FTSE 100 closes down 55
Retail stocks hit by weak sales data and DFS warning
Bank of England only votes 5-3 to keep rates on hold
FTSE 250 tanks 421 pts
FTSE 100 closed down around 55 points at 7,419 as retail and resource stocks weighed and the mid-cap index suffered the worst one-day drop in year.
FTSE 250, seen as a better gauge of the UK economy and domestic issues, tanked 421 points, at 19,553 - a drop of 2.11%.
It comes as there was an unexpected hint of a rate rise in the UK after three of the eight strong Bank of England Monetary Policy Committee voted for an interest rate rise, it emerged.
Laith Khalaf, analyst at broker Hargreaves Lansdown noted that sterling had "jumped up" in response, and that the market was now pricing in a one in three chance of an interest rate rise by the end of the year, up from a one in twenty chance yesterday.
In London. retailers got pummelled as official ONS numbers showed sales fell 1.2% last month. Next (LON:NEXT) also dropped 6.14% to 4,037p after a target price downgrade from Credit Suisse.
On FTSE 100 , the biggest faller was Fresnillo (LON:FRES) down 7.26% to 1,558p as gold fell 1.64%.
Ashtead Group (LON:AHT) was the biggest gainer, adding 1.46% to 1,600p
2.55pm... Only two FTSE 100 companies in blue as index tumbles
London's blue chip index tumbled as retail stocks reeled from a dismal trading statement from furniture maker DFS Furniture Group PLC (LON:DFS), a big downgrade for Next Plc and worse than expected retail sales in May.
DFS shed 21% to 198p as it warned trading had worsened in recent weeks with people starting feel the pinch of higher inflation and stagnant wages.
That was seemingly confirmed by the offical ONS numbers, which showed sales fell 1.2% last month. Next meanwhile dropped almost 7% as Credit Suisse slashed its target price to 3,956p from 4,250p.
Other retailers were also under the cosh,which had a big impact on the UK-focused FTSE 250.
The index was down almost 2% with Dunelm PLC (LON:DNLM) off by 6% to 601.5p, Ted Baker (LON:TED) 6% lower at 2,333p and WH Smith Plc (LON:WMSH) 4% down to 1,716p.
On the FTSE100 only HSBC PLC (LON:HSBA) and London Stock Exchange PLC (LON:LSE) made gains and both were up by less than 1%. HSBC was boosted by an investors presentation.
FTSE 100 losers included housebuilder Persimmon PLC (PLC) down 7,6% to 2,237p as it went ex-dividend.
Gold and silver miner Fresnillo PLC (LON:FRES) retreated 6.2% to 1,576p as the dollar rallied on the rate rise in the US yesterday. Gold and to a lesser extent silver traditionally move in the opposite direction to US interest rates and bond yields.
British Airways owner IAG PLC (LON:IAG) also suffered as it revealed the IT fiasco that grounded its planes over the Bank Holiday weekend had cost it £80mln with the bill likely to rise further.Shares fell 4.7% to 577.3p.
2.00pm ... Wall Street also heading for tough start
London is unlikely to get any help for the US, with spread bet firms suggesting the Dow Jones Industrial Average will shed 75 points when trading gets undray.
The interest rate rise to 1.25% announced last night was widely expected, but the hawkish tone adopted by Fed chair Janet Yellen was a surprise though on reflection the percentage of commentators that now think there will another rate rise in September fell.
1pm .. FTSE 100 in doldrums but pound surges on rate hike possibility
Three members of the Bank Of England Monetary Policy Committee voting for a rate rise at their latest meeting has sent the pound shooting up up to US$1.274 against the dollar, but it do es not necessarily mean the Bank will act says Howard Archer at E&Y Item CLub.
"Despite the closeness of the June vote, it is far from certain that interest rates will rise in the near term.
"With the UK economy struggling, economic and political uncertainty magnified by the election result, and earnings growth very weak, a compelling case can still be made for the Bank of England to hold off from any interest rate hike."
FTSE 100 dwon 79 at 7,395.
Noon... London shares slump as rate rise fear follows retail gloom
Shares in London were in full scale retreat as three members of the eight strong Bank of England Monetary Policy Committee voted for an interest rate rise at their last meeting.
Worries about rising prices prompted Ian McCafferty and Michael Saunders to join Kristin Forbes in voting to raise rates by to 0.5%.
Overall, the committee voted 5-3 on to keep interest rates on hold at 0.25%.
FTSE 100 slumped 86 points to 7,388.
10.30am …FTSE 100 hammered by retail woe
It was a triple whammy for retailers today as a profit warning from sofa maker DFS and poor retail sales figures for May added to concern for consumer spending after yesterday’s drop in UK real incomes.
FTSE 100 was down 57 points at 7,417.
“When prices rise faster than wages, it should be no surprise to see household spending come under pressure, and that’s exactly what the UK is seeing right now. Retail sales fell 1.2% in May, according to the Office for National Statistics, matching similar declines seen in other non-official data such as the Visa spending index," said Chris Williamson, Chief Business Economist, IHS Markit.
“The latest decline needs to be looked at in the context of the marked 2.5% sales increase seen in April, which was linked to the timing of Easter. The strong April still means second quarter sales are so far running 1.4% higher than the first quarter on average, and are up 0.6% in the latest three months compared to the prior three months..
