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London open: Investors anxious ahead of MPC’s ‘Super Thursday’
Investors in UK shares were anxious ahead of Thursday’s meeting of the Monetary Policy Committee after remarks by US Federal Reserve chairwoman Janet Yellen on the previous day led traders to push up the odds of a December rate hike across the Pond.
As of 0945 GMT the FTSE 100 was trading lower by 35.36 points to 6,377.22, tracking the slight losses seen on Wall Street overnight although China’s Shanghai composite ended the session 1.83% higher.
Yellen’s testimony before the House Financial Services Committee pushed Fed funds futures to price in a 56% probability of a rate hike at the 15-16 December FOMC meeting, up from the 33% they were pricing in at the start of October.
In the UK, some market watchers also believed the MPC might need to move more quickly than the date of November 2016 which futures markets were discounting, despite CPI running at -0.1% year-on-year in September.
Weale and Forbes are the most likely to shift their votes
Indeed, early on Thursday speculation was rife that the MPC minutes might show that another member had joined Ian McCafferty in calling for an immediate rise in rates, although the view of the market consensus was for an unchanged vote of 8-1.
Martin Weale and Kristin Forbes were seen as the most likely to possibly shifted their position, Barclays said.
Like the rest of the MPC, the pair were waiting on the outcome of four critical pieces of research which were to be included in the latest quarterly Inflation Report, which will be released alongside the meeting minutes.
Among the areas being studied were “the extent to which recent global developments signalled that global growth was weaker than previously assumed versus simply accentuating downside risks already prevalent,” Barclays said.
It was widely thought that if the MPC truly wanted to leave the door open to an rate increase come next February or May then it would need to make a very strong case for it at Thursday’s meeting.
“There may currently be some confusion in the markets around the timing of the first rate hike from the BoE, but after today’s events things should hopefully be much clearer,” said Craig Erlam, analyst at Oanda. “The problem is that while these things are intended to provide more clarity and transparency, what tends to happen is the indecision within the central bank sends mixed messages and can leave the markets more confused than before.”.
Linked to all of the above, a raft of Fed speakers were scheduled to take to the podium in the US on Thursday, including the presidents of the Dallas and New York reserve banks at 1330 GMT.
Momentum returning to housing market, economist says
UK house prices jumped by 1.1% month-on-month in October, according to the latest tally from Halifax.
That partly reflected “some catch-up [with other suverys] after years of relative weakness”, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
However, “momentum is clearly returning to the housing market as […] Banks continue to seek to increase their mortgage loan books, and the Financial Policy Committee’s rules on loan-to-income multiples are still not close to biting,” he added.
AstraZeneca and RSA pace gains
Though its third quarter revenues have been hit by foreign exchange woes AstraZeneca led the Footsie’s risers as it upgraded its revenue outlook for the year. While year to date revenues are flat at constant exchange rates on the previous year at $18.3bn (£11.9bn), the quarter only brought in $5.9bn in total revenue – a 2% drop.
RSA Insurance booked a net loss of £16m in the third quarter as a result of the earthquake in Chile, but its shares were on the up as it insisted turnaround plans remained on track and posted a 1% rise in underlying premium income for the first nine months of the year. After suitor Zurich Insurance announced an end to its interest in acquiring the company in September, chief executive Stephen Hester said the unsolicited approach was a distraction in the third quarter but the business continued to perform well despite that.
Third-quarter like-for-like sales at Morrison Supermarkets fell at a faster rate than in the previous quarter and worse than expectations, putting a drag on its shares. Management confirmed they expect underlying pre-tax profit to be higher in the second half than in the first, but analysts were mostly disappointed.
Food ingredients maker Tate & Lyle posted an increase in interim profit, marking a first improvement in trading after a turbulent end to 2014. The FTSE 250 group said that in the six months to 30 September, pre-tax profit rose 28% year-on-year to £103m, driven higher by a 28% increase in operating profit in the speciality food ingredients division. Group sales, however, declined 2% to £1.17bn, while sales in the bulk ingredients division slid 6% year-on-year hit by lower corn costs and a decline in commodity prices in the United States for ethanol.
Schroders saw profitability jump in the nine months to September 2015 alongside a sharp rise in net inflows at its Asset Management, with assets under management holding up better than expected in the third quarter. Total inflows rose by £8.3bn in the first nine months of the year, with the lion´s share or £8.1bn going into Asset Management and the remainder towards Wealth Management, the company said in a statement.
In the FTSE 250, clothing retailer SuperGroup climbed after said sales were up 22.4% in the first half but warned that comparatives throughout the second half are more challenging. Sales in the first half to October 24 rose to £254.9m on the back of positive growth in existing retail and wholesale channels and a healthy new store pipeline.
Engineering firm Cobham expects underlying earnings per share for the full year to be at the lower end of current market expectations on the back of order delays and decreased demand for some of its products.
But shares in Amec Foster Wheeler tumbled furthest after the oil and gas engineering services company announced it was cutting its dividend in half and lifting its cost-savings target for the year amid tough market conditions.
