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LONDON MARKET CLOSE: Stocks broadly lower with eyes on central banks

30th Jan 2023 17:00

(Alliance News) - Stocks in London closed largely lower on Monday as investors looked nervously ahead to looming interest rate decisions from a number of central banks.

"For the most part 2023 has been smooth sailing for stocks but two icebergs lurk in the waters this week in the form of the Federal Reserve and Bank of England interest rate decisions," said Russ Mould at AJ Bell.

The US Federal Reserve will announce its interest rate decision on Wednesday. The day after, the Bank of England and the European Central Bank will reveal their own respective decisions.

The FTSE 100 index closed up 19.72 points, or 0.3% at 7,784.87 on Monday, boosted by strong performances from retailers J Sainsbury and B&M European Retail which closed up 4.1% and 1.9%, respectively.

The FTSE 250, meanwhile, ended down 98.19 points, or 0.5%, at 19,937.20. The AIM All-Share closed marginally lower at 869.16.

The Cboe UK 100 ended up 0.4% at 778.69, the Cboe UK 250 closed down 0.1% at 17,408.35, and the Cboe Small Companies ended up 0.3% at 13,668.57.

Markets are expecting the two-day Federal Open Market Committee meeting, which begins on Tuesday, to end with a 25 basis point hike.

"That is the safe choice right now and we see no need for the Fed to deviate from its cautious path," said analysts at Brown Brothers Harriman.

In contrast, the BoE and the ECB are expected to hike rates by 50 basis points.

The pound was quoted at USD1.2375 at the London equities close on Monday, down from USD1.2383 at the close on Friday.

However, Chris Turner at ING said, depending on the state of the dollar after the Federal Open Market Committee meeting, GBPUSD "could be pressing 1.2500 by the end of the week."

In the FTSE 100, housebuilders were in the red after the UK government said they have six weeks to agree to a GBP2 billion remediation package for unsafe buildings or face "significant consequences".

Together with an earlier Building Safety Levy, it means developers will pay about GBP5 billion, as the UK government moves to shore up building safety in the wake of the Grenfell fire in London back in 2017.

Among London-listed housebuilders, Taylor Wimpey closed down 1.7%, Barratt Development lost 1.8% and Persimmon all closed 1.4% lower.

Unilever closed 1.3% higher as it named existing board member and Royal FrieslandCampina NV boss Hein Schumacher as its new chief executive.

Schumacher has been CEO of the Amersfoort, Netherlands-based dairy co-operative since 2018. He joined the Unilever board as a non-executive director in October last year.

He will begin as Unilever CEO on July 1, after a one-month handover period. Hein will replace Alan Jope, who announced in September 2022 his intention to retire from the London-based consumer goods company.

Legal & General closed down 2.0%. The life insurance and financial services provider announced Chief Executive Nigel Wilson plans to step down, after more than a decade in post.

L&G has begun the process to appoint a successor, considering both internal and external candidates. Wilson will continue as CEO until his successor starts. It is planned that this process will take around a year.

In the FTSE 250, Computacenter jumped 11% as it ended 2022 with a "record" fourth quarter and said it expects full-year results to slightly ahead of its guidance.

The computer services firm said total revenue, on a gross invoiced income basis, grew by more than 30%, including the effects of acquisitions made in the middle of 2022, and by over 27% in constant currency.

Adjusted pretax profit in the first half of the year against the first half of 2021 was down by 6%, however over the year as a whole pretax profit grew.

"We are therefore pleased with the profit growth which we have subsequently achieved for the year as a whole, and the significant momentum that we will carry into 2023, including in our previous and in-year US acquisitions, which have continued to make good progress, both in terms of profit growth and cash generation," Computacenter added.

In 2021, Computacenter brought in GBP248.0 million of pretax profit on GBP6.73 billion in revenue.

888 plunged 28% as it announced its chief executive has left the company immediately, with online gaming operator also reporting it has suspended some activities in the Middle East amid a customer compliance probe.

The departure of CEO Itai Pazner comes just over two weeks after the company announced Dafna would step down as chief financial officer. Dafna was expected to leave 888 at the end of March. However, 888 on Monday said he will remain in the post until the end of 2023.

In addition, following an initial review, 888 said some of its units in the Middle East region have fallen short in know your client and anti-money laundering compliance measures. 888 said it currently believes the issues are "isolated to this region only".

In European equities on Monday, the CAC 40 in Paris and the DAX 40 in Frankfurt both ended 0.2% lower.

The eurozone's largest economy contracted in the final quarter of 2022 from the third quarter, preliminary figures showed.

According to the Destatis, Germany's gross domestic product fell by 0.2% in the fourth quarter of 2022. Market consensus, according to FXStreet, had expected GDP to remain unchanged from the third quarter.

Franziska Palmas at Capital Economics said the data poured cold water on the recent optimism about the prospects for the eurozone and suggests that a technical recession in both Germany and the eurozone as a whole is "more likely than not after all".

The euro stood at USD1.0867 at the European equities close on Monday, higher against USD1.0857 at the same time on Friday.

Stocks in New York were in the red at the London equities close, with the Dow Jones Industrial Average down 0.2%, the S&P 500 index down 0.7%, and the Nasdaq Composite down 1.4%.

Against the yen, the dollar was trading at JPY130.35 late Monday, higher compared to JPY129.87 late Friday.

Brent oil was quoted at USD85.93 a barrel at the London equities close on Monday, down from USD86.78 late Friday. Gold was quoted at USD1,923.73 an ounce, sharply lower against USD1,930.80 at the close on Friday.

In Tuesday's UK corporate calendar, drinks maker AG Barr and pet supplies retailer Pets at Home will release trading statements.

In the economic calendar, there will be a flash GDP print for the EU at 1000 GMT. The US Federal Reserve will also begin its two-day monetary policy meeting.

By Heather Rydings, Alliance News senior economics reporter

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