LONDON MARKET CLOSE: Bond fears push Europe lower before Powell speech

(Alliance News) - Stock prices in London ended Thursday in the red, with traders unsettled as bond market concerns continue to stalk equity markets.

Investors will be looking to US Federal Reserve Chair Jerome Powell to calm bond market nerves as he speaks at the virtual Wall Street Journal Jobs Summit at 1705 GMT.

"European markets have followed their US and Asian counterparts lower, with markets looking for guidance from Powell over how the Fed will seek to ease the recent rise in yields," IG Markets analyst Joshua Mahoney commented.

"Rising yields increase the cost of borrowing, damaging economic prospects and lessening demand for equities. The volatility seen in stock markets of late does serve to highlight the potential detrimental impact if yields are allowed to rise rapidly over the near-term. Thus, today's appearance from Powell provides a perfect platform to prepare markets for a potential shift in asset purchases when the Fed meet in two weeks' time."

The FTSE 100 index closed down 24.59 points, or 0.4%, at 6,650.88 on Thursday. The FTSE 250 ended down 140.09 points, or 0.7%, at 21,296.23. The AIM All-Share fell 16.07 points, or 1.4%, at 1,172.82.

The Cboe UK 100 ended down 0.2% at 663.23, the Cboe UK 250 closed down 0.5%, at 18,988.28, but the Cboe Small Companies ended 0.5% higher at 13,541.77.

The DAX 30 in Frankfurt fell 0.2%. The CAC 40 in Paris spent most of the day in the red but ended marginally higher.

Equities in New York had a topsy-turvy morning, coming out of the blocks positively before giving up those gains.

The tech-heavy Nasdaq Composite was in the red at the time of the closing bell in London, down 0.2%. The Dow Jones Industrial Average and S&P 500 were both 0.2% higher.

"US stocks are awaiting Fed Chair Powell's pivotal moment of the trading week. It is all about the bond market and Fed Chair Powell will likely acknowledge he is watching the developments with both the short and long end of the Treasury curve," OANDA analyst Edward Moya noted.

"For stocks to get their groove back and focus on the Covid vaccine driven outlook, Powell needs to send a stronger dovish commitment than last week."

In London, Reckitt Benckiser ended up 3.0%, after Societe Generale boosted the Air Wick and Dettol owner to Buy from Sell.

Miner Antofagasta was at the other end of the large-caps, down 6.2%.

CMC Markets analyst Michael Hewson noted base metal prices came under pressure on Thursday, with copper "at a one-week low".

Share price gains for building materials group CRH and insurer Aviva helped spare the FTSE a deeper decline on Thursday. CRH ended up 2.3% and Aviva rose 1.2%.

CRH said it delivered a robust performance in a challenging environment caused by Covid-19 related disruption in key construction markets of North America and Europe.

For 2020, revenue was USD27.6 billion, down 1.8% from USD28.1 billion in 2019 and profit before tax from continuing operations was USD1.66 billion, down 24% from USD2.18 billion.

Aviva said it will sell its remaining Italian life and general insurance businesses for EUR873 million in cash and promised to return the proceeds of its programme of streamlining the company to shareholders.

Aviva will sell its general insurance business in Italy to Germany's Allianz for EUR330 million and life insurance business to French insurance firm CNP Assurances for EUR543 million.

Allianz shares closed 0.7% higher in Frankfurt on Thursday.

Among London-listed mid-caps, engineering firms Weir Group and Renishaw ended 5.6% and 4.9% lower. The duo will be promoted to the FTSE 100 later in March following Wednesday's index review. Making way for them are grocer Wm Morrison and utility Pennon Group. Morrisons and Pennon ended 1.0% and 2.4% higher.

Boot maker Dr Martens, which will join the mid-cap index, ended 0.5% lower.

Takeaway meals app Deliveroo chose London for its hotly anticipated stock market listing, a boost for the UK capital's financial sector which has been roiled by Brexit.

Deliveroo, in line with other home-delivery companies such as Just Eat Takeaway.com, has seen demand soar in the past year owing to lockdowns during the coronavirus pandemic.

Just Eat Takeaway.com shares closed 3.1% lower on Thursday.

Sterling was quoted at USD1.3989 at the time of the London equities close Thursday, largely unchanged from USD1.3988 late Wednesday.

The euro stood at USD1.2047 at the European equities close on Thursday, down from USD1.2077 on Wednesday. Against the Japanese yen, the dollar was trading at JPY107.56, up from JPY106.87.

"The US dollar index is up on the session as it seems the mild rebound in the 10-year yield is helping the currency. In recent months the dollar has been a popular safe-haven play, seeing the US equity markets have retreated recently, it is possible the dollar's demand has risen as a result," CMC Markets analyst David Madden noted.

"Things are looking more positive on the health front as US President Biden said there will be enough vaccine supplies to vaccinate every adult in the country by May - two months ahead of schedule. The vaccine update feeds into the recovery story."

An ounce gold fetched USD1,718.65 at the time of the London equity market close on Thursday, from USD1,722.45 at the same time on Wednesday. Brent oil was quoted at USD67.11 a barrel, improved from USD64.16.

Friday's economic calendar has German factory orders at 0700 GMT, the UK Halifax house price index at 0830 GMT and the eagerly-awaited US jobs report for February at 1330 GMT.

The UK corporate calendar has annual results from stock exchange operator London Stock Exchange Group, plastics and fibre products manufacturer Essentra and Irish lender AIB Group.

By Eric Cunha; ericcunha@alliancenews.com

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