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(Alliance News) - Stocks in London are called lower on Thursday, as investors take fright at hawkish minutes from the US Federal Reserve.
Wednesday's minutes from July's Federal Open Market Committee meeting showed Fed officials continue to see "significant" upside risks to inflation and suggested further interest rate increases may be necessary.
At that meeting, the US central bank lifted rates by a further 25 basis points to 5.25% to 5.50%, the highest level in more than two decades, a rise that many economists believe will be the last of this cycle. But, talks showed that most participants fear that the battle to tame inflation is far from over and could require additional tightening action.
"Despite recent hawkish rhetoric from various Fed officials’ markets had got comfortable with the idea that the July rate hike was probably going to be the last one. Last night's minutes called that assumption into question even as various Fed officials mulled that the risks around monetary policy were becoming two-sided, with some unease about how much further the central bank can go when it comes to further rate rises," said Michael Hewson, chief market analyst at CMC Markets UK
In early UK company news, BAE Systems announced a USD5 billion acquisition in the aerospace sector. Grosvenor-owner Rank Group swung to an annual loss due to impairment charges.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 24.3 points, 0.3%, at 7,332.58
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Hang Seng: flat at 18,329.03
Nikkei 225: closed down 0.4% at 31,626.00
S&P/ASX 200: closed down 0.7% at 7,146.00
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DJIA: closed down 180.65 points, 0.5%, at 34,765.74
S&P 500: closed down 0.8% at 4,404.33
Nasdaq Composite: closed down 1.2% at 13,474.63
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EUR: down at USD1.0872 (USD1.0906)
GBP: down at USD1.2725 (USD1.2750)
USD: up at JPY146.33 (JPY145.77)
Gold: down at USD1,892.95 per ounce (USD1,902.61)
Oil (Brent): down at USD83.309 a barrel (USD84.83)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
11:00 CEST EU foreign trade
08:30 EDT US Philadelphia Fed business outlook survey
08:30 EDT US unemployment insurance weekly claims report
10:00 EDT US leading indicators
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Rishi Sunak has outlined his hopes to ensure Britons feel better off next year, amid warnings that the UK economy faces a "very real risk" of recession due to higher interest rates. The UK prime minister attempted to strike an optimistic tone when asked about efforts to tame inflation, as he said there is a need to be "disciplined" and avoid "unfunded" tax cuts. Sunak's remarks came after it was revealed inflation has slowed to its lowest level for 17 months in July due to a fall in energy prices. Sunak said the "best thing for the country is to bring down inflation", speaking to The Times: "That means being disciplined on borrowing, disciplined on spending, whether that is spending on lots of things — public sector pay — or indeed unfunded tax cuts.
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The Lionesses battling for the Women's World Cup trophy is expected to give a GBP185 million boost to the UK economy as supporters flock to pubs and bars to watch the final. England going head-to-head with Spain on Sunday is set to lead to a spike in consumer spending over the weekend. Analysis by savings site VoucherCodes.co.uk found that 13.7 million viewers around the UK are set to tune into the match, with around a fifth heading to their local pub, bar or restaurant to soak up the atmosphere. Viewers could spend around GBP138 million in supermarkets to stock up on food, drink, merchandise and decorations ahead of the 11am kick-off, according to the report which uses forecasts from GlobalData.
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BROKER RATING CHANGES
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Goldman raises Flutter Entertainment price target to 19,100 (18,800) pence - 'buy'
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COMPANIES - FTSE 100
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BAE Systems said it has agreed to acquire Ball Aerospace from Ball Corp for around USD5.55 billion in cash. It will be funded from a combination of new external debt and existing cash resources. Ball Aerospace provides mission-critical space systems and defence technologies across air, land and sea, and will serve to strengthen BAE's multi-domain portfolio. The acquisition will add to an "attractive and strengthened" revenue outlook for BAE Systems. "It's rare that a business of this quality, scale and complementary capabilities, with strong growth prospects and a close fit to our strategy, becomes available," said BAE Chief Executive Charles Woodburn.
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COMPANIES - FTSE 250
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Empiric Student Property said it saw a "very strong start" to 2023, as revenue rose 16% year-on-year to GBP41.3 million in the first half, from 35.6 million. However, pretax profit dropped to GBP24.6 million from GBP70.3 million, owing to fewer gains on the fair value of investment property. EPRA net tangible assets per share rose 1.6% to 117.3p at the end of June from 115.4p at the end of December, with EPRA earnings rising 19% year-on-year to GBP14.1 million. This helped to underpin a 30% increase in its interim dividend, Empiric said, proposing a 1.625p payout for the period. This includes the 0.8125p proposed for the second quarter. "Having effectively filled our rooms for the forthcoming academic year and delivered strong like-for-like rental growth, we remain confident in the outlook for the business and the wider purpose-built student accommodation sector throughout the remainder of 2023 and beyond," the firm said.
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OTHER COMPANIES
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Rank Group reported on its recently-concluded financial year. In the 12 months to June 30, net gaming revenue rose 6% year-on-year to GBP681.9 million from GBP644.0 million. However, the company swung to a pretax loss of GBP122.7 million from GBP80.8 million profit. This was due to various impairment charges totalling GBP118.9 million over the year, as well as a lower-than-expected performance. The new financial year has started "strongly" across all of its businesses, with underlying group like-for-like net gaming revenue 16% ahead of the year before. In light of the continued challenges in the trading environment, and investment opportunities, the firm decided not to propose a dividend. It plans to recommence dividend payments "as soon as circumstances permit". Chief Executive John O'Reilly: "The return of customers to our Grosvenor and Mecca venues continues to pick up and our second half numbers give cause for optimism after a very challenging couple of years."
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The Central Bank of Ireland is seeking a "full account" of a glitch which saw Bank of Ireland Group customers withdrawing or transferring more money than was in their accounts. Minister for Finance Michael McGrath said he also wanted to know why it happened and what would be done to prevent a repeat. Bank of Ireland said the incident was down to a technical issue with its services and not a cyber attack. It said its app and online services are working again on Wednesday and any transfers or withdrawals taken out during the outage will appear in their accounts during the day.
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By Elizabeth Winter, Alliance News senior markets reporter
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