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(Alliance News) - Stock prices in London opened lower on Thursday after the US Federal Reserve all but announced that it will begin lifting interest rates in March.
The FTSE 100 index was down 20.10 points, or 0.3%, at 7,448.39 early Thursday. The mid-cap FTSE 250 index was down 199.12 points, or 0.9%, at 21,673.96. The AIM All-Share index was down 13.31 points, or 1.2%, at 1,083.98.
The Cboe UK 100 index was down 0.3% at 741.08. The Cboe 250 was down 0.8% at 19.422.79, and the Cboe Small Companies down 0.1% at 15,368.02.
In mainland Europe, the CAC 40 in Paris was down 1.3%, while the DAX 40 in Frankfurt was down 1.5%.
Victoria Scholar, head of Investment, interactive investor, "European markets are under pressure after the Fed prompted Wall Street to give back earlier gains in the session. All sectors in Europe are in the red with travel and leisure leading the declines.
"The FTSE 100 is under pressure but has recovered from session lows with the next major resistance hurdle to watch at 7,500. UK financials are bucking the weakness, trading at the top of the UK index as beneficiaries of the Fed's tightening path with Standard Chartered, NatWest and Barclays staging gains."
In the FTSE 100, banks were among the best performers following the Fed's hawkish tone. Standard Chartered was up 2.6%, NatWest up 1.0%, HSBC up 0.8% and Barclays up 0.7%. Banks generate stronger net interest income when interest rates are higher.
Diageo was up 1.2% after the brewer and distiller said that it delivered strong net sales growth during its recent half year and that it will accelerate its capital return programme.
For the six months to December 31, net sales rose 16% to GBP7.96 billion from GBP6.87 billion the year before, and pretax profit was GBP2.72 billion, up 24% from GBP2.20 billion.
Operating profit jumped 23% to GBP2.74 billion from GBP2.24 billion, and the operating profit margin increased by 190 basis points.
Diageo raised its interim dividend 5% to 29.36 pence from 27.96p the year prior.
The Johnnie Walker scotch, Smirnoff vodka and Guinness beer maker said that during the half-year it also returned GBP500 million to shareholders via share buybacks as part of its GBP4.5 billion capital return programme. It has decided will accelerated the timeline of that programme, with the full return now to be completed during financial 2023.
Conversely, Fresnillo was down 4.2%. RBC Capital downgraded the Mexican gold miner to Sector Perform from Outperform. Jefferies cut the stock to Hold from Buy. Fresnillo lowered its production guidance on Wednesday.
In the FTSE 250, Dr Martens was the worst performer, down 15%. The boot maker reported third-quarter revenue of GBP307.0 million, up 11% on a year before and up 15% at constant currency. The result for the period, which ended December 31, was in line with company expectations.
Revenue was up 21% from two years before. CEO Kenny Wilson said the company is confident in achieve market expectations for the full year.
However, the Asia-Pacific region was most hurt by Covid, with revenue declining by 28% and by 24% at constant currency. Dr Martens said it saw particular weakness in distributor markets, where third-party stores were hit by renewed restrictions, most notably in Australia and China.
In Asia on Thursday, the Japanese Nikkei 225 index closed down 3.1%. In China, the Shanghai Composite ended down 1.8%, while the Hang Seng index in Hong Kong lost 2.2%. The S&P/ASX 200 in Sydney closed down 1.8%.
US Federal Reserve Chair Jerome Powell on Wednesday said there is room to raise interest rates without undermining the labour market, after the central bank signalled a rate hike is imminent.
There is "quite a bit of room" to raise rates without hurting the labour market, he added, calling conditions for workers and employers "historically tight".
The US central bank on Wednesday kept the federal funds rate in a range of 0.00% to 0.25%, as expected, and signalled a rate hike is imminent.
In an unusually blunt comment for a central bank policymaker, Powell told reporters "the committee is of a mind to raise the federal funds rate at the March meeting".
Fed officials continue to expect that the wave of rising prices, which hit a multi-decade high in 2021, will ease this year as factors like supply chain struggles, largely caused by the pandemic, begin to resolve.
While a March hike has been pencilled in by traders for several months, investors appeared to be spooked by Powell's apparent hawkishness as he refused to be drawn on a timetable for further increases nor on the Fed's plans to unload financial assets on its balance sheet.
The dollar was higher in the wake of the Powell remarks. The pound was quoted at USD1.3426 early Thursday, down from USD1.3514 at the London equities close Wednesday.
The euro was priced at USD1.1213, down from USD1.1280. Against the Japanese yen, the dollar was trading at JPY114.68, higher against JPY114.34.
Brent oil was quoted at USD89.34 a barrel Thursday morning, down sharply from USD90.27 at the close Wednesday. Gold stood at USD1,813.10 an ounce, lower against USD1,832.19.
The economic calendar for Thursday has US economic growth figures and jobless claims at 1330 GMT.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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