London open: Stocks slide after US selloff; BoE eyed
By Michele Maatouk
Date: Thursday 19 Dec 2024
(Sharecast News) - London stocks tumbled in early trade on Thursday following sharp losses on Wall Street after the Federal Reserve spooked markets with its rate outlook, and as investors eyed the latest policy announcement from the Bank of England.
At 0830 GMT, the FTSE 100 was down 1.1% at 8,106.17.
On Wednesday, the Fed cut interest rates by 25 basis points, as widely expected. However, it also signalled there would be just two rate cuts next year, down from a previous forecast of four.
Kathleen Brooks, research director at XTB, said: "The Federal Reserve may have cut rates on Wednesday, but the market thinks it could be a while before they cut again.
"The expectation was for a cut and then a pragmatic pause in the Fed's rate cutting cycle, however, what the Fed delivered was a hawkish cut, which raises the possibility that the next move by the Fed may not be a rate cut."
The shift in expectations weighed heavily on US markets, with the Dow tumbling 2.6%, while the S&P 500 and the Nasdaq ended down 3% and 3.6%, respectively.
On home shores, the BoE is due to make its policy announcement at midday, with interest rates expected to be left unchanged at 4.75%.
Brooks said there had been a "troika of bad economic news" for the UK in the past week.
"Firstly, GDP fell for October, secondly, wage growth shot higher and thirdly, inflation is also moving in the wrong direction. Annual headline inflation rose to 2.6% from 2.3% in November, which was mostly down to expected base effects. Service price inflation remained steady at 5% YoY; however, this is still far too high for the BOE to be comfortable with. Pay growth is another concern. Private sector pay growth was 5.4% YoY in October, which suggests that the consumer could thwart the BOE's efforts to bring inflation back to the 2% target rate.
"Growth undershot the BOE's expected rate, while inflation overshot the BOE's forecast for November, thus recent data has complicated the path for the BOE in the coming months. The market has recalibrated UK rate cut expectations this week and have removed one full rate cut for next year. The BOE is still expected to cut rates by 25bps in February."
In equity markets, water companies were the top performers on the FTSE 100 after regulator Ofwat announced its final determination for the five-year period to 2030, saying that average bills would increase by 36% in England and Wales, the equivalent of around £31 per year.
The amount is higher than the 21% Ofwat initially proposed but below the water companies' request for an average rise of 40%.
United Utilities gained after Ofwat allowed the company to increase bills by 32%, less than the 36% it requested. Severn Trent was also higher as the regulator said it could lift bills by 47%.
Serco rallied as it said underlying operating profit rose 9% on the year to £270m in 2024 and upgraded its cash and net debt guidance.
On the downside, Scottish Mortgage Investment Trust, Barclays, Entain and Ashtead - all of which have large exposure to the US - slumped.
British American Tobacco was in the red as it traded without entitlement to the dividend.
Market Movers
FTSE 100 (UKX) 8,106.17 -1.13%
FTSE 250 (MCX) 20,377.20 -1.09%
techMARK (TASX) 4,612.40 -0.89%
FTSE 100 - Risers
Severn Trent (SVT) 2,581.00p 1.22%
United Utilities Group (UU.) 1,065.00p 0.14%
RELX FINANCE BV 3.375% GTD NTS 20/03/33 (BW73) 99.72p 0.00%
Imperial Brands (IMB) 2,557.00p -0.04%
Reckitt Benckiser Group (RKT) 4,815.00p -0.17%
Vodafone Group (VOD) 67.06p -0.27%
Unilever (ULVR) 4,595.00p -0.28%
Hikma Pharmaceuticals (HIK) 1,921.00p -0.36%
Shell (SHEL) 2,409.50p -0.39%
Frasers Group (FRAS) 607.50p -0.41%
FTSE 100 - Fallers
Scottish Mortgage Inv Trust (SMT) 927.40p -3.09%
CRH (CDI) (CRH) 7,448.00p -3.07%
Barclays (BARC) 258.85p -3.07%
Smith (DS) (SMDS) 529.00p -2.76%
3i Group (III) 3,536.00p -2.64%
Experian (EXPN) 3,515.00p -2.60%
Entain (ENT) 714.00p -2.46%
easyJet (EZJ) 567.20p -2.38%
Flutter Entertainment (DI) (FLTR) 21,050.00p -2.37%
Intermediate Capital Group (ICG) 2,084.00p -2.34%
FTSE 250 - Risers
Serco Group (SRP) 144.50p 4.18%
Vesuvius (VSVS) 430.00p 2.38%
Raspberry PI Holdings (RPI) 521.75p 2.30%
Jupiter Fund Management (JUP) 87.80p 2.09%
Currys (CURY) 94.80p 1.94%
HICL Infrastructure (HICL) 115.40p 1.58%
Wood Group (John) (WG.) 65.70p 0.77%
Spirent Communications (SPT) 180.00p 0.56%
Pennon Group (PNN) 588.50p 0.51%
Syncona Limited NPV (SYNC) 101.80p 0.20%
FTSE 250 - Fallers
Wizz Air Holdings (WIZZ) 1,436.00p -4.39%
Moonpig Group (MOON) 216.50p -4.20%
Carnival (CCL) 1,781.00p -4.14%
Allianz Technology Trust (ATT) 411.00p -3.29%
TBC Bank Group (TBCG) 3,045.00p -3.03%
Polar Capital Technology Trust (PCT) 340.00p -2.86%
Hilton Food Group (HFG) 886.00p -2.74%
Indivior (INDV) 920.00p -2.70%
Edinburgh Worldwide Inv Trust (EWI) 189.00p -2.68%
Monks Inv Trust (MNKS) 1,252.00p -2.64%
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