ADVFN Morning London Market Report: Thursday 11 October 2018

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London open: Losses across the board after Wall Street selloff

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London stocks fell in early trade, taking their cue from a sharp selloff in the US and Asia amid concerns about rising US interest rates.

At 0840 BST, the FTSE 100 was down 1.2% to 7,059.05, while the pound was flat against the dollar at 1.3199 and 0.2% lower versus the euro at 1.1429.

Stocks on Wall Street saw their worst losses in eight months on Wednesday, with the Dow suffering its biggest daily decline of the year and the Nasdaq its worst day of trade since June as worries rising bond yields, Sino-US trade tensions, relations between Italy and Europe and concerns about valuations heading into earnings season sparked heavy selling.

Meanwhile, the VIX, which is known as a fear gauge, hit its highest level since April.

Richard Hunter, head of Markets at Interactive Investor, said: “Wall Street weakness initiated this domino effect, with Asian markets dropping sharply and European markets playing catch-up in early trade. In the absence of a specific trigger, investors are currently voting with their feet due to mounting concerns around trade tensions and the impact on global growth, higher interest rates in the US, and a potential rotation away from equities due to rising bond yields.”

Hunter pointed out that US tech stocks bore the brunt of the selloff overnight, having been at the vanguard of US market strength over the last year. Netflix and Amazon, for example, had both seen their share prices double and a pause for breath was a matter of time, he said.

“In the UK, even prior to yesterday’s sell-off, the FTSE100 had lost 6% in the year to date, as Brexit uncertainty and a relatively strong pound pinned down shares whose earnings largely emanate from overseas.

“For the moment, no trend has been established and despite some minor headline hysteria nothing fundamental has changed. Recent IMF comments added weight to concerns on global growth and further pressure could come to bear later in the day if the US inflation number confirms the probability of hawkish monetary policy.”

Speaking to reporters before a political rally in Pennsylvania, US President Trump said of Wednesday’s selloff: “Actually it’s a correction that we’ve been waiting for a long time, but I really disagree with what the Fed is doing.”

He added: “I think the Fed has gone crazy.”

Neil Wilson, chief market analyst at Markets.com, said: “This is typical off-the-cuff remarks from a real estate guy who likes low rates. Doesn’t everyone in equity markets? I’d stick to the view that this won’t put the Fed off from hiking rates. The far larger selloff in February in US equity markets did nothing to dissuade the Fed from its hiking path and there is no reason why this smaller (at present) selloff will produce a reaction.”

In UK corporate news, paper and packaging group Mondi bucked the trend as it said higher average selling prices across fibre packaging and uncoated fine paper, a very strong operational performance, good cost containment and contributions from recent acquisitions boosted third quarter underlying EBITDA by a third to €466m (£407m) year-on-year.

Homewares retailer Dunelm also racked up strong early gains after it said revenues had picked up to 4.2% on a like-for-like basis in the first quarter of its financial year after a finish to the previous period.

Hargreaves Lansdown slumped as it reported an uncertain market environment and weak investor sentiment in the past three months, though assets under administration still grew 2.7%. In what was the first quarter of its financial year, the investment and pensions platform won £1.3bn of net new business, down 16% compared to the same period last year.

Countryside Properties was sharply lower after it reiterated its medium-term guidance, posted a jump in total completions and said demand for its homes remains strong.

WH Smith was also under the cosh after the retailer reported a drop in pre-tax profit for the year to the end of August and announced plans to restructure its high street business.

Recruiter Hays tanked nearly 10% as it posted a slower quarterly fee growth rate, while Moneysupermarket slipped following its third-quarter update.

Jupiter Fund Management retreated as it said assets under management fell in the third quarter, while Keller tumbled more than 30% after issuing a profit warning on its Asia Pacific business.

In broker note action, Auto Trader was lifted to ‘neutral’ by Macquarie while Gocompare.com was initiated at ‘outperform’.

Barratt Developments, Centrica, HSBC Holdings, Tesco, Close Brothers, OneSavings Bank, Primary Health Properties, Spectris, Spirax-Sarco Engineering, Superdry, Ted Baker and Weir Group were among the companies whose stock went ex-dividend.

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