London stocks had fallen into the red by midday on Tuesday, unable to hold on to earlier gains amid worries about inflation as investors grew jittery ahead of rate announcements by the US Federal Reserve and the Bank of England.
The FTSE 100 was down 0.9% at 7,144.48.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The US market entered bear territory last night, with its main markets dropping to long-forgotten lows. The crux of the concern plaguing investors is how harshly the Fed plans to tackle rising inflation in the face of stark new CPI data.
“Getting the balance wrong and hiking interest rates too aggressively could see recession fears become a reality. Concerns may be partially extinguished by today’s US producer prices index (PPI) report, which has started to suggest signs of slowing recently. This is also seen as a leading indicator, compared to backwards looking data sets like CPI.”
A rate announcement from the Fed is due on Wednesday, while the Bank of England will make its policy announcement on Thursday.
Investors were also digesting the latest figures from the Office for National Statistics, which showed the unemployment rate unexpectedly rose in the three months to April for the first time in a year, while vacancies remained at record levels and wages fell at the fastest rate in a decade.
The unemployment rate ticked up to 3.8% from 3.7% in the three months to March and versus expectations for a decline to 3.6%. Still, it remained close to 50-year lows.
The number of people on payrolls rose by 90,000 in May to a fresh record high of 29.6m and the number of job vacancies in March to May hit a new record high of 1.3m.
The data also showed that before inflation, total pay including bonuses grew 6.8% in the year to February-April and regular pay excluding bonuses was up 4.2%. However, real wages adjusted for inflation running at around 9% fell 2.2% on the year – the biggest decline since 2011.
Paul Dales, chief UK economist at Capital Economics, said: “The tentative evidence that the recent weakening in economic activity is filtering through into a slightly looser labour market may push the Bank of England a little closer to raising interest rates by 25 basis points on Thursday rather than by 50bps.
“But with the Fed seemingly on the cusp of announcing a blockbuster 75bps hike tonight and the pound having already weakened to $1.22, we’re sticking to our forecast of a 50bps hike from 1.00% to 1.50%. But it’s going to be mighty close.”
In equity markets, equipment rental firm Ashtead fell despite saying it had delivered a record full year, with both revenue and profits up following a solid fourth-quarter.
On the upside, banks were among the top gainers, with Standard Chartered, HSBC, Lloyds and NatWest all up amid the prospect of higher interest rates.
Housebuilder Crest Nicholson rose after upgrading its FY22 earnings guidance, while Paragon surged after it posted record half-year profits and upgraded its full-year guidance.
Rail and bus operator FirstGroup, which last week rejected a £1.23bn takeover approach, was also up after it reported higher full-year adjusted operating profits as travel recovered from the Covid pandemic.
Go-Ahead racked up strong gains amid the possibility of a takeover battle as Kelsian said it was still interested in making an offer even after the London-listed transport operator accepted a £647.7m offer from Australian bus firm Kinetic and Spanish infrastructure investor Globalvia Inversiones.
Market Movers
FTSE 100 (UKX) 7,144.48 -0.85%
FTSE 250 (MCX) 19,054.96 -0.55%
techMARK (TASX) 4,177.87 -0.90%
FTSE 100 – Risers
Standard Chartered (STAN) 593.60p 2.45%
HSBC Holdings (HSBA) 514.00p 2.21%
Fresnillo (FRES) 803.40p 1.70%
Barratt Developments (BDEV) 483.70p 1.68%
ITV (ITV) 68.10p 1.07%
Lloyds Banking Group (LLOY) 43.28p 1.06%
BT Group (BT.A) 181.40p 1.06%
Persimmon (PSN) 2,140.00p 1.04%
Taylor Wimpey (TW.) 123.20p 0.86%
NATWEST GROUP PLC ORD 100P (NWG) 220.80p 0.82%
FTSE 100 – Fallers
Ocado Group (OCDO) 845.20p -3.95%
Kingfisher (KGF) 236.30p -3.79%
Halma (HLMA) 1,930.50p -3.57%
Ashtead Group (AHT) 3,670.00p -3.52%
AstraZeneca (AZN) 9,441.00p -3.44%
Next (NXT) 5,888.00p -3.25%
Croda International (CRDA) 6,020.00p -2.78%
Smurfit Kappa Group (CDI) (SKG) 2,791.00p -2.68%
SSE (SSE) 1,665.50p -2.52%
Experian (EXPN) 2,319.00p -2.48%
FTSE 250 – Risers
Crest Nicholson Holdings (CRST) 273.80p 7.37%
Paragon Banking Group (PAG) 504.00p 7.23%
HGCapital Trust (HGT) 378.50p 3.70%
OSB Group (OSB) 495.20p 3.51%
Close Brothers Group (CBG) 1,048.00p 3.46%
Discoverie Group (DSCV) 704.00p 3.23%
Bellway (BWY) 2,274.00p 2.94%
National Express Group (NEX) 225.20p 2.55%
Vistry Group (VTY) 891.50p 2.24%
FirstGroup (FGP) 135.50p 2.03%
FTSE 250 – Fallers
Wood Group (John) (WG.) 197.00p -5.33%
Centamin (DI) (CEY) 77.36p -4.94%
Auction Technology Group (ATG) 855.00p -4.89%
Moonpig Group (MOON) 216.80p -4.75%
Spire Healthcare Group (SPI) 217.00p -4.41%
Hill & Smith Holdings (HILS) 1,152.00p -4.16%
Hammerson (HMSO) 22.09p -3.91%
Aston Martin Lagonda Global Holdings (AML) 519.00p -3.89%
Oxford Biomedica (OXB) 434.00p -3.77%
Greencore Group (CDI) (GNC) 107.70p -3.41%
