LONDON MARKET CLOSE: European stocks sink as Fed signals tightening

(Alliance News) - The FTSE 100 went into reverse on Wednesday - following global peers - as sentiment was rocked due to worries over tightening US monetary policy.

Comments on Tuesday from top Federal Reserve official Lael Brainard "triggered a taper tantrum of sorts in Treasuries and sparked a newfound sense of nervousness" ahead of Wednesday's Federal Reserve minutes, said Briefing.com analyst Patrick O'Hare.

The minutes come as Fed Chair Jerome Powell and other top US central bankers vow to take whatever steps are needed to bring inflation into line. Minutes from the Fed's March meeting are due to be released at 1800 BST.

Fed Governor Brainard, who is considered a dove, on Tuesday spooked traders by saying bringing US inflation down from 40-year highs was of "paramount importance" and that the bank was "prepared to take stronger action" if warranted.

Brainard also said bank policymakers were ready to start reducing its vast bond holdings, which have helped keep borrowing costs down.

The FTSE 100 index closed down 26.02 points, or 0.3%, at 7,587.70 on Wednesday. The mid-cap FTSE 250 index ended down 256.25 points, or 1.2%, at 21,100.73. The AIM All-Share index closed down 8.73 points, or 0.8%, at 1,047.77.

The Cboe UK 100 index closed 0.2% lower at 754.97. The Cboe 250 ended down 1.4% at 18,545.20, and the Cboe Small Companies ended down 0.6% 15,437.79.

In Paris, the CAC 40 index was down 2.2%, while the DAX 40 in Frankfurt fell 1.9%.

The US dollar was the big gainer from Brainard's hawkish shift. The pound was quoted at USD1.3073 on Wednesday evening, down from USD1.3115 at the London equities close Tuesday.

The euro was priced at USD1.0906, down from USD1.0927. Against the yen, the dollar was trading at JPY123.77 in London, up from JPY123.38.

In the US, Wall Street was taking its cue from Europe with a soft open. The Dow Jones Industrial Average was down 0.9%, the S&P 500 down 1.3%, and the Nasdaq Composite down 2.5%.

In the FTSE 100, Imperial Brands ended the best performer, advancing 3.3%, after the tobacco maker backed annual guidance and added it forecasts a "broadly flat" first-half revenue performance, with tobacco market struggles in Europe offset by progress elsewhere.

Peer British American Tobacco gained 1.2% in a positive read-across.

Imperial Brands said net revenue for the six months ended March 31 is expected to be broadly flat annually on a constant currency basis, in line with expectations.

Interim adjusted operating profit is expected to grow by around 2% on a constant currency basis, benefiting primarily from reduced losses in the Next Generation Product range, which includes Blu. The tobacco performance, meanwhile, will be weighted to the second half.

In the first half of financial 2021, it reported net revenue of GBP3.57 billion. For the whole of that year, it reported revenue of GBP7.59 billion, as well as an organic adjusted operating profit of GBP3.57 billion.

Imperial said it was on track to deliver full-year results in line with revised guidance issued in March. It forecasts a full-year net revenue performance ranging from flat to 1% growth on a constant currency basis. It expects adjusted operating profit growth of around 1%.

Barratt Developments gained 2.1% after it joined four other housebuilders in announcing that it has signed the UK government's Building Safety Pledge.

The deadline for signing the pledge was April 5.

The Building Safety Pledge programme was established by the UK government in the wake of the Grenfell Tower fire in 2017 to make sure that residents of high-rise buildings are safe by removing combustible materials, such as cladding. The pledge commits housebuilders to new guidelines for work on potentially unsafe cladding on buildings between 36 feet and 59ft high.

Remediating, or funding the remediation of buildings, will cost Barratt between GBP350 million and GBP400 million, the Leicestershire, England-based housebuilder explained. This follows a review of buildings above 11 metres, or 36 feet, developed by Barratt in England, Scotland and Wales in the last 30 years.

Rivals Persimmon and Berkeley closed up 1.1% and 1.4%, respectively.

Earlier on Wednesday, peers Redrow and MJ Gleeson announced that they signed the pledge. They gained 1.8% and 4.8%, while Bellway and Crest Nicholson added 2.2% and 2.7%.

Back in the FTSE 100, ITV shed 4.1%. It is interested in launching a bid for soon-to-be privatised UK broadcaster Channel 4, the Telegraph reported on Tuesday.

The Telegraph reported ITV has told ministers it would be interested in making an offer for Channel 4, which has an estimated price tag of GBP1 billion. Channel 4 is to be privatised by 2024.

ITV has turned to Credit Suisse and Robey Warshaw as advisers. No bid has been made yet.

The Telegraph noted ITV could face competition from elsewhere. Sky, Discovery Inc and Paramount Global, which already owns Channel 5 in the UK, could all be interested.

In London's junior market, Osirium Technologies jumped 40%, adding to Tuesday's meteoric rise.

The cybersecurity firm reported a record quarter for bookings in the first quarter of 2022 on Tuesday.

"The group is seeing continued growth in contract values and a return to pre-pandemic levels," it added.

Five contracts secured in the first three months of 2022 are each at a larger value than any individual contract the firm signed in the financial year 2021, Osirium explained

Brent was quoted at USD104.01 a barrel Wednesday evening, down from USD107.07 late Tuesday. Gold stood at USD1,927.10 an ounce, firm from USD1,926.80.

In the international economics events calendar on Thursday, there is Australian trade balance figures overnight, followed by UK Halifax house prices and German industrial production at 0700 BST, eurozone retail sales at 1000 BST and US initial jobless claims at 1330 BST.

In the local corporate calendar, blue chip bookmaker Entain and recruiter Robert Walters will issue first quarter results, while train data firm Tracsis will publish interim results.

By Paul McGowan; paulmcgowan@alliancenews.com

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