Portfolio

London open: Stocks nudge down after hawkish Fed lifts yields

By Michele Maatouk

Date: Thursday 18 Oct 2018

London open: Stocks nudge down after hawkish Fed lifts yields

(Sharecast News) - London stocks nudged lower at the open on Thursday as investors mulled hawkish minutes from the Federal Reserve and eyed the latest Brexit developments, ahead of the release of UK retail sales data.
At 0830 BST, the FTSE 100 was down 0.1% to 7,049.55, while the pound was off 0.2% against the dollar and the euro at 1.3094 and 1.1385, respectively.

Investors were digesting the latest minutes from the Federal Reserve out late on Wednesday, which showed members were broadly in agreement about the need to lift borrowing costs. A number of the rate-setting committee expressing support for raising the base rate above a neutral level to keep inflation in check.

"Whilst the minutes were always expected to have a hawkish slant, the Fed leaning towards more rate hikes moving forwards, made an already jittery market more nervous," said London Capital Group analyst Jasper Lawler, noting that US indices sank following the release, although they did close off their lows.

Closer to home, Brexit was still the big focus after Theresa May said during the EU summit in Brussels that she was willing to consider extending the transition period, which she clarified on Thursday morning "would only be for a matter of months". This would mean keeping the UK tied to the EU until beyond the originally planned 2020 deadline.

"Eurosceptics argue that this will keep the UK like a vassal state, observing EU laws without any vote or representation. On the other hand, it could give the EU and the UK time to find a solution to the Irish backstop issue," said Lawler.

EU leaders concluded at the summit that not enough progress has been made in Brexit talks to warrant calling a one-off summit in November for a divorce deal to be signed off.

On the data front, retail sales at 0930 BST are expected to show a drop of 0.4% on the month in September, down from a 0.3% increase in August.

"After a strong summer of spending from the UK consumer, and a surprise to the upside in August, there is a good chance the UK consumer is reining in their spending ahead of the Christmas period. According to the BRC the usual back to school shop has not been as supportive as it has in previous years. A larger than forecast decline in retail sales could see the Brexit battered pound take another hit," said Lawler.

On the corporate front, building materials group CRH was the worst performer after German giant HeidelbergCement cut its profit outlook, while equipment rental company Ashtead followed close behind following disappointing earnings from US peer United Rentals.

Unilever was in the red even as it reported an acceleration in underlying sales growth for the third quarter that was around what the market was expecting.

Rentokil slipped after the pest control group said third-quarter ongoing revenue rose 11.8% to £637.4m at constant exchange rates. But the Competition and Markets Authority said it has provisionally found that Rentokil's purchase of Cannon Hygiene could lead to higher prices or lower quality for some customers, following a similar probe into another recent acquisition.

Intu Properties was a touch weaker after an update on leasing, while Games Workshop slumped as it vaguely warned of "some uncertainties" ahead.

Casino and bingo hall operator Rank Group retreated after saying group like-for-like revenue for the 16 weeks to 14 October declined by 4.9% and engineer Renishaw lost ground as it reported a drop in first-quarter pre-tax profit.

On the upside, Domino's Pizza rallied on the back of its third-quarter trading statement and GVC Holdings edged up as it posted a 28% rise in online net gaming revenue for the third quarter.

National Express pushed higher after saying it had a good summer, with its UK coach business in particular delivering "outstanding" organic growth.

Hilton Food traded up after the food packing business said it has agreed to by a 50% stake in Dutch vegetarian product manufacturer Dalco, subject to clearance from the Dutch competition authority.

In broker note action, Mediclinic was downgraded to 'underperform' by Bank of America Merrill Lynch and to 'equalweight' at Barclays. OneSavings Bank was boosted by an upgrade to 'outperform' by Macquarie.

Market Movers

FTSE 100 (UKX) 7,049.55 -0.07%
FTSE 250 (MCX) 18,974.12 -0.21%
techMARK (TASX) 3,342.74 0.14%

FTSE 100 - Risers

Vodafone Group (VOD) 154.54p 1.64%
WPP (WPP) 1,045.25p 1.63%
BT Group (BT.A) 245.18p 1.48%
Tesco (TSCO) 211.70p 1.39%
Morrison (Wm) Supermarkets (MRW) 248.35p 1.14%
Royal Bank of Scotland Group (RBS) 242.10p 1.04%
GlaxoSmithKline (GSK) 1,509.00p 0.98%
Pearson (PSON) 843.40p 0.96%
Next (NXT) 5,224.00p 0.93%
easyJet (EZJ) 1,161.00p 0.91%

FTSE 100 - Fallers

CRH (CRH) 2,228.00p -3.84%
Ashtead Group (AHT) 1,934.00p -3.49%
Smiths Group (SMIN) 1,301.50p -2.33%
Johnson Matthey (JMAT) 3,015.00p -2.14%
Unilever (ULVR) 3,942.00p -2.04%
Antofagasta (ANTO) 780.00p -1.91%
Rio Tinto (RIO) 3,736.50p -1.52%
Ferguson (FERG) 5,420.00p -1.49%
Anglo American (AAL) 1,653.20p -1.41%
Fresnillo (FRES) 892.60p -1.30%

FTSE 250 - Risers

Domino's Pizza Group (DOM) 273.50p 4.91%
OneSavings Bank (OSB) 388.60p 4.24%
TI Fluid Systems (TIFS) 204.40p 3.13%
Avast (AVST) 290.00p 1.68%
Tate & Lyle (TATE) 648.40p 1.66%
Spire Healthcare Group (SPI) 120.20p 1.43%
Mercantile Investment Trust (The) (MRC) 195.00p 1.35%
Cairn Energy (CNE) 213.89p 1.18%
National Express Group (NEX) 400.80p 1.16%
BTG (BTG) 552.25p 1.14%

FTSE 250 - Fallers

Games Workshop Group (GAW) 3,130.00p -6.01%
Renishaw (RSW) 4,118.00p -3.70%
Mediclinic International (MDC) 381.40p -3.20%
Softcat (SCT) 678.00p -3.14%
Bodycote (BOY) 812.00p -2.75%
Intu Properties (INTU) 180.00p -2.70%
Rank Group (RNK) 159.00p -2.57%
Saga (SAGA) 130.90p -2.31%
Crest Nicholson Holdings (CRST) 289.60p -2.29%
Vesuvius (VSVS) 567.00p -2.07%

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