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London open: Stocks slump after Wall Street selloff
London equity markets slumped in early trade on Thursday, taking their cue from a weak session on Wall Street, where stocks suffered their worst losses since June 2020.
At 0850 BST, the FTSE 100 was 0.9% lower at 7,368.65. Overnight, the S&P 500 closed down 4%, while the tech-heavy Nasdaq ended 4.7% weaker.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “A red wall of worry has built up across financial markets with investors increasingly nervous that economies are set to career into recession.”
She said traders are trying to assess just how difficult it is going to be for central banks to rein in rampant inflation without pushing economies into reverse.
“The slide was sparked by the US retail giant Target warning that customers were already buying fewer high ticket items like furniture and electronics, with higher fuel prices and supply chain costs also eating into margins. It comes hot on the heels of Walmart’s. With consumer spending power expected to be eroded further through interest rate rises, the worry is that Target’s pain is a precursor for yet more struggles to come for retailers. A trend also seems to be emerging of people wanting to save their dollars to spend on experiences like holidays rather than homewares with luggage at Target selling fast.
“Consumers are showing more caution but after the pandemic lockdowns there is clearly pent up demand for travel with airlines like easyJet ramping up capacity to meet demand and bookings at restaurants surging. So while goods price inflation may fall, it may be hard to keep a lid on the price of services, particularly with higher wage costs amid the fight for labour also being passed onto customers.”
In equity markets, Kingfisher, Tesco, Unilever, PageGroup, Bunzl and GlaxoSmithKline all fell as they traded without entitlement to the dividend.
Royal Mail was under the cosh as it warned of price increases and £350m in cost cuts to combat soaring inflation after reporting a rise in full-year profits.
On the upside, Airtel Africa rose after saying that its subsidiary SmartCash PSB had started operations in Nigeria.
HomeServe surged after the emergency home repairs group agreed to be bought by Canada’s Brookfield Asset Management in a £4.1bn deal.
Auction Technology also gained as it lifted its full-year revenue growth guidance following a better-than-expected first half.
Budget airline easyJet flew higher after saying it expects third-quarter capacity to be 90% of pre-pandemic levels and that it had narrowed half-year loses.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Fresnillo Plc | +1.07% | +8.00 | 755.60 |
| 2 |  |
Hikma Pharmaceuticals Plc | +0.24% | +4.00 | 1,682.50 |
| 3 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 4 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 5 |  |
Royal Bank Of Scotland Group Plc | +0.00% | +0.00 | 120.90 |
| 6 |  |
Reckitt Benckiser Group Plc | +0.00% | +0.00 | 6,498.00 |
| 7 |  |
Standard Life Aberdeen Plc | +0.00% | +0.00 | 274.10 |
| 8 |  |
London Stock Exchange Group Plc | +0.00% | +0.00 | 8,620.00 |
| 9 |  |
Rsa Insurance Group Ld | +0.00% | +0.00 | 684.20 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
3i Group Plc | -8.91% | -118.00 | 1,206.00 |
| 2 |  |
Bunzl Plc | -6.00% | -175.00 | 2,744.00 |
| 3 |  |
Dcc Plc | -5.92% | -358.00 | 5,692.00 |
| 4 |  |
Carnival Plc | -5.43% | -57.20 | 995.80 |
| 5 |  |
Scottish Mortgage Investment Trust Plc | -5.29% | -41.20 | 737.20 |
| 6 |  |
Tesco Plc | -5.19% | -13.80 | 252.30 |
| 7 |  |
Kingfisher Plc | -4.93% | -12.50 | 241.00 |
| 8 |  |
Unilever Plc | -4.72% | -171.00 | 3,455.00 |
| 9 |  |
Rolls-royce Holdings Plc | -4.64% | -3.93 | 80.85 |
| 10 |  |
Hargreaves Lansdown Plc | -4.34% | -38.60 | 850.60 |
US close: Dow loses almost 1,200 points as equities tumble again
Wall Street stocks tumbled by the closing bell on Wednesday, with both the Dow and the S&P booking their worst single-day losses in almost two years.
