London close: Banks, travel stocks drag markets lower on macro fears

(Sharecast News) - London's blue chips finished the day lower again on Thursday as another surge in the price of crude hammered risk appetite, dampening prospects for the global economy, as ongoing disruptions to oil trade worsened the outlook for inflation.

The FTSE 100 slipped 0.5% to 10,305.15, finishing lower for the seventh time in the past nine trading days, with hefty falls in the banking and travel sectors weighing heavily on the benchmark index.

Concerns about the global economic fallout of the US-Iran war were weighing on global cyclical stocks, with banking shares across Europe also trading in the red, as another surge in the price of oil added to inflationary pressures.

Brent jumped over 9% to top $100 a barrel again on Thursday afternoon on the back of rising concerns about shipment disruptions along the key Strait of Hormuz, while hostilities again intensified across the Middle East, with more vessels hit in the Gulf, along with a fuel facility in Bahrain and an Italian military base in Iraq.

Prices climbed despite members of the International Energy Agency agreeing to release an unprecedented 400m barrels of oil stockpiles to help curb the economic fallout from the war.

"Markets are already pricing in the unwelcome return of uncomfortable levels of inflation, with bond yields rising significantly and investors eyeing the UK as particularly sensitive to an energy shock. Preventing inflation from spiralling once again will be at the forefront of rate setters' minds," said Danni Hewson, head of financial analysis at AJ Bell, in a note ahead of the Bank of England's policy meeting on 19 March.

Banks, housebuilders tank

Heavyweights HSBC, Barclays, Standard Chartered, Lloyds and NatWest all finished firmly in the red as cyclical stocks were sold off in response to the deteriorating macro outlook.

Housebuilders Barratt Redrow and Persimmon also fell as predictions about interest-rate cuts by the Bank of England were pushed out further, clouding the outlook for housing demand in the coming year.

Airlines easyJet and IAG were heavy fallers as oil prices spiked higher. News that packaging holidays group On the Beach (down 13% on the day) had suspended earnings guidance will have also weighed on sentiment across the wider travel sector.

In contrast, costlier crude was bolstering the share price of energy majors BP and Shell, which have now gained 9% and 7% since the war began at the end of February, respectively. The ongoing conflict was continuing to boost defence contractor BAE Systems, which has risen 8% since the fighting started.

Another high riser was pest control group Rentokil Initial after UBS upgraded the stock to 'buy' from 'neutral' and lifted the price target to 540p from 430p, citing accelerating earnings growth in North America over the coming years.

Investment manager M&G was trading firmly in the red after reporting flat full-year profits, as growth in Life and higher fee-based earnings in Asset Management was offset by lower performance fees in Asset Management and lower investment income in both Asset Management and Corporate Centre.

Market Movers

FTSE 100 (UKX) 10,305.15 -0.47% FTSE 250 (MCX) 22,194.55 -0.83% techMARK (TASX) 5,846.99 -0.02%

FTSE 100 - Risers

Rentokil Initial (RTO) 491.40p 5.16% BP (BP.) 529.20p 3.46% Airtel Africa (AAF) 348.60p 3.26% SSE (SSE) 2,704.00p 3.17% BAE Systems (BA.) 2,298.00p 3.14% Centrica (CNA) 206.80p 3.09% Severn Trent (SVT) 3,169.00p 3.09% Shell (SHEL) 3,328.00p 2.59% National Grid (NG.) 1,368.00p 2.51% United Utilities Group (UU.) 1,357.50p 2.26%

FTSE 100 - Fallers

Persimmon (PSN) 1,188.50p -6.31% HSBC Holdings (HSBA) 1,195.80p -6.05% Barclays (BARC) 389.35p -5.09% Barratt Redrow (BTRW) 285.80p -4.70% easyJet (EZJ) 380.80p -4.23% Melrose Industries (MRO) 512.60p -3.97% Standard Chartered (STAN) 1,598.00p -3.76% Diageo (DGE) 1,437.50p -3.65% M&G (MNG) 289.80p -3.59% Lloyds Banking Group (LLOY) 95.50p -3.55%

FTSE 250 - Risers

TP Icap Group (TCAP) 272.00p 10.79% Bluefield Solar Income Fund Limited (BSIF) 82.50p 4.43% Harbour Energy (HBR) 280.60p 3.85% Trustpilot Group (TRST) 168.10p 3.19% Ithaca Energy (ITH) 250.50p 2.77% Playtech (PTEC) 370.00p 2.64% Gamma Communications (GAMA) 882.00p 2.56% Pennon Group (PNN) 554.50p 2.50% CMC Markets (CMCX) 331.00p 2.48% Hochschild Mining (HOC) 664.50p 2.31%

FTSE 250 - Fallers

Shawbrook Group (SHAW) 360.50p -12.29% WPP (WPP) 235.20p -7.91% Bodycote (BOY) 704.50p -7.79% Savills (SVS) 930.00p -7.19% Dunelm Group (DNLM) 863.00p -6.14% Raspberry PI Holdings (RPI) 292.00p -5.99% Safestore Holdings (SAFE) 688.50p -5.17% Carnival (CCL) 1,824.00p -4.85% SDCL Efficiency Income Trust (SEIT) 46.00p -4.76% Wizz Air Holdings (WIZZ) 905.00p -4.74%