Shares open 1.1% lower in London at 6,097 as investors start to take seriously the prospect of more interest rate hikes in the US. Markets are pulling forward expectations of interest rate rises after minutes of the Federal Reserve's April meeting, released at 2pm in New York yesterday, said action could be taken as early as June.
Probabilities of higher interest rates by June increased from 4% to 34%, according to futures markets. The same markets indicate interest rates have a better than evens chance of rising before July, up from around one-fifth earlier in the week.
Commodity stocks are bearing the brunt of the action on stock markets as higher interest rate expectations dampens the outlook for prices of metals from gold to iron ore. Mexican gold miner Fresnillo (FRES) and diamonds and iron ore producer Anglo American (AAL) are the biggest losers, down 5.4% and 4.4%, respectively.
Raised expectations for a US interest rate rise results in dollar strength and oil price weakness. This puts the oil and gas sector under renewed pressure. Oil major Royal Dutch Shell (RDSB) is down 4.1% to £16.69 as the weakness in crude coincides with the stock trading ex-dividend.
Travel operator TUI (TUI) is also among the blue chip losers, down 3.2% at £10.00. A negative read-across from poor results at peer Thomas Cook (TCG) as well as another air disaster early this morning on a Paris-Cairo flight is weighing on market sentiment towards tour operators.
Travel agent Thomas Cook plunges 17% to 74.4p as news an EgyptAir flight from Paris to Cairo has disappeared is compounded by a 5% drop in bookings for summer 2016, driven by a huge slump in holidays to Turkey and a sharp decline in demand in Belgium. The group expects a shortfall, particularly in Airlines Germany, and says full-year underlying EBIT (earnings before interest and tax) will be between £310 million and £335 million - at the bottom of the range forecasted by analysts.
Travel fears also hit beach holiday website On the Beach (OTB), which slumps 5% to 289p despite increasing revenue by 21.6% to £35.5 million in the six months to 31 March, with adjusted underlying pre-tax profit up 53.2% to £9.5 million. The group says terrorist attacks created uncertainty and volatility and has led to some consumers delaying bookings.
All of the eight gainers on the FTSE 100 are financial stocks as investors back banks and insurers to be among the few sectors to benefit from a normalisation of interest rates. Auto insurer Admiral (ADM) leads the way, up 1.9% to £18.98 and fellow property and casualty specialist RSA puts on 1.8% to 488p.
Private equity house 3i (III) gains 1.5% on full year results which show a 32% gross investment return in its portfolio as well as close to £1 billion of proceeds from the sale of assets.
In other corporate news, unloved maternity products purveyor Mothercare (MTC) is marked up 9.5% to 130p as some optimism towards the stock returns. Finals reveal underlying profit before tax up 51% at £19.6 million and Mothercare's first statutory profit in five years as the UK turnaround continues, though the international business remains distressed, being battered by currency and economic headwinds.
Pub and restaurant group Mitchells & Butlers (MAB) edges up 1% to 280.1p as a 10% rise in sales from invested sites is offset by a fall in sales at uninvested sites, to give an overall first half like-for-like sales decline of 1.6%. The operating margin has edged up from 13.7% to 14.2%, while adjusted earnings are 9% higher.
Premium tonic water-to-ginger beer supplier Fevertree Drinks (FEVR:AIM) fizzes 11.7% higher to 667.75p on news full-year results should 'materially' beat market expectations. CEO and co-founder Tim Warrillow says the premium carbonated mixers marvel outperformed expectations in the first four months of the year, while gross margins have strengthened with the help of favourable currency moves.
Window and door replacement company Safestyle UK (SFE:AIM) skips 7.5% ahead to 284.75p as a positive annual meeting update stokes upgrades. The running Play of the Week highlights 24% growth in orders for the first four months of 2016 and expresses confidence in delivering 'excellent' results for the year.
Ceramic tableware maker Portmeirion (PMP:AIM) cheapens 4.9% to £12.05 on news sales for the opening four months to end-April were 2% down year-on-year as a hoped-for sales recovery in South Korea has failed to materialise. Non-executive chairman Dick Steele also flags an unexpected drop in demand from some other Asian markets, though he is still confident annual profits will meet expectations with a helping hand from recent compelling acquisition Wax Lyrical.