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(Alliance News) - Blue-chip indices in Europe were in the red around midday on Friday, with further losses seen in New York, as America's central bank gave its biggest hint yet that big interest rate hikes are in the near future.
"Jerome Powell, chair of the US Federal Reserve, looks to be taking a tougher line on monetary policy as the Fed seeks to calm the current surge in inflationary forces," said Steve Clayton, Hargreaves Lansdown Select Fund Manager.
The FTSE 100 index was down 62.91 points, or 0.8%, at 7,565.04 midday Friday. The mid-cap FTSE 250 index was down 135.52 points, or 0.6%, at 21,024.16. The AIM All-Share index was down 6.77 points, or 0.6%, at 1,051.85.
The Cboe UK 100 index was down 0.9% at 753.11. The Cboe 250 was down 0.7% at 18,570.41, and the Cboe Small Companies down 0.7% at 15,356.44.
Looking to New York, all three major indices are pointed to a negative start. The Dow Jones and the S&P 500 were both called down 0.4%, while the Nasdaq Composite was seen opening 0.5% lower.
"It is appropriate, in my view, to be moving a little more quickly. And I also think there's something in the idea of front-end loading whatever accommodation one thinks is appropriate," Powell said during a debate on the global economy hosted by the International Monetary Fund on the sidelines of its spring meetings.
"I would say that 50 basis points will be on the table for the May meeting."
Pierre Veyret, technical analyst at ActivTrades, said: "Most benchmarks reacted negatively following yesterday's hawkish words from Fed Chair Powell, who announced his ambition to tackle the highest inflation in years by accelerating monetary tightening. While speculation about higher-than-expected rate hikes that may take place during the upcoming Fed meetings grows, investors have welcomed a solid earning season so far, with 80% of companies beating profit estimates."
In the UK, retail sales slumped in March, the Office for National Statistics said, and came in significantly worse than market consensus.
March's retail sales volumes dropped by 1.4% from the month before, worsening from February's revised 0.5% fall. According to FXStreet, market consensus had tipped just a 0.3% month-on-month fall in March.
In London, as a result, retailers were having a tough day.
Burberry was down by 1.9%, Next by 1.3%, and Kingfisher by 3.1%. In the midcaps, Dr Martens was down 2.9%, M&S down 1.7%, and Dunelm down 1.5%. Frasers and JD Sports were trading flat around midday but were down 0.9% and 1.6% earlier in Friday.
"When energy bills are shooting up, it costs considerably more to fill up your car with petrol and buying essentials like a loaf of bread and a pint of milk has become more expensive, it's no wonder that retail sales have plunged," Russ Mould, investment director at AJ Bell, said.
"The ONS' retail sales data is a wake-up call that life is going to be tough for shops – virtual or physical – in the coming months. Once those vastly increased energy bills hit the doormat and households take time to reassess their financial situation, there is every chance that retail sales could get even worse."
B&M European Value Retail was down 6.4%. On top of the troubling UK retail figures, B&M said it will say goodbye to its long-time chief executive, Simon Arora, who has decided to step down next year.
Chair Peter Bamford has begun planning for Arora's successor, who has led the firm for 17 years, and who plans to retire in 12 months.
Simon Arora's brother, Bobby Arora, will remain with the company in his current role, as group trading director.
Homeserve was up 11%. Late Thursday, the company said it has entered talks with one of Brookfield Asset Management's private infrastructure funds over a potential takeover offer.
The home repairs and improvements service provider noted it has received a number of proposals from Brookfield since the end of March.
"The board has carefully considered the proposals, which are subject to a number of conditions," it explained.
Brookfield now has until May 19 to make firm offer, which was extended from Thursday as the pair enter discussions.
Shares in embattled Russian gold miner Petropavlovsk surged 32%.
Its first-quarter production has increased, despite the fallout from the war in Ukraine. But it has seen sales fall as it looks for new buyers, after its main customer was placed on a European sanctions list.
In the March-quarter, total gold production increased by 8% on a year before to 103,000 ounces. Own-mined gold production declined by 3% to 82,400 ounces, owing to lower production at the Albyn and Malomir mines, but third-party concentrate gold production increased 73% to 22,800 ounces.
Total gold sales dropped to 89,800 ounces from 95,600 ounces, but the average realised gold price in the quarter improved to USD1,871 per ounce from USD1,789.
Petropavlovsk was dumped from the FTSE 250 after the start of the war in Ukraine. It said that, at the moment, there are no direct sanctions on the company or any of its subsidiaries. It did, however, note it is prohibited from selling gold to Gazprombank, a lender to Petropavlovsk which had acted as the main off-taker for the company's production
"The group continues to explore options for the sale of its gold, including to other potential buyers, and has applied for a new licence to export gold," it added.
In IPO news, Recycling Technologies Group confirmed it halted its initial public offering on AIM in London after Chief Executive Adrian Griffiths resigned for "personal reasons".
The book was fully covered and the IPO "was all set to go", a spokesperson for RT told Alliance News, "but you can't go ahead without a CEO". The company opted for a private fund raising instead and will look to come back to the public market "next year".
In mainland Europe, the CAC 40 in Paris was down 1.7%, while the DAX 40 in Frankfurt was 1.9% lower.
Business activity in the eurozone accelerated in April, flash estimates showed, with the services sector boosted by a loosening of Covid-19 curbs.
Activity in France alone reached a 51-month high, though a downturn in Germany's manufacturing production slowed growth in Europe's largest economy.
The S&P Global eurozone flash composite purchasing managers' index rose to 55.8 points in April, from 54.9 in March. This was ahead of an FXStreet-cited market estimate of 53.9 points.
The flash PMI for services activity in the eurozone rose to an eight-month high of 57.7 points, from 55.6 in March. However, the manufacturing PMI fell to a 15-month low of 55.3 points, from 56.5 in March.
The dollar was mostly higher midday Friday due to the hawkish tone from the US central bank. Sterling was quoted at USD1.2903, lower than USD1.3040 at the London equities close on Thursday. The euro traded at USD1.0811 midday Friday, down against USD1.0852 late Thursday.
Against the yen, however, the dollar was quoted at JPY128.40, down from JPY128.45.
Gold was priced at USD1,935.40 an ounce around midday Friday, lower than USD1,945.88 on Thursday evening. Brent oil was trading at USD106.37 a barrel, down from USD108.22 late Thursday.
Still to come in the economics calendar on Friday, there is a US PMI print at 1445 BST.
By Paul McGowan; paulmcgowan@alliancenews.com
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