At the close, the Dow Jones Industrial Average was down 3.57% at 31,490.07, as the S&P 500 lost 4.04% to 3,923,68 and the Nasdaq Composite was 4.73% lower at 11,418.15.
The Dow closed 1,164.52 points lower on Wednesday, more than erasing the gains it recorded on Tuesday and making for its worst session since June 2020.
“Markets have fallen back into their old habits as an increase in yields has sparked a sell-off in stocks,” said Equiti Capital market analyst David Madden.
“Equity markets experienced low volatility at the start of the week and that was because US bond yields cooled, but today the 10-year yield traded above 3%, which sped up the decline in equities.
“In keeping with the recent theme, the technology-heavy Nasdaq has come under the most selling pressure.”
Madden said activity in the bond market often reflected what traders were predicting about interest rates, so the rise in yields was being seen as a sign the bond market was factoring in further interest rate hikes.
“Earlier this month the Federal Reserve hiked rates by 50 basis points.
“A short while ago, Fed member Charles Evans, called for another 50 basis points lift at next month’s meeting.
“Fears there could be more large rate hikes are hurting equities.”
On the data front, US mortgage applications decreased 11% week-on-week in the seven days ended 13 May for the biggest decline in three months, according to the Mortgage Bankers Association.
The purchase index slumped 11.9% and the repurchase index plunged 9.5% as the average contract rate on a 30-year fixed-rate mortgage dipped four basis points to 5.49% but remained at levels not seen since 2009.
“General uncertainty about the near-term economic outlook, as well as recent stock market volatility, may be causing some households to delay their home search,” said MBA economist Joel Kan.
Elsewhere, homebuilding activity in the US weakened more than expected last month.
According to the Department of Commerce, in seasonally adjusted terms, housing starts dipped at a month-on-month pace of 0.2% to reach an annualised pace of 1.724 million – significantly less than the 1.77 million print anticipated by economists.
Building permits – a leading indicator for activity – fell 3.2% on the month to reach a clip of 1.81 million.
In equities, Lowe’s fell 5.26% after posting broadly flat first-quarter earnings of $2.3bn, despite total sales slipping to $23.7bn from $24.4bn as its outdoor seasonal categories were impacted by “unseasonably cold temperatures” in April.
Fellow retailer Target plunged 24.93% after it delivered quarterly earnings well short of expectations on the back of heightened freight costs, bigger markdowns, and lower-than-expected sales of discretionary items.
Automotive marketing firm AutoWeb closed 18.99% lower, adding to its losses of 65% on Tuesday after it told shareholders of doubts it could continue as a going concern.
Thursday newspaper round-up: Pensions gap, access to cash, energy industry
Unions have called on the government to take urgent action to fix a “whopping pensions gap”, as research showed women working in many industries have half the retirement savings of men. The TUC said Thursday was “gender pensions gap day”, when female pensioners in Great Britain start getting paid after effectively going four and a half months without retirement income. – Guardian
The City watchdog will be handed powers to ensure local communities across the UK have access to cash and could ultimately fine banks that fail to comply. Under the government’s pending financial services bill, the Financial Conduct Authority will be in charge of making sure the UK’s largest banking and building societies give consumers access to withdrawal and deposit facilities such as ATMs within a “reasonable” distance from their community. – Guardian
Brussels has told European Union countries that they should consider telling drivers to cut their motorway speed in the battle to ditch Russian fossil fuel. The European Commission says saving energy is the “quickest way” to tackle the energy crisis.It has published a list of changes in behaviour which it argues could cut oil and gas demand by 5pc. – Telegraph
The energy industry believes it will soon fall victim to cyberattacks so severe that they will result in deaths as well as damage to critical infrastructure and the environment, a report has found. Such an attack is expected within the next two years, according to a survey of global energy executives for DNV, a risk management group. – The Times
The professional body for chartered accountants is facing questions from parliament over why it has pocketed tens of millions of pounds in fine money for auditor misconduct rather than hand over any of it to victims. Darren Jones, chairman of the Commons’ business, energy and industrial strategy committee, is writing to the Institute of Chartered Accountants in England and Wales for an explanation, as it emerged that the professional body has scooped £123.4 million in fines since 2004, according to its own figures. – The Times
