LONDON MARKET MIDDAY: Stocks red, pound fall amid rate rise fears

Fri, 17th Feb 2023 12:07

(Alliance News) - Stock prices in London were lower at midday on Friday, amid renewed rate rise fears and a poor share price performance from bank NatWest.

"It was only days ago that investors seemed confident we would only get one or two more small increases in US interest rates and then the Federal Reserve might start cutting rates later in the year. The rhetoric has now changed," said Russ Mould, investment director at AJ Bell.

The FTSE 100 index was down 25.75 points, or 0.3%, at 7,986.27. The FTSE 250 was down 90.19 points, or 0.5%, at 20,091.26, and the AIM All-Share was down 2.26 points, or 0.3%, at 867.33.

The Cboe UK 100 was down 0.3% at 799.25, the Cboe UK 250 was down 0.2% at 17,516.15, and the Cboe Small Companies was down 0.3% at 13,995.09.

Two Federal Reserve officials, Loretta Mester and James Bullard, on Thursday spoke in favour of a 50 basis-point interest rate hike from the US central bank in its next meeting in March.

The hawkish rhetoric added to fears among markets that interest rates may stay higher for longer, sending stocks lower.

In addition, a positive surprise from UK retail sales figures on Friday was quickly discounted by markets.

Retail sales volumes are estimated to have increased by 0.5% in January from December, reversing a revised fall of 1.2% in December from November. Markets had expected retail sales volumes to fall by 0.3% monthly, according to FXStreet.

"January's increase in retail sales wasn't enough to reverse a steep fall around Christmas, and the big picture is that sales have been on a downward trend," said James Smith, developed markets economist at ING.

The pound was quoted at USD1.1934 at midday on Friday in London, lower compared to USD1.2004 at the close on Thursday.

In London, NatWest remained the worst blue-chip performer at midday, down 6.3%, despite announcing a rise in annual operating profit and a fresh GBP800 million share buyback programme.

The bank reported pretax operating profit of GBP5.13 billion in 2022, up from GBP3.84 billion the previous year.

This came as net interest income jumped to GBP9.84 billion from GBP7.53 billion, and non-interest income climbed to GBP3.31 billion from GBP2.89 billion.

NatWest said its return on tangible equity in the year was 12.3%. Its CET1 ratio was 14.2%, 170 basis points lower than at January 1, 2022, reflecting distributions and linked pensions accruals of around 310 basis points, it said.

Segro, meanwhile, was the FTSE 100's best performer at midday, up 4.0%.

The real estate investment trust said it swung to an annual loss due to a property loss, despite revenue rising, and lifted its dividend by 8.2% amid higher income.

Segro said it swung to a pretax loss of GBP1.93 billion in 2022 from a profit of GBP4.06 billion in 2021. This came as it booked a realised and unrealised property loss of GBP1.95 billion in the year, compared to a gain of GBP3.67 billion the year prior.

More positively, revenue rose 8.4% to GBP669 million from GBP546 million as net rental income was up 19% to GBP522 million from GBP439 million a year ago, driven by strong like-for-like rental growth of 6.7% and development completions.

In the FTSE 250, Direct Line lost 1.1% after it named former Moneysupermarket.com Chief Executive Officer Mark Lewis as an independent non-executive director, joining on March 30.

Shares in Moneysupermarket.com were down 0.8%.

Elsewhere in London, EnQuest dropped 11% after it said it expects to report that operating expenditure increased faster than output during 2022.

The UK and Malaysia-focused oil and gas producer said average production in 2022 was 47,259 barrels of oil equivalent per day, up 6.4% from 44,415 in 2021.

However, citing high inflation, Enquest expects to report operating expenditure of around USD400 million, increased by 25% from USD321.0 million in 2021.

Looking forward, EnQuest said average net production is expected between 42,000 boepd and 46,000 boepd in 2023, down from 2022's level.

On AIM, Purplebricks plunged 20% after it said its turnaround plan has involved more disruption to the sales field "than originally envisaged" in order to achieve the required costs saving and efficiency improvements.

The estate agency has booked GBP1.2 million in one-off exceptional costs during the second half of the financial year ending April 30 so far, as a result. In addition, it said that instruction numbers in its third quarter were lower than previous expectations due to the disruption.

In response to this, Purplebricks said it has identified GBP4 million in further annual cost savings.

In European equities on Friday, the CAC 40 in Paris was down 0.8%, while the DAX 40 in Frankfurt was down 1.1%.

The euro stood at USD1.0625 midday Friday, lower against USD1.0674 at the London equities close on Thursday. Against the yen, the dollar was trading at JPY135.01, sharply higher compared to JPY134.08.

Stocks in New York were called lower, with the Dow Jones Industrial Average called down 0.5%, the S&P 500 index down 0.7%, and the Nasdaq Composite down 1.0%.

Brent oil was quoted at USD82.65 a barrel at midday Friday in London, down significantly from USD85.13 late Thursday. Gold was quoted at USD1,823.70 an ounce, sharply lower against USD1,835.31.

By Heather Rydings, Alliance News senior economics reporter

Comments and questions to newsroom@alliancenews.com