London open: Stocks slump on hawkish Fed comments; payrolls eyed

5th Apr 2024 07:57

(Sharecast News) - London stocks fell sharply in early trade on Friday, taking their cue from heavy losses on Wall Street, following hawkish comments from Federal Reserve officials

At 0830 BST, the FTSE 100 was down 1% at 7,898.38.

Richard Hunter, head of markets at Interactive Investor, noted that Thursday's US session began positively after the jobless claims reading came in higher than expected, which spoke to the narrative of a further reason for interest rate cuts.

"However, subsequent comments from several Federal Reserve officials cast aspersions on the current situation, with one suggesting that if inflation continues to track sideways the need for any rate cuts whatsoever this year could be called into question," he said.

"Another quoted outsized price increases in housing services as being a major barrier in the fight against inflation, while in the background strong wage growth brings its own price pressure."

Investors were also wary ahead of the release of the latest US non-farm payrolls report, which is due at 1330 BST, along with the unemployment rate and average earnings.

Kathleen Brooks, research director at XTB, said: "The market is expecting an increase of 214k for March. This is slightly lower than the 275k jobs growth for February. As always with payrolls, it is not just the payrolls figure that matters for the Fed. The unemployment rate and earnings data are also key."

The unemployment rate is expected to decline slightly to 3.8% from 3.9% in February, and average hourly earnings are expected to rise by 0.3% last month and increase by 4.1% on an annual basis.

On home shores, figures from Halifax showed that house prices fell for the first time in six months in March as the drop in mortgage rates stalled.

House prices declined by 1% on the month in March, following five months of growth and a 0.3% increase in February.

On the year, house price growth eased to 0.3% in March from 1.6% a month earlier.

The average price of a home stood at £288,430, down from £291,338 in February.

Kim Kinnaird, director of Halifax Mortgages, said: "That a monthly fall should occur following five consecutive months of growth is not entirely unexpected, particularly in view of the reset the market has been going through since interest rates began to rise sharply in 2022. Despite this house prices have shown surprising resilience in the face of significantly higher borrowing costs.

"Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed-term deals are yet to feel the full effect of higher interest rates. This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly.

"Financial markets have also become less optimistic about the degree and timing of Base Rate cuts, as core inflation proves stickier than generally expected. This has stalled the decline in mortgage rates that had helped to drive market activity around the turn of the year."

Imogen Pattison, assistant economist at Capital Economics, said: "Looking ahead, we expect mortgage rates to remain higher than in January and February and hover at just under 5% over the coming months, which will subdue demand and prevent further gains in house prices.

"But given public house price expectations are positive, we doubt prices will fall much either. And if we are right to think that Bank Rate will be cut further than most forecasters anticipate, mortgage rates will fall to below 4% by this time next year, giving house prices a fresh boost."

In equity markets, travel stocks were under the cosh, with BA and Iberia owner IAG, easyJet, Carnival and Tui all down amid growing geopolitical tensions.

Elsewhere, Scottish Mortgage Investment Trust fell, likely due to its exposure to US technology.

Oil and gas giant Shell nudged higher as it raised its short-term production forecasts and said it expects an increase in margins as it updated its guidance for the first quarter.

Market Movers

FTSE 100 (UKX) 7,898.38 -0.97%

FTSE 250 (MCX) 19,730.09 -0.72%

techMARK (TASX) 4,446.70 -0.59%

FTSE 100 - Risers

BAE Systems (BA.) 1,327.00p 1.07%

Shell (SHEL) 2,774.50p 0.38%

RELX FINANCE BV 3.375% GTD NTS 20/03/33 (BW73) 99.72p 0.00%

Glencore (GLEN) 462.90p -0.14%

Fresnillo (FRES) 539.50p -0.19%

BP (BP.) 507.80p -0.22%

Centrica (CNA) 126.50p -0.28%

Smith (DS) (SMDS) 409.60p -0.29%

Smith & Nephew (SN.) 962.80p -0.31%

Admiral Group (ADM) 2,626.00p -0.42%

FTSE 100 - Fallers

International Consolidated Airlines Group SA (CDI) (IAG) 171.30p -2.97%

easyJet (EZJ) 554.20p -2.74%

Scottish Mortgage Inv Trust (SMT) 862.20p -2.47%

GSK (GSK) 1,597.50p -2.44%

Halma (HLMA) 2,261.00p -2.33%

Ocado Group (OCDO) 407.60p -2.30%

Entain (ENT) 780.00p -2.18%

DCC (CDI) (DCC) 5,530.00p -2.12%

F&C Investment Trust (FCIT) 982.00p -2.00%

Croda International (CRDA) 4,579.00p -1.97%

FTSE 250 - Risers

Elementis (ELM) 152.60p 2.55%

Ferrexpo (FXPO) 46.00p 2.22%

Hammerson (HMSO) 28.40p 2.08%

Helios Towers (HTWS) 95.00p 1.93%

QinetiQ Group (QQ.) 360.00p 0.84%

Pennon Group (PNN) 657.00p 0.69%

NextEnergy Solar Fund Limited Red (NESF) 71.95p 0.63%

Breedon Group (BREE) 390.00p 0.52%

Herald Investment Trust (HRI) 2,115.00p 0.48%

Ibstock (IBST) 149.00p 0.40%

FTSE 250 - Fallers

Chemring Group (CHG) 351.00p -3.44%

Petershill Partners (PHLL) 191.20p -3.43%

Carnival (CCL) 1,078.00p -2.84%

Jupiter Fund Management (JUP) 86.20p -2.82%

TUI AG Reg Shs (DI) (TUI) 648.00p -2.48%

Victrex plc (VCT) 1,298.00p -2.41%

RHI Magnesita N.V. (DI) (RHIM) 3,420.00p -2.29%

Allianz Technology Trust (ATT) 343.50p -2.14%

Templeton Emerging Markets Inv Trust (TEM) 151.80p -2.06%

Domino's Pizza Group (DOM) 334.80p -2.05%