FTSE 100 leads European losses, insurance stocks offer some relief
9.07am: FTSE 100 leads European losses, insurance stocks offer some relief
The FTSE 100 Index remains on the backfoot this morning, leading European losses by being dragged 0.5% lower to 7,890.
Entain took a surprising 3% dip given its relatively strong earnings, while Endeavour, Rio Tinto, Antofagasta and others in the heavy industries are tallying up losses across the board.
On the other hand, the insurance segment appears buoyant, with Aviva adding 3.5%, and Prudential, Legal & General and Admiral also in the green.
Victoria Scholar, head of investment at interactive investor said: The FTSE 100 is leading the declines across Europe with miners like Rio Tinto languishing near the bottom of the basket following a drop in the Shanghai Composite and the Hang Seng overnight.
There were milder declines for Paris and Frankfurt at the open.
In the FX markets, Tuesday’s hawkish statement from the US Federal Reserve should keep the greenback in a leading position in the longer term, though the GBP/USD pair has actually gained around 15 pips so far.
The pound is also looking strong against the euro, with the EUR/GBP pair currently changing hands at 88.96p.
This morning we heard that the British Chambers of Commerce reckons the UK will avoid a recession this year, but sluggish growth means the economy won’t recover to pre-pandemic levels until the final quarter of 2024.
The lobby group upgraded its outlook after better-than-expected household spending and corporate investment at the end of 2022.
Yet housing market woes persist. As outlined below, the RICS UK Residential Market Survey fell to -48 in February 2023 from -46 in January, the lowest reading since April 2009 due to higher borrowing costs and a surge in the cost of living dampening demand and deterring would-be buyers.
Apart from RICS, there’s little else on the UK economic calendar to watch out for today.
8.39am: Sterling gains against US dollar
The US dollar headed into Thursday’s session near recent highs, though fell back around 10 pips as the day got underway.
Hawkish comments from Federal Reserve chair Jerome Powell have been a tailwind for the greenback of late.
As he said on Tuesday: “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.”
This hawkish rhetoric is causing a persistently strong US dollar- in a year where we were supposed to see a retraction, the US Dollar Index (DXY) has surged nearly 3.5% since February 1.
UK Monetary Policy Committee (MPC) member Catherine Mann said earlier this week the pound risked coming “under pressure” from hawkish policy overseas, which was certainly evident when GBP/USD dipped 1.6% to 1.182 on Tuesday.
Though the past couple of days has seen the pair clawback a bit. This morning, GBP/USD added 0.25% to 1.188, though long-term projections remain bearish.
GBP/USD — Source: capital.com
“We continue to favour EUR/GBP trading up to and staying near 0.90 over coming months given the risk of the Bank of England shifting to a pause far earlier than the Fed or the ECB,” said analysts at ING.
8.27am: Entain hits top end
Entain PLC (LSE:ENT) reported profits at the top end of expectations as growth in its retail operations offset a slowdown in online earnings.
The owner of Ladbrokes and Coral said underlying earnings (EBITDA) rose 13% to £993mln in the past calendar year, from £881.7mln a year before, at the top end of upgraded guidance given in February.
Online EBITDA fell 8% to £828mln, reflecting strong comparisons during lockdowns and regulatory changes in major markets, but the picture was brighter in betting shops, where underlying EBITDA for the retail business jumped 319% to £280mln.
With the dividend resuming this past year after being paused during the pandemic, a second interim dividend of 8.5p per share was paid, taking the payout for the year to 17.0p.
Looking ahead, the FTSE 100-listed group said despite “some regulatory headwinds, we remain excited by the opportunities ahead“.
“We have started 2023 with positive underlying momentum and we remain confident in our long-term strategic prospects.”
7.00am: FTSE opens lower
The FTSE 100 is expected to open in negative territory on Thursday following a mixed showing in the US after Federal Reserve chair, Jerome Powell, completed his two day grilling to lawmakers in Washington.
Spread betting companies are calling the lead index down by around 18 points.
Ipek Ozkardeskaya at Swissquote Bank noted the “second day of testimony was as hawkish as the first one, with one little exception.”
“Powell added a very small tweak to his Tuesday language, and said that the data will determine whether the Fed would increase the pace of the interest rate hikes, BUT that ‘no decision has been made on this’ yet.”
“If Powell’s intention was to cool down the 50bp hike bets yesterday, it didn’t go according to the plan. That probability went above 80% yesterday, as both the ADP report and the JOLTS data came in hotter-than-expected.”
Jobs data will be the main focus for the rest of the week with US weekly jobless claims figures today and non-farm payrolls figures tomorrow.
The Dow closed Wednesday down 58 points, 0.2%, at 32,799, while the Nasdaq Composite added 46 points, 0.4$, to 11,576 and the S&P 500 added 8 points, 0.1%, to 3,992.
In Tokyo on Thursday, the Nikkei 225 index was up 0.6%. In China, the Shanghai Composite was down 0.1%, while the Hang Seng index in Hong Kong was up 0.1%.
Back in London and the early focus will be results from Aviva and Entain.