The prospect of continued aggressive interest rate hikes to combat stubborn inflation pushed stock prices lower globally on Monday, while the euro slipped toward parity with the dollar.
Investors were looking ahead to a meeting of central bankers in Jackson Hole, Wyoming. This starts on Thursday, with a keynote speech from US Federal Reserve Chair Jerome Powell on Friday.
Markets have been optimistic of a ‘pivot’ to smaller interest rate increases by the Fed following the slowing in US consumer price inflation reported earlier this month. However, Fed policymakers have tried to dispel this, stressing in recent speeches that the central bank remains committed to pursuing its battle against inflation.
The FTSE 100 was down 18.49 points, or 0.2%, at 7,531.88 midday Monday. The FTSE 250 index was down 271.71 points, or 1.3%, at 19,616.08. The AIM All-Share index was down 7.42 points, or 0.8%, at 912.75.
The Cboe UK 100 index was down 0.1% at 752.53. The Cboe 250 was down 1.6% at 16,922.28. The Cboe Small Companies was flat at 14,304.68.
In Paris, the CAC 40 stock index was down 1.2%, while the DAX 40 in Frankfurt was 1.6% lower.
‘The FTSE 100 began Monday in downbeat mood ahead of what could prove to be a critical moment for markets at the end of this week,’ said AJ Bell investment director Russ Mould.
‘The Jackson Hole summit of central bankers and finance ministers is widely expected to see US Federal Reserve Chair Jerome Powell take to the floor and puncture optimism which has built up over hopes the Fed may be nearing the point at which it pivots away from rate hikes.’
In the FTSE 100, oil majors BP and Shell were up 0.5% and 0.2% respectively, following the stabilisation of spot oil prices.
Brent oil was quoted at $96.51 a barrel Monday at midday, firm from $96.45 late Friday.
Conversely, Vodafone was down 1.2%, surrendering an earlier gain.
The telecommunications firm said it has entered into an agreement in principle with Hungarian technology firm 4iG Public and Hungarian state holding company Corvinus to sell its Vodafone Hungary arm for a total cash consideration equivalent to an enterprise value of €1.8 billion, targeting completion by the end of 2022.
Vodafone said the combination of the Hungarian business with 4iG is ‘complementary’, with limited overlaps. The addition of Vodafone Hungary’s infrastructure to 4iG will create a ‘stronger competitor to the incumbent operator’, it said.
Pershing Square Holdings was down 0.9%. Bill Ackman’s London-listed investment fund swung to a $3.04 billion pretax loss in the first half of 2022 from a profit of $718 million a year before, saying the six months were ‘a challenging time’ due to the geopolitical environment and inflation.
Net return in the half-year was negative 26.0%. However, performance has improved since, bringing the year-to-date net return to August 16 to negative 10.8%.
‘The investment manager and the board view the decline in the market value of PSH’s portfolio year to date as a temporary dislocation resulting from market dynamics,’ Chair Anne Farlow said.
Elsewhere, Cineworld Group was down 12%. The embattled cinema chain confirmed it is considering filing for Chapter 11 bankruptcy in the US, as it continues to battle with liquidity issues.
Last Wednesday, Cineworld said it was in ‘active discussions’ with various stakeholders, exploring the possibilities to secure further liquidity or restructure its balance sheet through a ‘comprehensive deleveraging transaction’. It also warned that lacklustre trading was prompting potential financing decisions that could significantly dilute shareholders.
On Friday, the Wall Street Journal reported the company was preparing to declare bankruptcy, as it struggles to recover from pandemic lows. The report said Cineworld was expected to file a Chapter 11 petition in the US and is also considering filing for an insolvency proceeding in the UK.
A Chapter 11 bankruptcy is the US mechanism that allows a company to continue to operate while it negotiates with its lenders.
In response early Monday to the WSJ report, Cineworld said strategic options through which it may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the US and associated ancillary proceedings in other jurisdictions as part of an orderly implementation process.
‘Any such filing would be expected to allow the group to access near-term liquidity and support the orderly implementation of a fully funded deleveraging transaction,’ it said on Monday, adding: ‘As previously announced, any deleveraging transaction would, however, result in very significant dilution of existing equity interests in Cineworld.’
UK consumer price inflation will breach 18% in the first quarter of 2023, according to a new forecast by Citigroup Global Markets.
The US bank’s prediction follows last week’s report that UK inflation accelerated at the fastest pace in 40 years in July. The consumer price index surged 10.1% on an annual basis in July, topping market consensus of 9.8% and quickening from 9.4% in June.
Citi’s latest forecast is far higher than the Bank of England’s recent warning that inflation will peak at just over 13% in the fourth quarter of this year.
The UK retail price index inflation will exceed 21% in the first quarter next year, Citi believes, having reached 12.3% in July.
Benjamin Nabarro of Citi Research said the bank’s inflation forecast is based on the upcoming increase in the UK regulatory price cap for energy consumers. It assumes a cap of £3,717 per annum will be announced, with a £300 policy offset applied to household energy bills from October through to 2023.
‘More notable, in our view, will be any guidance on increases in January and April - for now these look set to be substantially greater,’ Nabarro added.
UK energy watchdog Ofgem this Friday will announce its latest price cap, which will apply from October to December. The cap will now be updated on a quarterly basis, rather than every six months, in a move the regulator hopes will ‘provide the stability needed in the energy market’.
The cap currently stands at £1,971, having been raised by £693 in February, for the period for April onwards, amid soaring wholesale energy costs following Russia’s invasion of Ukraine.
New York was pointed to a lower open on Monday, set to extend Friday’s losses. The Dow Jones Industrial Average was called down 0.9%, the S&P 500 down 1.1%, and the Nasdaq Composite down 1.4%. The indices had closed down 0.9%, 1.3% and 2.0% respectively on Friday.
On Wall Street, Signify Health was up 40% to $29.58 in pre-market trade after Bloomberg reported Amazon.com and UnitedHealth are among those competing to acquire health care technology company.
The highest bid for the company so far has come from UnitedHealth, at over the $30 a share mark, with Amazon believed to be not far behind, Bloomberg reported, citing ‘people with knowledge of the matter’.
Amazon was down 2.0% and UnitedHealth down 0.6% in pre-market trade.
CVS Health Corp and Option Care Health are also in the running, according to the report.
The pound was quoted at $1.1805 at midday on Monday, up from $1.1790 at the London equities close Friday.
The euro was priced at $1.0008, just above parity and down from $1.0035. Against the yen, the dollar was trading at JP¥136.84 in London, lower against JP¥137.15.
Gold stood at $1,742.28 an ounce, lower against $1,748.05 late Friday.
Copyright 2022 Alliance News Limited. All Rights Reserved.
