London close: Stocks weaker after overnight Fed surprise
London stocks closed in negative territory on Thursday, after the US Federal Reserve signalled that it could hike interest rates earlier than expected.
The FTSE 100 ended the session down 0.44% at 7,153.43, and the FTSE 250 was 0.36% weaker at 22,535.14.
Sterling was in a mixed state, meanwhile, last trading 0.49% weaker against the dollar at $1.3919, while it gained 0.24% on the euro to €1.1687.
“Yesterday’s FOMC meeting served as a rude awakening for the markets, with the presumption that monetary policy would remain accommodative in spite of rising inflation being severely undermined,” said IG senior market analyst Joshua Mahony.
“If a healthy minority of members are willing to raise rates in 2022, it begs the question of exactly how long those same members would wait before they see tapering as being necessary.
“Nonetheless, today’s surprise rise in initial and continuing jobless claims does undermine the increasingly hawkish stance adopted by many Fed members.”
Mahony said that, while GDP forecasts may have been raised by the FOMC, the first jobless claims rise since April did highlight how markets could be in for a “road bump” in the economic recovery.
“For the most part this is likely to be a blip within a positive in jobs.
“However, with markets worrying that strong economic data could push the Fed towards tightening, we are starting to see markets take on a ‘bad news is good news’ approach.”
In economic data out from across the pond earlier in the afternoon, weekly jobless claims in the United States rose for the first time since April last week.
According to the Department of Labor, initial unemployment claims increased by 37,000 over the week ending on 12 June to reach 412,000.
Economists at Barclays had forecast a reading of 350,000.
The four-week moving average however, which smoothes out the variations in the claims figures from one week to the next, slipped by 8,000 to 395,000.
Secondary unemployment claims, which reference the week ending on 5 June, edged up by 1,000 to 3.518m.
“Claims are noisy, even when the trend is clear, and readings around holidays are not reliable,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
“We expect claims to drop back below 400,000 next week, but we don’t expect to see new lows until early July.
"The fundamentals - reopening, and a very tight labor supply picture - then point to further sustained declines.”
Back in Britain, miners were among the losing equities in London as metals prices retreated, with Anglo American down 3.41%, BHP off 3.26%, Antofagasta 2.24% weaker, and Glencore 3.61% lower.
Shares in safety equipment specialist Halma slumped 4.52% after Berenberg said in a note that the stock’s valuation "remains a hurdle".
Dr Martens was also in the red, sliding 11.47% as the iconic boot brand reported a jump in full-year revenue in its first results as a listed company but a drop in profit due to costs associated with the float.
On the upside, banks managed gains, with NatWest up 0.15%, HSBC ahead 0.31%, Barclays rising 0.96%, and Lloyds Banking Group adding 0.53%.
Premier Inn owner Whitbread rallied 1.91% as it maintained guidance despite an extension of the UK government’s lockdown, forecasting strong summer demand in coastal destinations.
Travel and leisure stocks were higher following reports that fully-vaccinated Britons could be exempt from quarantine after an amber list holiday.
British Airways and Iberia parent IAG ascended 1.86%, budget airlines easyJet and Wizz climbed 2.44% and 1%, travel company TUI gained 2.43%, cruise operator Carnival was ahead 0.09%, Upper Crust owner SSP added 0.89%, engine maker Rolls-Royce grew 1.75%, InterContinental Hotels was 1.06% firmer, and WH Smith was 1.91% higher.
EasyJet was also boosted by news of 12 new UK domestic services, as it looked to capitalise on demand for ‘staycations’.
Trainline advanced 5.09% after it posted a 324% jump in first-quarter sales as commuter travel started to recover as Covid-19 lockdowns eased.
FTSE 100 - Risers
BT Group (BT.A) 205.60p 2.70%
Whitbread (WTB) 3,353.00p 1.91%
International Consolidated Airlines Group SA (CDI) (IAG) 200.90p 1.86%
Pershing Square Holdings Ltd NPV (PSH) 2,570.00p 1.78%
Rolls-Royce Holdings (RR.) 111.92p 1.75%
Avast (AVST) 493.50p 1.61%
Associated British Foods (ABF) 2,364.00p 1.46%
Scottish Mortgage Inv Trust (SMT) 1,240.00p 1.35%
InterContinental Hotels Group (IHG) 5,168.00p 1.06%
Sainsbury (J) (SBRY) 259.30p 0.97%
FTSE 100 - Fallers
Halma (HLMA) 2,722.00p -4.52%
Renishaw (RSW) 5,330.00p -3.96%
Glencore (GLEN) 305.60p -3.61%
Anglo American (AAL) 2,862.50p -3.41%
Fresnillo (FRES) 805.20p -3.36%
Polymetal International (POLY) 1,597.00p -3.33%
Evraz (EVR) 604.20p -3.27%
BHP Group (BHP) 2,059.50p -3.26%
3i Group (III) 1,215.50p -3.06%
Intermediate Capital Group (ICP) 2,189.00p -2.66%
FTSE 250 - Risers
Ultra Electronics Holdings (ULE) 2,248.00p 5.73%
Trainline (TRN) 285.00p 5.09%
Morrison (Wm) Supermarkets (MRW) 181.70p 2.89%
easyJet (EZJ) 973.60p 2.44%
TUI AG Reg Shs (DI) (TUI) 405.20p 2.43%
Helios Towers (HTWS) 166.20p 2.41%
Vietnam Enterprise Investments (DI) (VEIL) 680.00p 2.10%
Allianz Technology Trust (ATT) 278.50p 2.00%
Marshalls (MSLH) 685.50p 1.93%
WH Smith (SMWH) 1,763.00p 1.91%
FTSE 250 - Fallers
Dr. Martens (DOCS) 438.20p -11.47%
Centamin (DI) (CEY) 106.00p -5.86%
Tullow Oil (TLW) 61.68p -5.02%
Ferrexpo (FXPO) 421.60p -4.53%
Hochschild Mining (HOC) 164.60p -3.52%
CLS Holdings (CLI) 242.00p -3.39%
Energean (ENOG) 779.50p -2.93%
ICG Enterprise Trust (ICGT) 1,020.00p -2.86%
Victrex plc (VCT) 2,500.00p -2.72%
Cairn Energy (CNE) 164.60p -2.66%