"However, the latest decline means sales have now fallen in five of the past seven months, which is a clear warning sign that households are feeling the pinch."
8.44 am... FTSE 100 heads lower after Fed call on interest rates; shop stocks sold off
The US Federal Reserve put a dampener on the early performance of the FTSE 100 after raising interest rates by a quarter of a percentage point to 1.25% on Wednesday.
At 8.30am the index of blue-chip shares was off 36 points at 7,438.07 with retail stocks on offer.
A bearish sector note from City firm Liberum was being cited for the nervousness among traders.
But whether the broker, ranked mid-tier at best, has the clout to knock around 3% from the value of Next (LON:NXT) remains to be seen.
It may transpire that one of the ‘heavyweights’ has taken out its red pen, particularly given the retreat of Marks & Spencer (LON:MKS) and Kingfisher (LON:KGF).
Liberum’s note does, however, make rather gloomy reading if you are a fan of shop stocks.
“After a slew of weak data…our household cash flow model now forecasts a deeper and longer disposable income ‘recession’ for consumers in the third and fourth-quarters,” it said.
“New lending will not fill the gap – pressure on both the supply and demand for unsecured credit persists.”
There was barely a handful of Footsie risers early on, with Intu (LON:INTU), the shopping centre specialist, among that small group following a Goldman Sachs upgrade on the stock to ‘buy’.
Dropping down to AIM, one of the early movers was ANGLE (LON:AGL), the med-tech firm whose liquid biopsy may lead to a breakthrough in prostate cancer. The stock shot up 15% on the news.
Proactive news headlines …
Driver safety technology leader Seeing Machines PLC (LON:SEE) has secured its first UK multi-year services contract for its Guardian system solution with FreshLinc, the chilled products delivery specialist.
A growing global demand for high-quality rubies has helped Gemfields PLC (LON:GEM) to generate record revenues at the latest auction of gemstones from its Montepuez ruby mine in Mozambique. Gemfields sold US$54.8mln worth of the red-coloured gems at the auction; which was held in Singapore and is the second and final ruby auction this year.
Having placed an order for 100,000 capsules of OptiBiotix Health plc's (LON:OPTI) cholesterol-reducing LP-LDL strain back in late April, German distributor HLH has entered into a three-year commercialisation agreement with the Aim-listed firm.
AIM-listed ValiRx Plc (LON:VAL) said recruitment has concluded for an early-phase study of VAL401, a potential treatment for non-small cell lung cancer. VAL-401 is being developed jointly by ValiRx and Tangent Reprofiling as part of the pair’s ValiSeek collaboration.
Asiamet Resources Limited (LON:ARS) said the infill and expansion drilling on its BKM copper project in Indonesia has met and some cases exceeded expectations. The stand-out result came from the BKM058 Zone where twin drill holes confirmed the existence of high-grade, near-surface mineralisation.
6.45am..Fed 'blues' predicted
London’s FTSE 100 is expected to open lower on Thursday as equity markets react to the change in US interest rates announced last night.
The Federal Reserves raised interest rates, increasing by 25 basis points, moving into a new target range of 1% and 1.25%.
It was the second rate rise in three months, and the expectation is that the central bank will move up rates once more later this year.
The Fed additionally noted its anticipation that inflation will be short of the central bank’s 2% target and also detailed its plans for unwinding its post-asset purchasing balance sheet, which amounts to some US$4.5 trillion.
CMC Market analyst Michael Hewson, in a note, said: “Having spent most of the last six weeks preparing the market for yesterday’s rate rise the Federal Reserve would have been unwise to demur at this late stage, however yesterday’s weak inflation numbers, coming on the back of a weak first quarter are likely to be a cause for concern.
“If there was concern it would appear that policymakers are determined not to show it, confident that the current weakness is transitory in nature, and keeping their options open for one more rate hike this year.”
In New York, the Dow Jones closed Wednesday’s up 46 points, 0.22%, at a new high of 21,374. The S&P 500, meanwhile, was negative marking a 0.1% decline to 2,437 at the end of trading, and the Nasdaq finished at 6,194.
Asian markets mainly adjusted lower following the US rate decision. Japan’s Nikkei was down 0.22% to 19,839 and Hong Kong’s Hang Seng moved 0.86% lower to 25,660, though the Shanghai Composite nudged slightly higher to 3,135.
Here in London, the FTSE 100 is seen on the back foot.
CFD and spreadbetting firm IG Markets makes the blue-chip benchmark about 20 points lower, at 7,470 to 7,474 about an hour before Thursday’s open.
Thursday’s agenda
Interim: Safestore Holdings PLC (LON:SAFE)
Finals: Majestic Wine PLC (LON:WINE); Consort Medical PLC (LON:CSRT)
Trading Statements: Drax Group PLC (LON:DRX); PZ Cussons PLC (LON:PZC)
Headlines
Pay squeeze intensifies as wage growth falls further behind inflation - The Guardian
Roaming charges in Europe officially scrapped from TODAY - Mirror
Camelot launches internal review as National Lottery sales plunge - Telegraph
Brexit: More than half of skilled EU workers in UK say they are going to leave - The Independent