London open: Stocks fall on hawkish Fed comments; UK economy stagnates

(Sharecast News) - London stocks fell in early trade on Friday following hawkish comments from Federal Reserve chair Jerome Powell, as investors mulled the latest UK GDP data. At 0820 GMT, the FTSE 100 was down 0.5% at 7,415.04.

Stocks in the US slumped after Powell said in a speech that he was not confident the Fed had reached a monetary policy stance to achieve the 2% inflation target and that there was still a long way to go.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "The FTSE 100 has rocks in its shoes after markets around the world digest Jerome Powell's speech yesterday, which suggested the US would hike interest rates again if needed. The battle to vanquish inflation could still need an extra pair of hands, and that's upset an investor base that had grown increasingly optimistic that policymakers would stick to the hands-off approach.

"While the comments weren't a warning of imminent increases, they do keep monetary tightening on the table. Early signs from the US and Europe show that markets are taking this news with pouted mouths. Treasury yields have also increased slightly and that's another way to burst equity market bubbles as the risk-reward profile for investing in riskier assets becomes less palatable."

On home shores, figures from the Office for National Statistics showed the economy stagnated in the third quarter.

GDP was unchanged in the three months to September, versus consensus expectations for a 0.1% contraction.

Activity in the services sector shrank 0.1%, while construction grew 0.1% and production was flat.

For the month of September, GDP rose 0.2% on the month following 0.1% growth in August, which was revised down from 0.2%. Economists were expecting no growth.

Darren Morgan, ONS director of economic statistics, said: "The economy is estimated to have shown no growth in the third quarter.

"Services dropped a little with falls in health, management consultancy and commercial property rentals.

"These were partially offset by growth in engineering, car sales and machinery leasing.

"In the month of September the economy grew slightly, with increases in film production, health and education.

"This growth was partially offset by falls in retail and computer programming."

Lund-Yates said: "It's not exactly a time for cheer though. There are growing concerns about entrenched stagnation, triggered by higher interest rates. It's a tough problem to solve, especially for the Prime Minister as he gears up for a political fight. At the same time, some would argue that the lack of 2023 recession is no victory at all because a cool, rather than ice-cold economy is still able to breed inflation."

In equity markets, drinks giant Diageo tumbled after saying it expects to see a slowdown in growth in the first half due to a weaker performance in Latin America and the Caribbean.

Latin America and the Caribbean (LAC), one of its five key regions which accounts for 11% of group net sales values, is now expected to see an organic net sales decline of more than 20% in the second half compared with last year.

Redrow slumped as it warned that full-year sales and profits would likely be at the lower end of guidance due to a subdued Autumn trading period.

The housebuilder said all of its key performance metrics have worsened year-on-year since the start of the financial year which began on 3 July, such as the value of reservations, average reservations per outlet, cancellations, selling prices and the order book.

Market Movers

FTSE 100 (UKX) re -0.54% FTSE 250 (MCX) 17,655.88 -2.12% techMARK (TASX) 4,075.70 -0.58%

FTSE 100 - Risers

Smith & Nephew (SN.) 1,007.50p 1.01% B&M European Value Retail S.A. (DI) (BME) 526.20p 0.96% BP (BP.) 477.65p 0.48% Imperial Brands (IMB) 1,794.00p 0.42% Shell (SHEL) 2,623.50p 0.33% Vodafone Group (VOD) 77.82p 0.31% Relx plc (REL) 2,964.00p 0.27% Centrica (CNA) 151.80p 0.23% F&C Investment Trust (FCIT) 903.00p 0.22% Informa (INF) 722.60p 0.19%

FTSE 100 - Fallers

Ocado Group (OCDO) 528.20p -3.08% Spirax-Sarco Engineering (SPX) 8,570.00p -2.17% Flutter Entertainment (CDI) (FLTR) 12,045.00p -2.07% SEGRO (SGRO) 763.00p -1.88% Fresnillo (FRES) 533.60p -1.80% Burberry Group (BRBY) 1,691.00p -1.66% RS Group (RS1) 706.80p -1.51% Croda International (CRDA) 4,509.00p -1.42% Rentokil Initial (RTO) 439.90p -1.41% Halma (HLMA) 1,923.50p -1.36%

FTSE 250 - Risers

FDM Group (Holdings) (FDM) 489.00p 3.16% LXI Reit (LXI) 96.60p 2.44% Mobico Group (MCG) 64.30p 2.31% Kainos Group (KNOS) 1,249.00p 1.96% Senior (SNR) 165.80p 1.84% Ferrexpo (FXPO) 78.00p 1.43% UK Commercial Property Reit Limited (UKCM) 58.30p 1.22% TBC Bank Group (TBCG) 2,845.00p 1.07% Hilton Food Group (HFG) 692.00p 0.87% Ithaca Energy (ITH) 158.30p 0.70%

FTSE 250 - Fallers

JTC (JTC) 662.50p -4.81% Redrow (RDW) 495.00p -4.81% Ceres Power Holdings (CWR) 200.40p -4.57% Target Healthcare Reit Ltd (THRL) 77.00p -3.39% Energean (ENOG) 830.50p -3.15% Fidelity China Special Situations (FCSS) 206.00p -2.83% CAB Payments Holdings (CABP) 65.05p -2.77% Drax Group (DRX) 408.90p -2.76% Liontrust Asset Management (LIO) 554.00p -2.64% Oxford Instruments (OXIG) 1,912.00p -2.45%