Ondon’s strong start to business in 2022 was halted today as investors reacted to the prospect of a hike in US interest rates as of March.
Wall Street markets fell sharply and the FTSE 100 index is expected to open 100 points lower after the Federal Reserve released minutes of the meeting, suggesting rates could rise “relatively soon”.
The sell-off impacted another strong business performance from Next, the fashion chain upgraded its profit guidance on the back of a strong Christmas sales performance.
FTSE 100 drops 1%, next stock drops
The FTSE 100 index is down 1%, or 74 points, to 7440, though still above the level of 7384 at which London’s top flight started the year.
British Airways owner IAG gave up recent gains falling 3% and tech-focused Scottish Mortgage Investment Trust declined 2% as the latest rise in US bond yields put pressure on the value of holdings including Tesla and Amazon.
Transatlantic retailer JD Sports Fashion also fell 2% on fears of a consumer squeeze due to an imminent hike in US interest rates.
Discount chain B&M European Value Retail rose 2% after upgrading full-year forecasts on the back of a “very strong golden quarter,” but there was no rally for Next shares. The FTSE 100-listed stock was 52p lower at 7986p, despite another profit upgrade.
Greg’s boss Roger Whiteside will retire, Roisin Curry to become CEO
Roger Whiteside, chief executive of high street bakery chain Greg’s, will retire this year from the company he has headed since 2013.
Boss, who is 63, will step down after Greggs’ annual meeting in May. He will be replaced by Roisin Curry, the FTSE 250 firm’s director of retail and property.
During his time leading Greggs, the firm’s assets have grown from approximately 1600 stores to 2181, with more openings planned.
whiteside Said: “Gregs is a fantastic organization with a very strong team. Roisin is a great leader and has been instrumental in the growth of the business over many years, most recently shaping our ambitious plans for further growth In.”
The next Shows Other Retailers How It’s Done (Again)
Next is up. Not the first time. Today it posts another profit upgrade and another special dividend to shareholders.
FTSE 100 declines on fears of US rates
The FTSE 100 index opened sharply lower after fresh minutes from the US Federal Reserve triggered a major sell-off on Wall Street last night.
Comments from the Fed’s most recent meeting in December suggested that the rate hike could come “relatively soon”, raising bets among traders for a hike in March. Some Fed members also considered when would be the right time to reduce the size of the central bank’s balance sheet as part of monetary policy normalization.
US inflation is currently above 6%, while the central bank has also noted America’s “very tight” labor market as reasons to accelerate its policy response.
The prospects of a spring interest rate hike put pressure on US bond yields for a third consecutive session, reducing the appeal of high-growth companies valued on future cash flows.
The tech-focused Nasdaq closed down 3.3% and the S&P 500 lost nearly 2% of its value, although US futures markets are pointing to a stable session today.
London’s FTSE 100 index is expected to open down more than 100 points, having gained ground in the first two sessions of 2022 after closing last night at its highest level since February 2020.
Michael Hewson of CMC Markets said: “It appears that the markets have talked about a reduction in the balance sheet.
“This has caused considerable concern with some at the Fed talking about the possibility of it being appropriate to reduce the size of the balance sheet, thus pulling liquidity from the market.
“While this may be a valid concern, with speculation that the Fed may start doing so, it seems a little premature that it has yet to stop adding to its balance sheet, let alone reducing it.”