Market report

FTSE 100 lower on Fed recession fear | JD Sports rises


5pm: Markets seek calming messages

Blue chips recovered from a triple-digit dive amid hopes of “calming messages” from the US Federal Reserve. However, Fed chair Jerome Powell told US lawmakers it is possible that chunky rate hikes, meant to cool demand and bring inflation down, could trigger a US recession.

“It’s not our intended outcome at all, but it’s certainly a possibility,” he said in testimony before the US Senate Banking Committee.

The FTSE 100 closed 62.83 points lower at 7,089.22.

Danni Hewson, AJ Bell financial analyst, said: “There’s a lot riding on Jay Powell’s shoulders at the moment, today a little matter of calming global market jitters whilst not delivering false hope that the inflation story can feature anything other than further, aggressive rate hikes. 

“Wall Street seemed to like what it heard, the iron fist which has been smashing confidence was clothed in a soft glove.  Words like ‘nimble’ and ‘appropriate’ took the sting out of the ‘strongly committed’ as did his assertions that the US economy was fit enough to handle what’s coming down the tracks.

“A crowd of familiar names enjoyed quick bumps up the Nasdaq, lockdown favourites DocuSign, Netflix and Zoom enjoying a moment in the sun.

“In a reversal of fortunes, commodity giants fell along with the oil price. Concern about demand if recession takes hold collided with the US President’s call to Congress to suspend gas taxes to help out US motorists and has led to speculation that the Biden administration might consider other means to bring down the soaring cost at the pump.

“The gaggle of energy companies keeping each other company on the S&P faller list was echoed in London with both BP and Shell suffering declines along with a host of miners.”

Brent oil was trading at $111.14 a barrel at the time of the London equities close, dropping from $114.71 late Tuesday.

JD Sports surged 6.6% a its delayed annual results showed the leisurewear retailer booked a record performance, but warned that further growth would be held back by global volatility (see below).

10.30am: NatWest rises on share sale extension

Shares in NatWest Group rose after the UK government said it will continue selling down its stake in the bank for a further year.

Extending the trading plan supports the government’s intention to return NatWest Group to full private ownership by 2025-26, after acquiring the shareholding as a result of the global financial crisis.

The trading plan unveiled last July will now terminate no later than 11 August 2023, managed by US investment bank Morgan Stanley. The number of shares sold on any one day will be determined by market conditions.

3% this morning at 228.60p. The stock is up 12% in the past 12 months.

Full story here

8.02am: Market plunges

The FTSE 100 opened sharply lower after inflation edged higher. The index was 102.87 points (1.44%) lower at 7,049.18.

7am: JD Sports Fashion profits soar

High street leisurewear company JD Sport Fashion said pre-tax profits before exceptionals in the year to 29 January shot up to £947.2 million against £421.3m last time. A total dividend of 0.35p is proposed (2021: 0.29p).

Helen Ashton, interim chair, said: “This was another period of outstanding progress with the Group delivering a record headline profit before tax and exceptional items … more than double the previous record of £438.8 million set in the period to 1 February 2020, which was the last completed financial year prior to the COVID-19 pandemic.

“This result demonstrates our capacity for growth in both existing and new markets, and the strength of our global proposition and consumer engagement in store and online.”

7am: Berkeley profits rise

Berkeley Group said full-year pre-tax profits and earnings per share had both improved in the year to 30 April, reflecting the “stability” of its operating model throughout an “exceptionally volatile” period.

The company posted a 6.4% rise in PTP to £551.5m, a 23.1% surge in basic earnings per share to 417.8p, and a single percentage point increase in pre-tax return on equity to to 17.5%.

Revenues were up 6.6% at £2.38bn on the sale of 3,760 homes, compared to 2,825 in the prior year.

7am: Inflation up

Petrol price

UK inflation rose to 9.1% in May, the highest rate in 40 years, according to new figures from the Office for National Statistics.

Chancellor of the Exchequer, Rishi Sunak said:  “I know that people are worried about the rising cost of living, which is why we have taken targeted action to help families, getting £1,200 to the eight million most vulnerable households. 

Rachel Reeves, Labour’s Shadow Chancellor of the Exchequer, said: “Over the last decade, Tory mismanagement of our economy has meant living standards and real wages have failed to grow.

“We need more than sticking plasters to get us back on course – we need a stronger, and more secure economy.”

The Bank of England has warned inflation is on track to reach 11% later this year amid soaring gas and electricity prices.

Union blames ‘corporate profiteering’

7am: Springfield acquisition

Springfield Properties has agreed to acquire the Scottish housebuilding business of Mactaggart & Mickel Group in a deal worth £46.3 million.

Full story here

Global markets

Wall Street stocks rallied yesterday, making up some ground on recent losses ahead of today’s testimony by Fed Chair Jerome Powell before Congress. It is anticipated that he will outlay the central bank’s strategy to tackle inflation.

The Dow Jones advanced 2.15%, the S&P 500 was stronger, up 2.45%, whilst the Nasdaq climbed 2.51%.

In Asia, this morning, though, Japan’s Nikkei drifted 0.08% lower whilst Hong Kong’s Hang Seng fell 1.24% and the Shanghai Composite dipped down 0.31%.

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