(Alliance News) - Stocks in London look set to end the shortened trading week on the back foot, after the US Federal Reserve gave its clearest indication yet that it will move aggressively to combat rampant inflation.
In early news Friday, UK retail sales saw a much larger than expected drop. B&M European Value has laid out CEO succession plans. Eastern European miners Petropavlovsk and Ferrexpo have seen production interrupted.
IG says futures indicate the FTSE 100 index of large-caps to open down 94.55 points, or 1.2%, at 7,533.40 on Friday. The blue-chip index closed down 1.27 points at 7,627.95 on Thursday.
"Red flags are going up today. While one day certainly does not make a trend, when the market decides to focus on a super-hawkish inflation-fighting Fed narrative stoking recession fears, it typically triggers significant shifts in investor behaviours and conversations, and markets then turn a lot more cautious," SPI Asset Management's Stephen Innes said.
The Fed may opt to hike interest rates by larger-than-normal half a percentage point at its policy meeting next month in a bid to battle record US inflation, Chair Jerome Powell said Thursday.
"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.
He continued: "I would say that 50 basis points will be on the table for the May meeting."
CMC Markets Chief Market Analyst Michael Hewson added: "Powell's comments that 'there's something in the idea of front loading' aren't new. They've been trailed by pretty much every single member of the FOMC over the past few days, so for markets to take fright about something they know is coming, comes across as trying to find a narrative to justify a price move.
"That said the tone of his remarks could have been taken that while markets aren't concerned about a 50bps hike in May, they are concerned that the Fed might go harder for longer, that is another two 50 basis points hikes subsequently by the end of the summer."
It was a bleak picture on Wall Street on Thursday after Powell's comments. The Dow Jones Industrial Average ended down 1.1%, the S&P 500 lost 1.5%, and the tech-heavy Nasdaq Composite closed down 2.1%.
In the UK, March's retail sales volumes dropped by 1.4% from the month before, worsening from February's revised 0.5% fall and missing market expectations. According to FXStreet, market consensus had tipped for just a 0.3% month-on-month fall in March.
The Office for National Statistics said the largest contribution to the fall came from non-store - meaning online - retailing, where sales volumes fell by 7.9% over the month following a fall of 6.9% in February.
Despite March's woeful performance, sales volumes were 20% above their pre-coronavirus February 2020 levels.
Food store sales volumes fell by 1.1% in March from February and have fallen each month since November 2021, the ONS noted.
"Higher spending in pubs and restaurants linked to reduced coronavirus restrictions, as well as the impact of rising food prices on the cost of living are possible factors for reduced spending in food stores," the stats body added.
Non-food store sales volumes rose by 1.3% in March from February.
The proportion of retail sales conducted online fell to 26% in March 2022, its lowest proportion since February 2020.
In London, FTSE 100-listed variety goods store chain B&M European Value Retail said Friday its long-time Chief Executive Simon Arora is stepping down next year.
B&M European 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.
Russian miner Petropavlovsk said 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.
In the March-quarter, total gold production increased 8% on the year before to 103,000 ounces. Own-mined gold production dropped 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 ounces from USD1,789.
Chief Executive Denis Alexandrov said: "Despite the conflict in Ukraine and related sanctions that have led to various challenges at the corporate level, our mines operated without disruption throughout the period.
"In this rapidly changing environment, we continue to monitor the situation to take all necessary steps to ensure the continuity of our business and compliance with sanctions, and to plan for contingencies that may adversely impact our operations."
Petropavlovsk said, 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.
Ukraine-focused iron ore pellet producer Ferrexpo said its production in 2021 - before the Russian invasion of Ukraine - was flat, but its revenue saw a boost from higher prices.
FTSE 250-listed Ferrexpo recorded a pretax profit of USD1.07 billion, rising from USD747.9 million in 2020.
Revenue rose to USD2.52 billion from USD1.70 billion.
Pellet production was flat at 11.2 million tonnes, while its sales volume dropped 6% to 11.4 million tonnes from 12.1 million tonnes.
Ferrexpo pointed out, however, that average Platts CFR 62% iron ore fines price rose to USD160 per tonne from USD109 per tonne in 2020. For higher grade iron, prices increased to USD186 per tonne from USD122.
Chief Executive Jim North said: "The events of early 2022 have changed Ukraine significantly, but our business model and our resolve remains unchanged. We continue to produce high grade iron ore pellets, and we are continuing to invest in growing our business for the future, which will help further support the Ukrainian economy to rebuild."
Currency manager Record ended its financial year with over USD83 billion in assets under management equivalent, but the total had slipped over the final quarter of financial 2022.
Record ended March 31 with USD83.1 billion AuME, down from USD85.3 billion at December 31.
"As expected, increased uncertainty in financial markets linked predominantly to the war in Ukraine impacted the value of some clients' underlying portfolios, reflected by a decrease in AuME of USD2.3 billion, or 2.7%, from market movements over the quarter," Chief Executive Leslie Hill explained.
Over the course of the year, however, Record noted its AuME advanced by 3.7%, or USD3,0 billion.
The dollar was mostly higher early Friday due to the hawkish tone from the US central bank. Sterling was quoted at USD1.2994, lower than USD1.3040 at the London equities close on Thursday. The euro traded at USD1.0845 early Friday, down against USD1.0852 late Thursday.
In Asia on Friday, the Japanese Nikkei 225 index closed down 1.6%. In China, the Shanghai Composite was up 0.2%, while the Hang Seng index in Hong Kong was 0.4% lower. The S&P/ASX 200 in Sydney ended down 1.6%.
Japan's core consumer prices rose at the fastest rate in over two years in March, reflecting the soaring cost of energy and other products, official data showed Friday.
The core consumer price index, which excludes fresh food, edged up 0.8% year-on-year, in line with market expectations.
The index has marked increases for seven straight months, reflecting pandemic distortions including supply chain issues and, more recently, the effects of the war in Ukraine.
However, the figure remains far below the Bank of Japan's target of 2.0%, seen as necessary to turbocharge the world's third-largest economy, and the recent increases are viewed as driven by exceptional rather than durable circumstances.
Japan also had the sharpest rise in private sector output for four months, as the flash composite purchasing managers' index rose to 50.9 points in April, up from March's final figure of 50.3, according to new figures from au Jibun Bank.
Against the yen, the dollar was quoted at JPY127.87, down from JPY128.45.
Gold was quoted at USD1,953.10 an ounce early Friday, higher than USD1,945.88 on Thursday evening. Brent oil was trading at USD106.35 a barrel, down from USD108.22 late Thursday.
The economic events calendar on Friday has PMI readings from the eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST.
By Paul McGowan; paulmcgowan@alliancenews.com
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