LONDON MARKET CLOSE: Stocks fall as Fed keeps markets "on edge"

(Alliance News) - London's FTSE 100 ended lower on Monday, hit by sizeable share price declines in the housebuilding sector, with heavy falls in New York equities also knocking confidence as markets kicked off the week in nervous fashion.

Despite a largely positive start to 2022, markets have since been faced with the prospect of a sooner-than-expected Federal Reserve interest rates hike, following last week's release of a hawkish set of minutes.

The FTSE 100 index ended down 40.03 points, or 0.5%, at 7,445.25. The mid-cap FTSE 250 index closed down 351.44 points, or 1.5%, at 23,001.81. The AIM All-Share index fell 17.07 points, or 1.4%, at 1,170.27.

The Cboe UK 100 index ended down 0.3% at 740.02. The Cboe 250 closed down 1.2% at 20,569.58, while the Cboe Small Companies lost 0.3% at 15.524.62.

In Paris, the CAC 40 stock index ended down 1.4%, while the DAX 40 in Frankfurt lost 1.1%.

"It's been a broadly weaker session for European shares today, as we start a new week with higher yields and inflation worries continuing to temper appetite for risk. The prospect of a faster pace of US rate rises has continued to keep markets on edge, with losses accelerating as US markets reopened after the weekend," CMC Markets analyst Michael Hewson commented.

The International Monetary Fund on Monday warned emerging economies should gird for possible rough times as the US Federal Reserve prepares to raise interest rates and world economic growth slows because of the Omicron variant of Covid-19.

Omicron, which seems to cause less severe disease than previous strains of the coronavirus, is causing countries to reinstitute health measures that hamper economic growth.

"Given the risk that this could coincide with faster Fed tightening, emerging economies should prepare for potential bouts of economic turbulence," IMF economists said, as these countries are also confronting elevated inflation and substantially higher public debt.

The pound was quoted at USD1.3567 late Monday, down from USD1.3572 at the London equities close Friday. The euro stood at USD1.1327, lower against USD1.1343. Against the Japanese yen, the dollar was trading at JPY115.14, down from JPY115.64.

In London, housebuilders were hit by the unveiling of UK cladding plans.

Developers in the UK must agree a GBP4 billion plan to fix dangerous cladding on low-rise flats by early March or risk new laws forcing them to act, Housing Secretary Michael Gove has said.

The Cabinet minister threatened that he is "prepared to take all steps necessary" to fix the "broken system" in a letter to the industry ahead of detailing the plans on Monday.

UBS said the move has the potential to have a "significant" effect on the sector.

Barratt Developments fell 4.4%, Berkeley ended down 3.6%, while Taylor Wimpey shares declined 3.0%. Property listing portal Rightmove was also among those hit, ending 4.2% lower.

Industrial firms ended markedly lower. Equipment rental company Ashtead ended down 5.9%, while thermal energy management and pumping systems manufacturer Spirax-Sarco lost 6.5%.

Elsewhere in London, there remained signs of Omicron-related optimism, with picture house operator Cineworld rising 8.0%, the best midcap performer. Pub operator Mitchells & Butlers adding 2.1%.

On AIM, Chariot shares jumped 44% as the Africa-focused transitional energy company reported "significant gas accumulations" at the Anchois-2 well in Morocco. Chariot has a 75% stake in the asset.

Also in the oil and gas space, Canadian Overseas Petroleum added 15%. The exploration and production company made a "significant conventional light oil discovery" at its leasehold in Converse and Natrona Counties, Wyoming.

THG shares suffered another heavy decline, closing down 5.8%.

The Times reported THG has given the UK Financial Conduct Authority information that it thinks will show that stockbrokers and hedge funds have worked together to drive down the e-commerce company's shares.

According to the Times, THG has passed on what it believes to be irregular stock market trading and short-selling data to the watchdog.

THG Chief Executive Matthew Moulding is particularly suspicious of trading on October 12, the Times said. THG shares dropped 35% that day, as the company held its first Capital Markets Day. The meeting was meant to reassure shareholders but instead it spooked them.

In New York on Monday, the Dow Jones Industrial Average was down 1.2% at the time of the London equities close. The S&P 500 was down 1.3%, and the Nasdaq Composite shed 1.8%.

"With Fed chair Jay Powell due to testify tomorrow to US politicians at his reconfirmation hearing, and a host of FOMC voting members due to speak this week including Loretta Mester and Esther George, also tomorrow, we'll get to find out how wedded to the rate hike narrative various committee members actually are," CMC's Hewson added.

On the corporate front, video game publisher Take-Two Interactive plunged 14%. It announced it will buy Zynga, in a deal valuing the mobile games developer behind the Farmville series at around USD12.7 billion.

Brent oil was quoted at USD81.26 a barrel at the London equities close on Monday, down from USD81.99 late Friday. Gold stood at USD1,795.34 an ounce, higher from USD1,791.80.

Tuesday's economic events calendar has the latest British Retail Consortium-KPMG retail sales monitor just after midnight. Focus is also on inflation data from the US and China on Wednesday.

The local corporate calendar has a trading statement from industrial and electronics products distributor Electrocomponents.

By Eric Cunha; ericcunha@alliancenews.com

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