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LONDON MARKET MIDDAY: Stocks fall on higher for longer rate worries

27th Sep 2023 12:12

(Alliance News) - Stock prices in London were in the red at midday on Wednesday as markets remained uneasy about the prospect of global interest rates staying elevated for longer.

The FTSE 100 index was down 22.94 points, or 0.3%, at 7,602.78. The FTSE 250 was down 55.60 points, or 0.3%, at 18,281.05, and the AIM All-Share was virtually flat at 730.07.

The Cboe UK 100 was down 0.3% at 759.43, the Cboe UK 250 was down 0.4% at 15,919.08, and the Cboe Small Companies was down 0.3% at 13,238.67.

A member of the European Central Bank board said he has not ruled out another interest rate hike in the fight against inflation, an interview published on Wednesday revealed.

One could "not necessarily" say that the latest phase of key interest rate hikes had reached its peak, ECB board member Frank Elderson told the news agency Market News International.

The central bank raised key interest rates for the 10th time in a row earlier this month, with the aim of pushing inflation back to the targeted level of 2% in the medium term.

The following week, the US Federal Reserve left its benchmark interest rate at a 22-year high on Wednesday but signalled it still expects one more hike before the end of the year and fewer cuts than previously indicated next year.

Fed Chair Jerome Powell, speaking at a press conference following the decision, pledged to keep rates restrictive until confident inflation was moving down to 2%, saying there was a "long way to go".

Russ Mould, investment director at AJ Bell, said the rates outlook, a looming threat of a government shutdown in Congress, a weak US consumer confidence reading overnight and continued industrial action by the country's autoworkers was creating a "mood of instability" which was "not a happy cocktail for stocks".

US consumer confidence declined for the second consecutive month in September, data on Tuesday showed, as people's short-term outlook for business, the labour market and income conditions worsened.

The Conference Board's consumer confidence index fell to 103 this month, down from an upwardly revised 108.7 in August.

On Monday, the Moody's ratings agency warned that a US government shutdown this weekend, amid political deadlock in Congress, would have negative implications for the country's top-tier credit rating.

In London, Centrica was one of the worst blue-chip performer at midday, down 3.8% after Morgan Stanley cut the British Gas-owner to 'equal-weight'.

Land Securities was down 2.7% despite saying that customer demand for its office space in London has remained strong since the end of March.

As a result, over the first five months of Landsec's current financial year, occupancy in its Central London portfolio has increased by a full percentage point to 96.9%. Landsec said it has signed, or is close to signing, GBP17 million in lettings during the period, at 3% ahead of estimated rental value.

Significantly, Landsec said its office estate near Victoria Station, which makes up half of its Central London business, is now 100% let.

In the FTSE 250, Ithaca Energy was the best performing stock, up 8.6%. Alongside Equinor UK, it will invest USD3.8 billion on the development of Rosebank on the UK continental shelf.

The oil field was approved by the UK government's regulator, the North Sea Transition Authority. The UK government expects billions of pounds to be added into the economy from the project, which has been criticised by environmentalist groups.

"The Rosebank field will produce in excess of 21 million square cubic feet of natural gas every day, the equivalent to the daily use of Aberdeen city," Ithaca said.

First production is anticipated between 2026 and 2027.

Elsewhere in London, Alfa Financial Software surged 13% after it confirmed it is in preliminary discussions with Thomas H Lee Partners regarding a possible takeover offer.

The software developer noted that there is no certainty that a firm offer will be made. It did not disclose any further details.

On AIM, Tasty tumbled 25% after the restaurant owner and operator reported a widened loss in the half-year ended June 25 amid higher operating expenses.

In the 26 weeks ended June 25, the company's pretax loss widened to GBP6.2 million from GBP2.7 million the year prior. Its revenue remained largely flat, edging up to GBP21.7 million from GBP21.5 million.

However, Tasty's operating expenses jumped to GBP5.2 million from GBP2.8 million and its cost of sales rose to GBP21.8 million from GBP20.4 million.

Tasty explained that the casual dining market is facing inflationary pressures on food, labour and utility costs, and said these headwinds are expected to continue through the second half of 2023.

In European equities on Wednesday, the CAC 40 in Paris was flat, while the DAX 40 in Frankfurt was down 0.2%.

Stocks in New York were called higher after a sharp sell-off on Tuesday. The Dow Jones Industrial Average was called up 0.2%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 0.3%.

The greenback was stronger on Wednesday afternoon. The pound was quoted at USD1.2151 at midday on Wednesday in London, down from USD1.2163 at the London equities close on Tuesday. The euro stood at USD1.0557, lower against USD1.0576. Against the yen, the dollar was trading at JPY149.19, higher compared to JPY148.91.

Brent oil was quoted at USD93.41 a barrel at midday in London on Wednesday, up from USD92.37 at the London equities close on Tuesday. Gold was quoted at USD1,895.50 an ounce, sharply lower against USD1,903.23.

By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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