London open: Resources stocks lead slide after hawkish Fed
London stocks fell in early trade on Friday as investors digested a hawkish policy statement from the Federal Reserve, with miners and oil companies under the cosh.
At 0830 GMT, the FTSE 100 was down 0.7% to 7,093.41, while the pound was off 0.3% against the dollar at 1.3023 and 0.1% lower versus the euro at 1.1479.
The Fed left interest rates on hold on Thursday, as expected, while the post-announcement statement was slightly hawkish, suggesting a rate hike next month and more next year.
The Fed left the funds rate unchanged at 2% to 2.25% and said it expects "further gradual increases" in the target range for the funds rate, depending on economic expansion, labour conditions and inflation. Notably, there was no mention in the statement of recent financial market volatility.
"In line with its risk management approach, we look for the Fed to engineer another rate hike this year, followed by three more next year as an insurance policy against the prospect that inflation accelerates faster than forecast," said Oxford Economics.
"Currently, the Fed is blessed with a goldilocks scenario of a strong economy operating at full employment and inflation remaining close to its 2% target. However, the Fed cannot rest on its laurels. Instead it is challenged to maintain this nirvana-like state, as the labour market is near full employment, increasing trade-related supply-chain disruptions are boosting cost pressures, and companies are starting to pass along price increases to consumers."
On the UK macro calendar, third-quarter and monthly GDP, industrial and manufacturing production and the trade balance are all due at 0930 GMT.
On the corporate front, SSE was the biggest loser on the FTSE 100 after the energy firm said late on Thursday that its merger with Npower would be delayed beyond the first quarter of next year as the two parties work together to discuss changes to the terms due to the government's price cap and tough market conditions.
Miners were a drag, with Antofagasta, BHP Billiton, Anglo American and Glencore all on the back foot as metals prices took a hit from the stronger dollar, which was boosted by the hawkish Fed statement.
Oil heavyweights BP and Shell, plus mid-cap producers including Tullow Oil and Premier Oil, were in the red as oil prices continued extended the recent sell-off. Brent crude was down another 0.7% to $70.18 per barrel.
“Oil has entered a grizzly bear market as the effect of Iran sanctions become better understood; critically it seems the impact on supply is far less than feared, in no small part to waivers," said analyst Neil Wilson at Markets.com, noting that crude prices are down around 20% from their October peaks.
Morgan Advanced Materials was in the red even as it said sales for the 10 months to October 2018 were up 7.2% on an organic constant-currency basis, adding that expectations for the full year remained unchanged. For the quarter to October, organic constant-currency sales growth was 6.4% compared to the same period last year.
Residential landlord Grainger fell as it said it had agreed to forward fund and buy a 108 home private rental development in Tottenham Hale, North London for £41m.
On the upside, Informa rallied after exhibitions organiser and business publisher said it remains on track for the full year. With 10 months of the year gone, underlying revenue growth was up 3.9% compared to this time last year, with the combination of the acquired UBM completed on schedule.
Outside the FTSE 350, online electrical goods retailer AO World was weaker as it agreed to buy UK-based online-only mobile phones retailer Mobile Phones Direct in a cash and share deal worth £32.5m.
In broker note action, AA was the standout loser on the FTSE 250 after a downgrade to 'underperform' by Credit Suisse, while Smurfit Kappa was weaker after a downgrade by Goldman Sachs.
Hochschild Mining was lifted 'outperform' at RBC Capital Markets and Inchcape was boosted by an upgrade to 'buy' at HSBC.
FTSE 100 - Risers
Informa (INF) 714.60p 3.24%
Imperial Brands (IMB) 2,718.00p 0.89%
Relx plc (REL) 1,542.00p 0.72%
Unilever (ULVR) 4,106.00p 0.71%
Pearson (PSON) 924.40p 0.70%
Sainsbury (J) (SBRY) 325.95p 0.60%
Admiral Group (ADM) 2,041.00p 0.59%
Morrison (Wm) Supermarkets (MRW) 250.50p 0.58%
Reckitt Benckiser Group (RB.) 6,300.00p 0.57%
Diageo (DGE) 2,716.50p 0.54%
FTSE 100 - Fallers
SSE (SSE) 1,143.00p -3.34%
Antofagasta (ANTO) 795.00p -2.81%
Smurfit Kappa Group (SKG) 2,404.00p -2.51%
Mondi (MNDI) 1,779.83p -2.34%
BHP Billiton (BLT) 1,607.00p -2.23%
Anglo American (AAL) 1,713.00p -2.18%
Glencore (GLEN) 311.55p -2.03%
Burberry Group (BRBY) 1,829.00p -1.90%
Standard Chartered (STAN) 569.10p -1.71%
HSBC Holdings (HSBA) 633.90p -1.60%
FTSE 250 - Risers
Vivo Energy (VVO) 116.00p 8.19%
Inchcape (INCH) 583.00p 2.55%
G4S (GFS) 187.49p 2.01%
Sophos Group (SOPH) 358.80p 1.07%
Greene King (GNK) 501.40p 1.01%
Tate & Lyle (TATE) 699.30p 0.97%
CLS Holdings (CLI) 222.50p 0.91%
Aveva Group (AVV) 2,636.00p 0.69%
Auto Trader Group (AUTO) 443.70p 0.66%
Millennium & Copthorne Hotels (MLC) 463.00p 0.65%
FTSE 250 - Fallers
AA (AA.) 102.00p -5.90%
Premier Oil (PMO) 102.10p -3.41%
Kaz Minerals (KAZ) 524.80p -3.17%
Wizz Air Holdings (WIZZ) 2,809.00p -3.14%
Woodford Patient Capital Trust (WPCT) 84.58p -3.01%
BBA Aviation (BBA) 235.40p -2.65%
Bank of Georgia Group (BGEO) 1,639.80p -2.64%
IMI (IMI) 957.00p -2.40%
Amigo Holdings (AMGO) 246.00p -2.30%
Petrofac Ltd. (PFC) 581.80p -2.28%