London close: Stocks mixed as Fed enthusiasm fades away
By Josh White
Date: Thursday 01 Dec 2022
(Sharecast News) - London stocks were mixed at the close on Thursday, with the top-flight index dipping into the red in afternoon trading alongside its Wall Street counterparts as enthusiasm for Fed chair Jerome Powell's Wednesday comments fizzled out.
The FTSE 100 ended the session down 0.19% at 7,558.49, while the FTSE 250 gained 1.28% to 19,409.42.
Sterling was in the green against its major trading pairs, last rising 1.44% on the dollar to $1.2232, as it strengthened 0.73% against the euro to change hands at €1.1672.
"A resurgent pound served to limit any FTSE 100 upside today, with early European optimism fading into the close," said IG senior market analyst Joshua Mahony.
"Yesterday's comments from Powell over the willingness to slow the pace of tightening has helped boost risk assets, to the detriment of the dollar.
"However, it seems the rebound for US stocks has been relatively short-term in nature, with the Dow leading the losses today."
Mahony said the financial stocks had particularly felt the pressure, with expectations of a "slower and lower approach" from the Fed serving to limit margin expectations for banks.
"While Powell's stance that the rate rise should move at a slower pace is nothing new, markets appear to be pricing in a lower terminal rate, much to the dismay of US bank stocks."
In economic news, UK house prices fell in November according to a closely-watched survey, as the fallout from the government's disastrous mini-budget continued to reverberate.
According to the latest Nationwide house price index, prices fell by 1.4% month-on-month in November, making for the biggest decline since June 2020.
In October, they eased by a comparatively smaller 0.9%.
On an annual basis, UK house price growth was 4.4% last month, sharply down on October's 7.2% increase, while the average price of a house in the UK now stood at £263,788.
The 23 September mini-budget - which included large, unfunded tax cuts but no spending plans or economic forecasts - sparked turmoil across credit markets, sending mortgage rates sharply higher and leading to the temporary withdrawal of some offers.
"The fallout from the mini-budget continued to impact the market," said Robert Gardner, chief economist at Nationwide.
"While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum.
"Housing affordability for potential buyers and home movers has become much more stretched at a time when household finances are already under pressure from high inflation."
Looking ahead, Gardner said the housing market was likely to remain subdued.
"Inflation is set to remain high for some time, and bank rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures.
"The outlook is uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible."
On the continent, unemployment across the eurozone nudged lower in October, official data showed earlier.
According to Eurostat, the seasonally-adjusted unemployment rate was 6.5%, down from 6.6% in September 2022 and 7.3% in October 2021.
Consensus had been for no change month-on-month.
Across the wider bloc, the rate was 6.0%, down on both September's 6.1% and the 6.6% recorded in October 2021.
The slowdown in eurozone manufacturing activity meanwhile eased in November, with S&P Global's final manufacturing purchasing managers' index for the sector rising to 47.1 from 46.4 in October.
That was below a flash estimate of 47.3, but ahead of the 50.0 mark that separates contraction from expansion.
The survey also showed that there was a further easing of inflationary pressures, in part due to weaker demand and reduced strain on suppliers.
Elsewhere, German retail sales fell a more-than-expected 2.8% in October compared with the previous month, as consumers reined in discretionary spending.
Compared with October 2021, retail sales were down 5.0%.
Across the pond, unemployment claims in the United States slipped over last week, with the Department of Labor reporting that initial jobless claims fell by a seasonally-adjusted 16,000 to 225,000 over the week ended 26 November.
Economists at Barclays had forecast an increase to 245,000.
"New filings can be volatile around holidays because of difficulty with the seasonal adjustment process," said Ryan Sweet, chief US economist at Oxford Economics.
"We still expect the November employment report to show a payroll gain of 185,000 - a downshift from October's job growth of 261,000, and the weakest reading for payrolls since a drop in employment in December 2020."
At the same time, wage and salary growth accelerated stateside in October, supporting faster consumption.
According to the US Department of Commerce, personal incomes grew at a month-on-month pace of 0.7% in October, well above consensus expectations for a 0.4% uptick.
In parallel, personal consumption expenditure was up 0.8% month-on-month, in line with what economists had pencilled in.
Finally on US data, manufacturing activity slipped further in November amid weaker domestic and international orders.
The Institute for Supply Management's factory sector PMI fell to 49.0 in November,from a reading of 50.2 for October.
Consensus had been for a reading of 49.8, although a much weaker than expected reading for the regional Chicago PMI on Wednesday had led some to lower their projections.
