London midday: Stocks slip after OECD warning, ahead of Fed announcement
London stocks had slipped into the red by midday on Wednesday after the OECD warned the UK is likely take the worst hit from the coronavirus pandemic among developed nations, and as investors awaited the latest policy announcement from the Federal Reserve.
The FTSE 100 was down 0.2% at 6,320.18.
Stocks turned lower after the Organisation for Economic Cooperation and Development said the pandemic has caused the deepest global recession in a century, with the UK set to feel the biggest impact.
It also said Britain should consider an extension of its trade terms with the EU beyond the Brexit transition deadline of December 2020 to reduce uncertainty given the economic disruption caused by Covid-19. The UK economy was already stagnating due to drawn out negotiations over its future relationship with the bloc after voting to leave in a 2016 referendum.
As restrictions begin to ease, the path to global economic recovery remained "highly uncertain and vulnerable to a second wave of infections", the OECD warned in a set of gloomy forecasts.
Britain was set for a 11.5% slump in national income in 2020, compared with a fall of 6.6% in Germany, 11.1% in Spain, 11.3% in Italy and France’s 11.4%.
Investors were also jittery ahead of the Fed’s rate announcement at 1900 BST.
Danske Bank said it does not expect the Fed to make any significant changes to its policy stance despite the very positive jobs report surprise on Friday, although markets have priced out negative rates.
"However, we are looking for two things: whether the Fed changes its forward guidance and whether it puts a number on its monthly QE buying. We think it is too early for the Fed to change its forward guidance at this point just because of one economic data release although we cannot completely rule out the Fed will make it more clear what the conditions for rate hikes are (i.e. announcing a temporary asymmetric operational inflation targeting as discussed in January and February or a revival of the old Evans rule (linking rates to unemployment).
"We think the Fed is satisfied with its unlimited, open-ended and flexible QE programme and does not think it will gain much by announcing a monthly purchasing target. We do not expect the Fed to implement yield curve control."
In equity markets, travel stocks were under the cosh again, with British Airways parent IAG, budget airline easyJet, InterContinental Hotels and cruise operator Carnival all lower, while travel company TUI also lost ground.
Elsewhere, Shaftesbury reversed earlier gains after warning that at least half its rent could go uncollected in the second half as the London West End property company reported a near-8% drop in the value of its portfolio.
On the upside, Lancashire Holdings rallied after saying it has raised around £277m in a placing to take advance of rate rise across the majority of its business lines. The company placed just under 39.6 million new common shares at 700p each, which is a 3.6% discount to the closing share price on Tuesday.
Beazley was also trading higher.
Market Movers
FTSE 100 (UKX) 6,320.18 -0.25%
FTSE 250 (MCX) 17,650.17 -0.59%
techMARK (TASX) 3,790.46 -0.06%
FTSE 100 - Risers
London Stock Exchange Group (LSE) 8,014.00p 2.25%
Severn Trent (SVT) 2,574.00p 2.10%
RSA Insurance Group (RSA) 422.40p 1.81%
British American Tobacco (BATS) 3,076.00p 1.65%
Intertek Group (ITRK) 5,422.00p 1.57%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,910.00p 1.55%
Auto Trader Group (AUTO) 547.40p 1.37%
Hargreaves Lansdown (HL.) 1,663.00p 1.31%
Pennon Group (PNN) 1,130.00p 1.30%
National Grid (NG.) 937.80p 1.27%
FTSE 100 - Fallers
M&G (MNG) 158.35p -6.88%
Melrose Industries (MRO) 124.40p -6.82%
Rolls-Royce Holdings (RR.) 349.00p -5.68%
International Consolidated Airlines Group SA (CDI) (IAG) 293.90p -5.56%
Whitbread (WTB) 2,545.00p -4.07%
Meggitt (MGGT) 316.20p -3.89%
easyJet (EZJ) 823.60p -3.58%
InterContinental Hotels Group (IHG) 4,032.00p -3.54%
Compass Group (CPG) 1,223.00p -3.32%
Carnival (CCL) 1,455.50p -3.06%
FTSE 250 - Risers
Lancashire Holdings Limited (LRE) 800.00p 10.19%
Beazley (BEZ) 432.60p 3.34%
Ferrexpo (FXPO) 197.20p 3.19%
Centamin (DI) (CEY) 155.70p 2.98%
Oxford Instruments (OXIG) 1,334.00p 2.62%
Helios Towers (HTWS) 194.60p 2.42%
Plus500 Ltd (DI) (PLUS) 1,133.50p 2.39%
Dunelm Group (DNLM) 1,178.00p 2.26%
BlackRock Smaller Companies Trust (BRSC) 1,374.00p 2.23%
Avast (AVST) 470.40p 2.08%
FTSE 250 - Fallers
TUI AG Reg Shs (DI) (TUI) 479.80p -8.92%
Cineworld Group (CINE) 88.30p -6.06%
Hammerson (HMSO) 118.00p -5.45%
Wood Group (John) (WG.) 222.40p -5.24%
Signature Aviation (SIG) 233.70p -5.04%
Shaftesbury (SHB) 615.50p -5.02%
Aston Martin Lagonda Global Holdings (AML) 75.05p -5.00%
IWG (IWG) 282.60p -4.53%
SSP Group (SSPG) 300.20p -4.39%
WH Smith (SMWH) 1,250.00p -4.36%