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Stock prices in London were down at midday on Thursday, with the pound soft against the dollar, after US Federal Reserve minutes hinted at the possibility of further interest rate hikes.
The FTSE 100 index was down 12.17 points, 0.2%, at 7,344.71. The FTSE 250 was down 97.64 points, 0.5%, at 18,483.14, and the AIM All-Share was down 3.77 points, 0.5%, at 744.07.
The Cboe UK 100 was down 0.1% at 732.73, the Cboe UK 250 was down 0.6% at 16,236.04, and the Cboe Small Companies was up 0.4% at 13,596.20.
In European equities on Thursday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both down 0.1%.
Minutes from July’s Federal Open Market Committee meeting showed that US Federal Reserve officials continue to see ‘significant’ upside risks to inflation and suggested further interest rate increases may be necessary.
At that meeting, the US central bank lifted rates by a further 25 basis points to 5.25% to 5.50%, the highest level in more than two decades, in a rise that many economists believe will be the last of this cycle.
However, the minutes showed that most participants fear that the battle to tame inflation is far from over and could require additional tightening action.
‘With inflation still well above the committee’s longer-run goal and the labour market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy,’ the meeting summary stated.
AJ Bell investment director Russ Mould said that minutes ‘have thrown a cat among the pigeons by pointing to upside risks on inflation which might necessitate more rate hikes.’
‘It feels like we‘re in a constant back and forth between central banks and the markets, with the former having to constantly disabuse the latter of the notion the rate hiking cycle is at an end,’ Mould added.
Stocks in New York were called higher, after closing in the red on Wednesday following the minutes. The Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite were all called up 0.2%.
The pound was quoted at $1.2746 at midday on Thursday in London, down from $1.2750 at the equities close on Wednesday. The euro stood at $1.0882, lower against $1.0906. Against the yen, the dollar was trading at JP¥146.11, higher compared to JP¥145.77.
In the FTSE 100, BAE Systems lost 4.6%, making it the worst performer of the morning.
It said it has agreed to buy the Ball Aerospace business from Ball Corp for about $5.55 billion, in cash.
Ball Aerospace provides mission critical space systems and defence technologies across air, land and sea, and will serve to strengthen BAE’s multi-domain portfolio. The business is headquartered in Colorado, with more than 5,200 employees.
Shore Capital’s Jamie Murray said he was ‘not surprised’ with an acquisition like this happening.
‘It is a theme that we expect to continue, not just with BAE Systems, but across the defence industry as players look to scale up their operations so that they can capitalise on the long term uptick for defence products,’ Murray continued.
The FTSE 100 was also weighed down by stocks going ex-dividend. This included abrdn, down 3.4%, Berkeley Group down 2.3%, and GSK down 1.2%.
In the FTSE 250, Bank of Georgia jumped 14%.
The Tbilisi-based lender said profit in the first half of 2023 jumped 38% to ₾709.9 million, about £215.3 million, from ₾516.1 million a year before. Profit before income tax expense and one-off items improved 41% to ₾807.5 million from ₾573.7 million.
The bank declared an interim dividend of ₾3.06, up 65% from ₾1.85 a year prior. Furthermore, its board has approved a ₾62 million share buyback and cancellation programme that is expected to start later this year.
Bank of Georgia cited an improved sentiment which has supported the Georgian lari in the first half of 2023, healthy bank lending, continued fiscal consolidation, falling inflation and strong economic growth in Georgia. It noted that in the first half of 2023, real gross domestic product growth in Georgia was 7.6%, boosted by construction, information & communication, and trade sectors.
Among London’s small-caps, Kin & Carta rose 16%, after it said it expects profit to beat market forecasts for financial 2023.
Full year adjusted operating profit is expected to be between £17.9 million and £18.4 million, 10.5% to 14.0% ahead of market expectations. Kin & Carta said this reflects ‘a realigned operating model with a lower cost base and improved operational efficiencies’.
On London’s AIM, Tremor International plummeted 29%.
The New York-based advertising technology company said pretax loss during first half of 2023 was $24.7 million, swinging from a profit of $28.8 million the year prior. It noted that its operating costs increased by 52% to $148.4 million, from $97.5 million.
Further, looking ahead, Tremor cut its full-year guidance.
Brent oil was quoted at $84.11 a barrel at midday in London on Thursday, down from $84.83 late Wednesday. Gold was quoted at $1,896.72 an ounce, down from $1,902.61.
Still to come in Thursday’s economic calendar, there’s the latest US jobless claims reading at 1330 BST.
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