London close: Stocks weaker as central bank jitters grow

(Sharecast News) - London stocks finished in the red on Tuesday, after Sweden's central bank announced its biggest rate hike in nearly three decades, heightening expectations of big moves from the US Federal Reserve and the Bank of England later in the week.

The FTSE 100 ended the session down 0.61% at 7,192.66, and the FTSE 250 was off 1.43% at 18,528.14, after markets returned from a bank holiday for Queen Elizabeth II's funeral on Monday.

Sterling was meanwhile in a mixed state, last trading down 0.27% on the dollar at $1.1400, while it strengthened 0.16% against the euro to change hands at €1.1423.

"European markets initially started the day in positive territory, however the gains soon disappeared in the wake of a supersized rate hike from the Swedish Riksbank of 100 basis points, pushing their headline rate up to 1.75%," said CMC Markets chief market analyst Michael Hewson.

"The size of the hike has shifted the focus back to tomorrow's Fed rate decision and the possibility that the US central bank might do something similarly aggressive.

"This seems a stretch given that US rates are already quite a bit higher than Swedish ones, however in this case discretion appears to be the better part of valour, and markets have ratcheted lower, as rates have gone higher."

On the interest rate front, Sweden's central bank upped its key rate earlier as it warned that further increases were likely.

The executive board of the Riksbank increased the cost of borrowing by 100 basis points, to 1.75%, after inflation exceeded its last forecast.

"Inflation is too high. It is undermining households' purchasing power and making it difficult for both companies and households to plan their finances," the Riksbank said in its decision.

"Monetary policy now needs to be tightened further, to bring inflation back to the target.

"The forecast for the policy rate is that it will continue to be raised in the coming six months."

Central bankers in Sweden joined a growing global list of peers, putting up interest rates in a bid to curb surging inflation.

The Bank of England had now upped the cost of borrowing six times since December, to 1.75%, with another 50 basis point rise expected on Thursday.

Across the pond, the US Federal Reserve was also forecast to raise rates by another 75 basis points on Wednesday.

Staying stateside, US housing starts rose in August according to the Commerce Department, although analysts argued the gain could be short-lived.

Starts pushed up 12.2% from the revised July estimate to a seasonally-adjusted annual rate of 1.575m.

July's figure, meanwhile, was revised down to 1.404m from 1.446m, after economists pencilled in a rate of 1.450m for August.

Building permits fell 10% on the month in August, to an annual rate of 1.517m.

"You can expect media attention after these numbers to focus on the 12.2% leap in housing starts, and more or less ignore the 10.0% plunge in permits," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"But as a general rule, when starts and permits move in opposite directions, trust the permits numbers, which lead and usually are less noisy.

"The surge in headline starts was concentrated in a 31% leap in the multi-family component, lagging prior gains in permits."

Finally on data, producer prices in Germany surged last month, according to fresh official data, pushed higher by the soaring cost of energy.

Destatis said its index of producer prices for industrial products surged 45.8% in August 2021, making for the highest ever annual increase.

In July, the increase had been 37.2% and 32.7% in June, while on a month-on-month basis, the index rose 7.9%, which was also the highest on record.

Analysts had forecast an annual increase of around 37.1%, and a month-on-month rise of just 1.6%.

"German producer price inflation is out of control," said Neil Wilson, chief market analyst at Markets.com.

Rabobank, meanwhile, called the annual increase "shocking", adding that it "underpinned the likelihood of further strong policy moves from the European Central Bank going forward".

On London's equity markets, Schroders slipped 0.03% after a five for one split was applied to the share price.

B&Q owner Kingfisher lost 3.18% after it reported a fall in first-half profits against a tough comparator last year, when DIY boomed during pandemic lockdowns.

The company, which also owns Screwfix and European brand Castorama, said it was facing a "more uncertain macroeconomic environment".

Media group Future tumbled 15.69% after it said chief executive Zillah Byng-Thorne had "informally indicated" that she would like to step down by the end of next year.

The firm was responding to a Sky News report over the weekend suggesting she had told the chairman she was planning to leave in the next 18 months.

Online greeting card and gift retailer Moonpig Group slid 7.5% even after it said trading since the start of May had been in line with its expectations, backed its full-year guidance and announced it will go back to focusing on greeting cards.

Elsewhere, Ferrexpo lost 13.44% after Ukraine's appeal court found against the company in a long-running dispute over a 2002 deal, sending shares in the miner lower.

The court said the sale was invalid, and that Ferrexpo's 40.19% stake in Ferrexpo Poltava Mining should be transferred to the division's former shareholders.

On the upside, consumer healthcare company Haleon - which was spun off from GSK earlier this year - rallied 1.22% after it said operating profits grew more than 20% in the six months ended 30 June.

Holiday giant TUI closed ahead 1.39% after reporting that winter bookings were at 78% of pre-Covid pandemic levels, and that it still expected to swing to a profit this year.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Abigail Townsend.

Market Movers

FTSE 100 (UKX) 7,192.66 -0.61% FTSE 250 (MCX) 18,528.14 -1.43% techMARK (TASX) 4,197.82 -0.59%

FTSE 100 - Risers

Lloyds Banking Group (LLOY) 49.00p 2.50% Haleon (HLN) 265.45p 2.33% Halma (HLMA) 2,042.00p 2.10% International Consolidated Airlines Group SA (CDI) (IAG) 108.16p 2.06% F&C Investment Trust (FCIT) 908.00p 1.57% Fresnillo (FRES) 740.80p 1.48% WPP (WPP) 775.40p 1.10% BAE Systems (BA.) 771.80p 0.92% British American Tobacco (BATS) 3,481.50p 0.90% HSBC Holdings (HSBA) 534.10p 0.85%

FTSE 100 - Fallers

Schroders (SDR) 427.95p -15.02% Ocado Group (OCDO) 606.40p -9.63% Persimmon (PSN) 1,337.00p -6.50% Barratt Developments (BDEV) 404.80p -5.64% Intermediate Capital Group (ICP) 1,146.50p -5.44% Admiral Group (ADM) 2,152.00p -5.28% Melrose Industries (MRO) 105.60p -4.82% Unite Group (UTG) 954.50p -4.65% Smurfit Kappa Group (CDI) (SKG) 2,714.00p -4.30% British Land Company (BLND) 392.60p -4.27%

FTSE 250 - Risers

Playtech (PTEC) 469.60p 4.12% HarbourVest Global Private Equity Limited A Shs (HVPE) 2,140.00p 3.38% Syncona Limited NPV (SYNC) 178.40p 3.24% 888 Holdings (DI) (888) 121.50p 2.97% Aston Martin Lagonda Global Holdings (AML) 183.30p 2.89% Wizz Air Holdings (WIZZ) 2,037.00p 2.70% BH Macro Ltd. GBP Shares (BHMG) 4,770.00p 2.25% NB Private Equity Partners Ltd. (NBPE) 1,580.00p 1.94% easyJet (EZJ) 352.60p 1.91% Network International Holdings (NETW) 298.80p 1.84%

FTSE 250 - Fallers

Future (FUTR) 1,380.00p -16.72% Ferrexpo (FXPO) 130.90p -13.65% Wood Group (John) (WG.) 129.35p -9.61% IntegraFin Holding (IHP) 232.00p -8.66% Countryside Partnerships (CSP) 234.00p -8.38% Sirius Real Estate Ltd. (SRE) 75.50p -8.04% Bridgepoint Group (Reg S) (BPT) 245.60p -7.74% Moonpig Group (MOON) 185.00p -7.50% Crest Nicholson Holdings (CRST) 218.60p -7.22% Royal Mail (RMG) 214.40p -6.66%