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(Alliance News) - Stock prices in London opened lower on Thursday after the US Federal Reserve pointed to interest rate hikes faster than originally anticipated, while Whitbread rose after expressing optimism over its prospects.
The FTSE 100 index was down 36.65 points, or 0.5%, at 7,146.30. The mid-cap FTSE 250 index was down 38.60 points, or 0.2%, at 22,579.06. The AIM All-Share index was down 0.3% at 1,240.46.
The Cboe UK 100 index was down 0.6% at 712.16. The Cboe 250 was down 0.1% at 20,337.72, and the Cboe Small Companies down 0.1% at 15,319.19.
In mainland Europe, the CAC 40 in Paris was down 0.2%, while the DAX 30 in Frankfurt down 0.1%.
The Fed turned hawkish as policymakers eyed rising inflation, as a majority of the members its policy setting committee predicted a rate hike in 2023.
The Federal Open Market Committee left its benchmark rate unchanged in the range of 0.00% to 0.25%, as widely expected, and recommitted to "maintain an accommodative stance of monetary policy". The Fed also left its quantitative easing programme unchanged.
Fed officials appear to have grown more hawkish since their last meeting in April, with 11 of the 18 committee members expecting at least two rate hikes in 2023 and 7 expecting one as soon as next year, according to updated quarterly economic projections released after the discussions closed.
Looking ahead, the Fed expects US GDP growth of 7.0% in 2021, up from its 6.5% prediction in March, with 2022's target unchanged at 3.3%, while GDP growth in 2023 is now tipped at 2.4%, up from 2.2% in March.
In the FTSE 100, Whitbread was the best performer, up 4.5%, after the Premier Inn owner was upbeat over its prospects as lockdown restrictions ease.
Total UK accommodation sales were down 61% in the first quarter, the 13 weeks to May 27, compared to the same period in financial 2020, the 13 weeks to May 30, 2019, with the period being the last similarly timed period before the onset of the Covid-19 crisis. Food & Beverage total sales were down 86%, reflecting the UK government's lockdown restrictions that were in place for most of the quarter.
Whitbread said total first quarter sales were down 70% from two years earlier and like-for-like sales were down 71%. Whitbread said that, since May 17, trading has been strong, with high levels of demand in tourist locations, driven by the anticipated bounce in leisure demand post reopening, and also by the period including May half-term school holidays.
Looking ahead, Whitbread said outlook and guidance is unchanged from what was provided at the full-year results in April, despite the four-week delay in the UK government's Step 4 of lockdown easing, announced on Monday.
Whitbread expects leisure demand in coastal and other tourist locations to remain very strong throughout the summer, while the full recovery of leisure demand is dependent on the final release of lockdown, and the return of unrestricted events.
"Forward booking trends are very strong throughout the summer, especially in tourist locations, if not at airports or within central London. Improving metrics are however notable as the effects of the pandemic slowly recede," said interactive investor's Richard Hunter. "In all, Whitbread is well-positioned at the cusp of what could be a return to some sort of normality."
Banks were higher after the Fed pointed to faster-than-expected rate hikes. HSBC, NatWest, Standard Chartered, Barclays and Lloyds Banking were up 2.2%, 2.1%, 2.0%, 1.9% and 1.7% respectively. Banks generally benefit from higher interest rates as higher rates make lending more profitable.
At the other end of the large-caps, 3i Group was 2.7% after the stock went ex-dividend meaning new buyers no longer qualify for the latest payout.
Gold miners Polymetal International and Fresnillo were down 2.6% and 2.3% respectively, tracking spot gold prices lower. The precious metal was trading at USD1,812.80 an ounce, down from USD1,857.40.
"Fed officials revising the timetable for interest rate hikes has brought a taper tantrum for the gold price. For investors, the opportunity cost of holding non-interest bearing assets have increased and gold has become less attractive asset for them for now," said AvaTrade analyst Naeem Aslam.
In the FTSE 250, Trainline was up 5.2% after the rail and coach ticketing platform reported its best ticket sales since the start of the pandemic as a relaxation of lockdown rules saw passengers return to public transport.
Trainline reported total net ticket sales of GBP334 million for the three months ended May 31, surging from just 79% a year ago. UK sales made up the bulk, standing at GBP270 million in the firm's first quarter versus GBP67 million a year prior.
At the other end of the midcaps, Dr Martens was on the back foot after the boot maker reported a fall in pretax profit, as it released its first set of earnings since floating in London. The stock was 10% lower.
For the financial year that ended March 31, revenue was up 15% to GBP773 million from GBP672.2 million the year before, but pretax profit declined 52% to GBP35.7 million from GBP74.8 million.
Looking ahead, Dr Martens said the guidance set out at the IPO in February remains unchanged, for both financial 2022 and over the medium-term. In financial 2022 it expects high-teens revenue growth, as it laps the Covid-19 hit experienced in financial 2021.
From financial 2023 and over the medium-term Dr Martens anticipates mid-teens revenue growth. In addition, the company said it expects to begin paying a dividend in financial 2022.
The Japanese Nikkei 225 index ended down 0.9% on Thursday. In China, the Shanghai Composite closed up 0.2%, while the Hang Seng index in Hong Kong was up 0.1%.
The dollar was higher against major counterparts in the wake of the Fed's rate decision.
The pound was quoted at USD1.3983 early Thursday in London, down sharply from USD1.4103 at the London equities close Wednesday.
The euro stood at USD1.1978, sharply lower from USD1.2117. Against the yen, the dollar was trading at JPY110.66, up from JPY109.94.
"Given how long investors have been waiting for the central bank to talk taper and how uncertain they were as to whether it would happen, we see further gains in the dollar. The Fed's optimism is a reflection of their belief that economic data will continue to improve in the coming months," said analysts at BK Asset Management.
Brent oil was quoted at USD74.04 a barrel, down from USD74.88 late Wednesday.
The international economic events calendar on Thursday has eurozone consumer price index figures at 1000 BST and US initial jobless claims at 1330 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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