London close: Stocks hit as Fed's Powell sends bond yields higher
An early advance for London stocks faltered in the final hour of trading , despite strong earnings from the likes of Persimmon and a counter bid for Sky from Comcast, as the first congressional testimony from new Federal Reserve Chair Jerome Powell sent government bond yields higher on both sides of the Atlantic.
In his first remarks before the US Congress as the head of the country's central bank, recently-appointed chair Jerome Powell said that "the economic outlook remains strong".
"The robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in U.S. exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment," he said.
Significantly, in response to a question from one of the Congressmen, Powell responded: "My personal outlook for the economy has strengthened since December."
His comments sent the FTSE 100 0.1% lower to 7,282.45, alongside a 0.49% drop in the pound's value against the dollar to 1.3900, although against Europe's single currency it was a tad stronger, adding 0.21% to 1.1364, as yields on Gilts chased those on US Treasuries higher.
Thus, by the closing bell the yield on the benchmark 10-year Gilt was five basis points higher at 1.56%, trailing a six point increase in those on similarly-dated US Treasuries to 2.92%.
Following Powell's testimony, James Knightley at ING revised his call for the number of interest rate hikes expected from the Federal Reserve this year from three to four.
"At the moment the Fed are projecting three rate hikes this year while financial markets are currently pricing in around 80bp of rate hikes. Given our above consensus 3% GDP growth forecast for 2018 and the potential for inflation to rise more quickly than many in the market anticipate (wages, dollar weakness, medical care costs, cell phone data distortions, commodity prices), we are now forecasting four rate rises this year. We look for one every quarter – starting with the March 21 FOMC meeting," he said.
Acting as a backdrop, investors were digesting the latest data from the European Commission, which showed UK economic sentiment dipped in February. The EC's Economic Sentiment Indicator fell to 109.5 from 111.1 in January, dragged down by a decline in confidence in the industrial sector to its lowest level since April.
In corporate news, Sky surged as US cable TV company Comcast made a £22.1bn takeover bid for the broadcaster, outbidding 21st Century Fox.
Standard Chartered edged up after saying it will resume its dividend as it swung to a net profit of $774m for 2017 from a loss of $478m the year before.
Doorstep lender Provident Financial rocketed as investors welcomed the announcement of a smaller-than-expected rights issue, although the company also said it swung to a pre-tax loss in 2017 from a profit the year before.
Housebuilder Persimmon rose sharply as it pledged to pay out double its previously promised surplus cash via bumper dividends over this and the next two years and reported profits growth and encouraging recent sales. Peers Barratt Developments, Berkeley and Taylor Wimpey all gained.
FTSE 250 challenger bank Virgin Money rallied after it reported a 28% increase in underlying full-year profit amid robust customer demand and growth across its core products while Derwent London was up as it proposed a special dividend and said net asset value rose in 2017.
Greggs gained after well-received full-year numbers, while Drax powered ahead as its full-year core earnings beat expectations.
Thread maker Coats Group racked up stellar gains after saying its full-year adjusted operating profit increased 11% to $174m and RBS was just in the black even as the Treasury Select Committee criticised the bank over the rebranding of its Global Restructuring Group.
Insurer Direct Line turned lower despite announcing bumper dividend payments and posting a more than 50% increase in annual operating profit.
Speciality chemical company Croda International declined even as it posted a record full-year profit as sales grew thanks to a strong performance across sectors and regions, while Fresnillo slid as the precious metals miner reported a small jump in full-year profit amid record silver production.
Engineer GKN, which is currently fending off a hostile bid from turnaround specialist Melrose Industries, recovered from an early swoon after posting a 125% jump in full-year reported pre-tax profit.
Market Movers
FTSE 100 (UKX) 7,282.45 -0.10%
FTSE 250 (MCX) 19,860.22 0.16%
techMARK (TASX) 3,327.65 -0.09%
FTSE 100 - Risers
Sky (SKY) 1,328.00p 20.18%
Persimmon (PSN) 2,609.00p 4.86%
Evraz (EVR) 438.00p 2.84%
Ashtead Group (AHT) 2,108.00p 1.84%
Pearson (PSON) 727.00p 1.82%
Shire Plc (SHP) 3,054.00p 1.72%
Barclays (BARC) 212.00p 1.68%
TUI AG Reg Shs (DI) (TUI) 1,553.00p 1.54%
InterContinental Hotels Group (IHG) 4,701.00p 1.21%
Mediclinic International (MDC) 607.20p 1.20%
FTSE 100 - Fallers
Fresnillo (FRES) 1,273.00p -4.43%
Randgold Resources Ltd. (RRS) 5,948.00p -2.33%
Reckitt Benckiser Group (RB.) 5,843.00p -2.29%
Associated British Foods (ABF) 2,664.00p -2.27%
Unilever (ULVR) 3,752.00p -2.07%
British Land Company (BLND) 637.20p -2.00%
Hammerson (HMSO) 456.50p -2.00%
SEGRO (SGRO) 575.20p -1.84%
St James's Place (STJ) 1,124.50p -1.70%
British American Tobacco (BATS) 4,397.50p -1.50%
FTSE 250 - Risers
Provident Financial (PFG) 998.98p 69.89%
Coats Group (COA) 83.00p 11.11%
Sirius Minerals (SXX) 28.50p 6.18%
FirstGroup (FGP) 86.50p 5.49%
Virgin Money Holdings (UK) (VM.) 278.60p 5.33%
IP Group (IPO) 117.60p 5.00%
Dechra Pharmaceuticals (DPH) 2,478.00p 4.21%
Go-Ahead Group (GOG) 1,598.00p 3.97%
Jardine Lloyd Thompson Group (JLT) 1,366.00p 3.80%
Petrofac Ltd. (PFC) 453.60p 3.61%
FTSE 250 - Fallers
Jupiter Fund Management (JUP) 505.40p -4.06%
Moneysupermarket.com Group (MONY) 265.70p -3.73%
Stobart Group Ltd. (STOB) 246.00p -3.53%
Meggitt (MGGT) 451.10p -3.32%
Workspace Group (WKP) 952.00p -3.01%
TBC Bank Group (TBCG) 1,582.00p -2.94%
Capital & Counties Properties (CAPC) 267.90p -2.86%
Acacia Mining (ACA) 139.95p -2.81%
AA (AA.) 73.48p -2.70%
SSP Group (SSPG) 616.50p -2.68%