London open: FTSE nudges up ahead of Fed announcement; housebuilders rally
London stocks nudged higher in early trade on Wednesday, underpinned by strength in the housebuilding sector, as investors braced for another big rate hike by the US Federal Reserve.
At 0835 BST, the FTSE 100 was up 0.2% at 7,205.10. Meanwhile, sterling fell to its lowest level against the dollar since 1985 ahead of the Fed’s interest rate decision later in the day and the Bank of England’s rate announcement on Thursday.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "All eyes will be on the Federal Reserve’s latest inflation busting move today, as the price spiral continues to cause financial pain for consumers and companies. The US central bank is expected to go big and raise rates by 0.75% for the third time in a row, with some expectations that policymakers may decide to supersize the hike to 1%. There are worries that inflation is becoming dangerously entrenched in the economy, threatening financial stability.
"The Federal Reserve’s decision may be more imminent but investors are also now factoring in big rate rises from the European Central Bank, after president Christine Lagarde’s hawkish comments, warning that even though action has already been front loaded, more hikes will be needed. Bond markets are pricing in a 0.75% jump in the base rate to be voted in by policymakers at the Bank of England on Thursday, with further rises to come by the end of the year.
"The forecast now is for the monetary screws to be tightened much more than investors expected just a few months ago, with inflation staying stubbornly close to double digits, which is set to pile more pressure on the consumer discretionary sector."
On the macro front, figures released earlier by the Office for National Statistics showed that UK government debt hit a fresh record in August. Interest payments rose by £1.5bn on the year to £8.2bn, marking the highest August figure since records began in 1997.
In equity markets, housebuilders were the standout gainers amid reports that Friday’s mini-Budget could include plans to cut stamp duty. Persimmon, Taylor Wimpey, Berkeley Group, Barratt, Redrow, Bellway, Vistry and Crest Nicholson all rallied.
Defence firm BAE Systems shot higher after Russian President Putin announced the partial mobilisation of forces in Russia.
Victoria Scholar, head of investment at Interactive Investor, said: "Russian President Vladimir Putin is mobilising more troops for Ukraine and said the West wants to destroy Russia ahead of announced referendum plans on Ukraine joining Russia in the coming days. His speech sent the Russian rouble lower and oil prices sharply higher amid escalating tensions after a partially successful counterattack by Ukraine."
Aveva was in the black after the software firm agreed to be bought by France’s Schneider Electric in a £9.5bn deal.
On the downside, Flutter Entertainment was knocked lower by a downgrade to ‘neutral’ at Citi.
Games Workshop also lost ground after it reported a year-on-year fall in pre-tax profit for the three months to August 28, in line with expectations.
JD Sports was weaker after saying it had agreed a truce with former CEO Peter Cowgill, including a non-compete and consultancy deal that will see him receive £5.5m in addition to his salary package up to his departure in May and a 12 month notice period.
Market Movers
FTSE 100 (UKX) 7,205.10 0.17%
FTSE 250 (MCX) 18,530.20 0.01%
techMARK (TASX) 4,211.08 0.32%
FTSE 100 - Risers
Persimmon (PSN) 1,397.00p 4.49%
BAE Systems (BA.) 801.20p 3.81%
Barratt Developments (BDEV) 417.90p 3.24%
Taylor Wimpey (TW.) 106.10p 2.96%
Berkeley Group Holdings (The) (BKG) 3,599.00p 2.62%
Glencore (GLEN) 491.95p 2.30%
Aveva Group (AVV) 3,113.00p 2.13%
BP (BP.) 460.60p 1.79%
Harbour Energy (HBR) 479.20p 1.76%
Shell (SHEL) 2,341.00p 1.67%
FTSE 100 - Fallers
Flutter Entertainment (CDI) (FLTR) 9,978.00p -3.22%
International Consolidated Airlines Group SA (CDI) (IAG) 105.50p -2.62%
Entain (ENT) 1,168.50p -2.50%
Smurfit Kappa Group (CDI) (SKG) 2,667.00p -1.73%
Scottish Mortgage Inv Trust (SMT) 804.60p -1.66%
WPP (WPP) 764.00p -1.47%
Smith (DS) (SMDS) 257.50p -1.38%
Prudential (PRU) 940.80p -1.36%
Melrose Industries (MRO) 104.20p -1.33%
F&C Investment Trust (FCIT) 896.00p -1.32%
FTSE 250 - Risers
Bellway (BWY) 1,964.00p 3.26%
Redrow (RDW) 493.20p 3.05%
Tullow Oil (TLW) 47.10p 2.53%
QinetiQ Group (QQ.) 334.20p 2.39%
Babcock International Group (BAB) 322.20p 2.35%
Travis Perkins (TPK) 832.00p 2.29%
Dr. Martens (DOCS) 268.00p 2.21%
Biffa (BIFF) 357.40p 2.11%
Grafton Group Ut (CDI) (GFTU) 712.20p 2.08%
Volution Group (FAN) 307.50p 1.99%
FTSE 250 - Fallers
Games Workshop Group (GAW) 6,610.00p -6.37%
Aston Martin Lagonda Global Holdings (AML) 175.30p -4.55%
Future (FUTR) 1,304.00p -4.54%
Carnival (CCL) 789.40p -3.97%
Bridgepoint Group (Reg S) (BPT) 237.00p -3.50%
TUI AG Reg Shs (DI) (TUI) 134.00p -3.49%
Johnson Matthey (JMAT) 1,917.50p -2.42%
easyJet (EZJ) 345.00p -2.16%
Victrex plc (VCT) 1,630.00p -1.87%
Network International Holdings (NETW) 293.40p -1.81%