Earlier in the global day, data showed activity in China's manufacturing sector shrinking again in November.
The Caixin manufacturing PMI rose to 49.4 from 49.2 in October - ahead of consensus expectations for 48.9, but remaining in contraction territory for the fourth consecutive month.
Caixin's subindex for employment printed at the lowest level since March 2020, while the input price subindex had been above 50 for the last two months amid high crude oil and metals prices.
On London's equity markets, components maker Essentra rose 1.84% after saying it had bought Wixroyd Group, a UK supplier of industrial parts for the engineering sector, for an initial £29.5m with a further £7m potentially payable on a deferred earn-out basis.
Darktrace rallied 4.34% after an initiation at 'buy' by Redburn, while online grocer and warehouse technology developer Ocado Group leapt 6.78% after its customer, US grocery giant Kroger, lifted its annual sales forecast.
On the downside, educational publisher Pearson was knocked 5.18% lower after a downgrade to 'neutral' at Exane.
AJ Bell reversed earlier gains to close down 1.04% after it reported a jump in revenues and profits despite a "challenging" year for markets.
Ninety One Group slid 5.12% as it traded without entitlement to the dividend, while Auction Technology Group slumped 8.05% after full-year results.
Engine maker Rolls-Royce was on the back foot by 4.39%, having rallied on Wednesday after Barclays initiated coverage of the stock with an 'overweight' rating.
Oil giants BP and Shell gushed 1.62% and 2.54% lower, respectively, despite a rise in oil prices.
"The recent strength of the pound may be a factor here, acting as a drag on those big US dollar earners," said Michael Hewson at CMC Markets.
HSBC and Standard Chartered also lost a respective 2.32% and 3.66%, following strong gains in the last two sessions.
Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend and Alexander Bueso.
Market Movers
FTSE 100 (UKX) 7,558.49 -0.19%
FTSE 250 (MCX) 19,409.42 1.28%
techMARK (TASX) 4,423.14 0.66%
FTSE 100 - Risers
Ocado Group (OCDO) 664.80p 6.78%
Intermediate Capital Group (ICP) 1,268.00p 6.24%
Schroders (SDR) 463.40p 4.75%
Prudential (PRU) 1,016.00p 3.74%
Scottish Mortgage Inv Trust (SMT) 796.40p 3.48%
RS Group (RS1) 941.00p 3.16%
Haleon (HLN) 292.95p 3.12%
Kingfisher (KGF) 246.50p 2.24%
Ashtead Group (AHT) 5,086.00p 2.23%
Halma (HLMA) 2,219.00p 2.16%
FTSE 100 - Fallers
Pearson (PSON) 943.60p -5.18%
Rolls-Royce Holdings (RR.) 86.93p -4.39%
Standard Chartered (STAN) 594.80p -3.66%
Anglo American (AAL) 3,301.50p -3.11%
Shell (SHEL) 2,382.00p -2.54%
3i Group (III) 1,315.50p -2.45%
HSBC Holdings (HSBA) 497.90p -2.32%
Barclays (BARC) 158.28p -1.84%
NATWEST GROUP (NWG) 257.40p -1.72%
Lloyds Banking Group (LLOY) 46.13p -1.66%
FTSE 250 - Risers
Bridgepoint Group (Reg S) (BPT) 212.60p 8.19%
Molten Ventures (GROW) 421.20p 8.00%
Syncona Limited NPV (SYNC) 182.80p 6.16%
Future (FUTR) 1,486.00p 5.77%
Hipgnosis Songs Fund Limited NPV (SONG) 86.50p 5.49%
Ascential (ASCL) 226.40p 5.38%
C&C Group (CDI) (CCR) 183.20p 4.87%
Petershill Partners (PHLL) 182.00p 4.72%
Abrdn Private Equity Opportunities Trust (APEO) 431.00p 4.61%
Jupiter Fund Management (JUP) 129.30p 4.44%
FTSE 250 - Fallers
Investec (INVP) 466.20p -9.38%
Auction Technology Group (ATG) 788.00p -8.05%
Ninety One (N91) 190.90p -5.12%
Hammerson (HMSO) 23.06p -4.24%
Petrofac Ltd. (PFC) 81.10p -3.34%
CLS Holdings (CLI) 157.40p -2.84%
Bellway (BWY) 1,958.00p -2.39%
Quilter (QLT) 98.70p -2.21%
Sirius Real Estate Ltd. (SRE) 80.80p -1.94%
Currys (CURY) 76.25p -1.93%
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