A hawkish tone from the head of the US central bank pummelled global stock markets at the end of the week, with a 50 basis point interest rate hike from the Federal Reserve all but certain next month.
Fed Chair Jerome Powell on Thursday said a half-point interest rate increase was ‘on the table’ at the bank's policy meeting next month, underscoring the institution's willingness to aggressively tighten lending conditions to fight record US inflation.
‘It is appropriate, in my view, to be moving a little more quickly. And I also think there's something in the idea of front-end loading whatever accommodation one thinks is appropriate,’ Powell said during a debate on the global economy hosted by the International Monetary Fund on the sidelines of its spring meetings.
‘I would say that 50 basis points will be on the table for the May meeting.’
The FTSE 100 index closed down 106.27 points, or 1.4%, at 7,521.68 on Friday - ending the week overall down 0.8%.
The mid-cap FTSE 250 index ended down 277.88 points, or 1.3%, at 20,881.80 and lost 0.5% over the past 5 days.
The AIM All-Share index finished down 9.60 points, or 0.9%, at 1,049.02 - closing out the week 0.7% lower.
The Cboe UK 100 index closed down 1.3% at 749.49. The Cboe 250 closed down 1.2% at 18,472.17, and the Cboe Small Companies closed down 1.0% at 15,309.12.
In mainland Europe, the CAC 40 stock index in Paris ended down 2.0%, while the DAX 40 in Frankfurt lost 2.5%.
‘With Fed officials seemingly competing to try and sound more hawkish than their peers, a 50bp rate hike next month appears nailed on,’ said Andrew Hunter, senior US economist at Capital Economics.
In the FTSE 100, Berkeley Group was among just a handful of stocks in the green, up 0.4%, after Jefferies upgraded the housebuilder to 'buy' from 'hold'.
At the other end of the large-caps, B&M European Value Retail ended as the worst performer, down 6.1%. The discount retailer said it will say goodbye to its long-time chief executive, Simon Arora, who has decided to step down next year.
Chair Peter Bamford has begun planning for Arora's successor, who has led the firm for 17 years, and who plans to retire in 12 months.
Simon Arora's brother, Bobby Arora, will remain with the company in his current role, as group trading director.
Anglo American ended the second-worst performer, down 5.9%, after RBC Capital cut the miner to 'sector perform' from 'outperform'.
In the FTSE 250, Homeserve ended the standout performer, up 15%. The home repairs and improvements services provider late Thursday said it has entered talks with one of Brookfield Asset Management's private infrastructure funds over a potential takeover offer.
Homeserve, which also owns Checkatrade, noted it has received a number of proposals from Brookfield since the end of March.
‘The board has carefully considered the proposals, which are subject to a number of conditions,’ it explained.
Brookfield now has until May 19 to make firm offer, which was extended from Thursday as the pair enter discussions.
Elsewhere, shares in embattled Russian gold miner Petropavlovsk closed up 9.3% after its first-quarter production increased, despite the fallout from the war in Ukraine.
In the March quarter, total gold production increased by 8% on a year before to 103,000 ounces. Own-mined gold production declined by 3% to 82,400 ounces, owing to lower production at the Albyn and Malomir mines, but third-party concentrate gold production increased 73% to 22,800 ounces.
Petropavlovsk was ejected from the FTSE 250 after the start of the war in Ukraine. It said that, at the moment, there are no direct sanctions on the company or any of its subsidiaries. It did, however, note it is prohibited from selling gold to Gazprombank, a lender to Petropavlovsk which had acted as the main off-taker for the company's production.
Record closed up 12% after the currency manager reported yearly growth in assets under management equivalents and positive net inflows.
The Windsor, England-based firm said assets under management equivalents increased 3.7% in the year ended March 31 to $83.1 billion. Record registered positive net inflows of $800 million in its final quarter and net inflows of $2.4 billion for the entire financial year.
On the IPO front, Recycling Technologies Group confirmed it halted its initial public offering on AIM in London after Chief Executive Adrian Griffiths resigned for ‘personal reasons’.
The book was fully covered and the IPO ‘was all set to go’, a spokesperson for RT told Alliance News, ‘but you can't go ahead without a CEO’. The company opted for a private fund raising instead and will look to come back to the public market ‘next year’.
The dollar was higher in the wake of Powell's hawkish comments. The pound was quoted at $1.2848 at the London equities close, down sharply from $1.3040 at the same time on Thursday.
The euro stood at $1.0778 at the European equities close, lower against $1.0852 late Thursday. Against the yen, the dollar was trading at JP¥128.87, up from JP¥128.45.
Aside from dollar strength, sterling was hurt after disappointing March UK retail sales figures.
March's retail sales volumes dropped by 1.4% from the month before, data from the Office for National Statistics showed, worsening from February's revised 0.5% fall. Market consensus had tipped just a 0.3% month-on-month fall in March.
‘Rising prices and wages have little impact on retail activity so far, which may prove to be a complication for the Bank of England in further tightening monetary policy,’ said FXPro analyst Alex Kuptsikevich.
In addition, sterling's cause was not aided after the UK's private sector saw its growth slow in April, as inflation and the war in Ukraine continued to weigh on output.
The flash UK S&P Global/CIPS composite purchasing managers' index dropped to 57.6 in April from 60.9 in March. The flash UK services PMI fell to a three-month low of 58.3 points in April from 62.6 in March, while the manufacturing PMI inched higher to 55.3 from 55.2.
Sterling fell to an intraday low of $1.2862 in the wake of the PMI figures - its worst level since late 2020.
New York was lower at the London equities close as a renewed push higher in bond yields put fresh pressure on equity markets.
The DJIA was down 1.5%, the S&P 500 index was down 1.2% and the Nasdaq Composite was down 0.7%.
The yield on the 10-year US Treasury note, a benchmark for borrowing costs, was just below 2.9% on Friday in anticipation of the central bank's move.
On Wall Street, Verizon Communications was the worst Dow performer, down 6.7%, after the telecommunications company said it expects its annual outturn to land at the lower end of guidance.
In the first three months of 2022, pretax profit declined 14% year-on-year to $6.08 billion from $7.08 billion. Profit fell despite revenue inching up 2.1% to $33.55 billion, from $32.87 billion a year prior.
Looking ahead, the New York-based company tipped its profit growth to be at the lower end of forecasts. Its adjusted earnings before interest, tax, depreciation and amortisation is expected to rise at the lower end of a previously guided 2% to 3% range. Adjusted Ebitda in 2021 was $48.38 billion.
Brent oil was quoted at $106.44 a barrel at the equities close, falling from $108.22 at the close Thursday.
Gold stood at $1,929.57 an ounce at the London equities close, slipping against $1,945.88 late Thursday.
The economic events calendar on Monday has UK Rightmove monthly house price index figures overnight and eurozone construction output at 1000 BST.
The UK corporate calendar on Monday has annual results from Audioboom Group and interim results from Lok'n Store Group.
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