London open: Stocks steady as investors eye Fed, Capita tumbles on profit warning
London stocks were steady in early trade on Wednesday following heavy losses in the previous session, as investors eyed the latest policy announcement from the Federal Reserve, amid weakness in the housebuilder sector and a profit warning from outsourcer Capita.
At 0825 GMT, the FTSE 100 was flat at 7,585.19, while the pound was down 0.1% against the euro at 1.1398 but up 0.3% against the dollar at 1.4186.
Market participants were mulling over a consumer sentiment survey released overnight.
GfK’s consumer confidence index rose four points to -9 in January, beating expectations for the reading to be unchanged at -13.
Joe Staton, head of market dynamics at GfK, said: “Having survived Christmas, New Year, the January Sales and Blue Monday, bullish Brits report a more upbeat view of their financial prospects for 2018 this month. From expectations for their personal financial situation to the outlook for the UK economy and major purchase index, we are reporting a rebound in levels of optimism across the board after two years of the overall index score sitting at zero or in negative territory."
The main focus on Wednesday will come after the UK market close, when the Fed makes its rate announcement at 1900 GMT. Although the meeting itself isn’t expected to contain many surprises, it will be Janet Yellen’s last as Chair as she passes the baton to Jerome Powell.
CMC Markets analyst Michael Hewson said: “Given that today is likely to be fairly straightforward in the context of the actual announcement with no change expected investors will be looking very closely at the statement and the FOMC’s expectations about the glide path for inflation given the recent tax reform measures, along with the recent announcements of US dollar repatriation, inward investment, bonus payments and pay rises.
“Any indication that the Fed might be thinking in terms of more than two to three rate rises this year could push yields even higher, and that may well prompt the Fed to adopt a cautious tone and not deviate too much from what they said in December.”
Markets are currently pricing in more than 90% probability of another 25 basis point hike at the March meeting.
Housebuilders were the biggest drag in equity markets, with Persimmon, Barratt Developments, Taylor Wimpey and Berkeley Group all firmly in the red following a report in The Times that property developers are set to lose planning permission on unused land if they fail to hit construction targets under moves to kickstart housebuilding.
In company news, Capita tumbled more than 30% after it announced a rights issue for this year, shelved its dividend plans and warned over its 2018 profit.
Tritax Big Box REIT edged lower as it confirmed that it had acquired 11 new ‘big box’ investments in 2017 with an aggregate purchase price of £435m, along with 124 acres of prime London distribution development land for a total consideration of £62.5m.
Gold miner Centamin fell as reported a 13% drop in core profit for 2017 and said gold production declined.
FTSE 250 soft drinks maker Britvic was in the red after it said first-quarter revenue rose 3.3%, although on an organic basis excluding the acquisition of Bela Ischia, it was up a more modest 0.7%. The group also highlighted uncertainty from the introduction of the soft drinks levy.
Budget airline Wizz Air flew lower as its net profit guidance of between €265m and €280m for 2018 fell short of analysts’ expectations.
SSE rallied as it upgraded its estimate for annual earnings and reported progress in delivery of operations and returns from long-term investments.
On the upside, Dairy Crest advanced after saying that revenue in the nine months to the end of December 2017 was “well ahead” of the previous year thanks to a strong performance from its key brands, while Polypipe as it said it has entered into exclusive negotiations to sell its French operations.
Paddy Power was boosted by an upgraded to ‘buy’ at Investec, while Softcat was lifted by an upgrade to ‘hold’ at the same outfit and Informa was higher after an upgrade to ‘buy’ at Panmure Gordon.
Tullow Oil gushed lower after a downgrade to ‘hold’ at Canaccord, while Micro Focus was hit by a downgrade to ‘sell’ at Investec.
SSP was trading lower after being cut to ‘sell’ at Goldman Sachs and Hargreaves Lansdown slipped after a downgrade to ‘underperform’ at Credit Suisse.
Market Movers
FTSE 100 (UKX) 7,585.19 -0.04%
FTSE 250 (MCX) 20,278.87 -0.45%
techMARK (TASX) 3,443.31 -0.09%
FTSE 100 - Risers
Paddy Power Betfair (PPB) 8,265.00p 1.79%
SSE (SSE) 1,312.00p 1.67%
Centrica (CNA) 134.25p 1.44%
Halma (HLMA) 1,292.00p 1.33%
United Utilities Group (UU.) 744.80p 1.28%
Severn Trent (SVT) 1,985.00p 1.20%
Rolls-Royce Holdings (RR.) 869.60p 1.19%
Associated British Foods (ABF) 2,815.00p 1.19%
Ferguson (FERG) 5,520.00p 1.10%
Reckitt Benckiser Group (RB.) 6,953.00p 1.06%
FTSE 100 - Fallers
Persimmon (PSN) 2,514.00p -2.22%
Hargreaves Lansdown (HL.) 1,844.08p -1.78%
Taylor Wimpey (TW.) 191.65p -1.77%
Berkeley Group Holdings (The) (BKG) 3,986.00p -1.63%
Micro Focus International (MCRO) 2,148.00p -1.42%
Rio Tinto (RIO) 3,904.50p -1.33%
Barratt Developments (BDEV) 594.80p -1.00%
Anglo American (AAL) 1,699.80p -0.97%
BHP Billiton (BLT) 1,554.80p -0.96%
Admiral Group (ADM) 1,838.50p -0.94%
FTSE 250 - Risers
Softcat (SCT) 528.00p 1.93%
Ocado Group (OCDO) 500.00p 1.81%
Howden Joinery Group (HWDN) 462.40p 1.63%
RDI Reit (RDI) 34.75p 1.61%
Ted Baker (TED) 3,022.00p 1.34%
ZPG Plc (ZPG) 351.00p 1.33%
Diploma (DPLM) 1,185.00p 1.20%
Pennon Group (PNN) 719.40p 1.07%
TI Fluid Systems (TIFS) 258.00p 1.02%
Dignity (DTY) 870.00p 0.93%
FTSE 250 - Fallers
Babcock International Group (BAB) 679.00p -3.47%
Wizz Air Holdings (WIZZ) 3,460.03p -3.24%
SSP Group (SSPG) 602.00p -2.90%
Kaz Minerals (KAZ) 806.40p -2.25%
Mitie Group (MTO) 176.80p -1.89%
Kier Group (KIE) 1,055.00p -1.86%
Serco Group (SRP) 92.90p -1.85%
TalkTalk Telecom Group (TALK) 128.70p -1.53%
B&M European Value Retail S.A. (DI) (BME) 411.70p -1.51%
IG Group Holdings (IGG) 768.50p -1.35%