 230.50p -4.08%
Tullow Oil (TLW) 221.60p -4.07%
CLS Holdings (CLI) 1,536.00p -3.94%