The FTSE 100 fell again on Tuesday as early strength in housebuilders and banks shares wasn’t enough to offset concerns over volatility in US stocks and upcoming central banks decisions.
The S&P 500 officially entered a bear market, with the index down 3.8% to 3,749.6 yesterday and tumbling 21.8% year-to-date.
“The US market entered bear territory last night, with its main markets dropping to long-forgotten lows. The crux of the concern plaguing investors is how harshly the Fed plans to tackle rising inflation in the face of stark new CPI data,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.
“Getting the balance wrong and hiking interest rates too aggressively could see recession fears become a reality.”
The markets are currently bracing for the US Federal Reserve’s interest rate decision on Wednesday, with investors anticipating a significant hike.
The NASDAQ plummeted 4.6% to 10,809.2 and the NYSE dropped 3.7% to 14,527.9 in advance of the Fed’s expected hawkish move.
“The Fed is focused on inflation and the economy, not the markets, yet its actions have significant influence on the direction of stocks and bonds,” said Russ Mould of AJ Bell.
“A decision to raise rates by more than half a percentage point could cause chaos on the markets and put a bigger dent into investors’ portfolios than they’ve already seen this year.”
However, the European markets managed to avoid the massive slide, with the French CAC falling 0.6% to 5,981.8, the German DAX down 0.3% to 13,383.4 and the Italian FTSE MIB dipping 0.4% to 21,819.8.
Housebuilders defy gravity
The housing market continued to defy gravity, with Persimmon share up 1.8% to 2,158p, Barratt Developments rising 1.8% to 484.2p, Taylor Wimpey gaining 1.2% to 123.7p and Berkeley Group Holdings climbing 1.2% to 4,017p.
“The housebuilding sector continues to shine despite all the gloom about cost of living pressures and rising interest rates,” said Mould.
“A shift towards hybrid working means those who can afford it are often looking for extra space to accommodate a home office.”
“Supply of new homes remains a long-term issue in the UK and this is helping to support the market.”
Banks gain
Meanwhile, the banking sector was spurred higher by the prospect of higher interest rates from the Bank of England on Thursday, with the institution anticipated to hike rates 0.25% to 1.25% at its meeting this week.
Standard Chartered shares rose 2.4% to 593.8p, HSBC shares gaining 2.2% to 514.1p, Lloyds shares up 1.2% to 4,334p and NatWest shares increasing 1.1% to 221.5p.
ITV
ITV shares rose 1.1% to 68.1p following the company’s 79.5% acquisition of natural history film producer Plimsoll Productions for £103.5 million.
The acquisition is set to deepen ITV’s relationships with companies in the streaming industry and expand its entertainment offerings across its customer base.
“Growing ITV Studios with an exciting pipeline of premium programmes is core to our strategy as we further diversify the business by genre, by geography, by customer and grow ahead of the market,” said ITV CEO Carolyn McCall.
Mould added: “The move will strengthen ITV’s position in natural history content which has widespread appeal around the world.”
“ITV has been trying to beef up its content arm with a view to having programmes that appeal beyond its UK domestic audience and this acquisition looks like a winner.”
Ashtead sinks
Meanwhile, Ashtead shares sank 4.9% to 3,617p despite reporting a 19% rise in FY 2022 revenue to $7.9 billion compared to $7.6 billion in the previous year.
The company also increased its final dividend by 40% to 67.5c against 48.2c.
“Construction equipment rental group Ashtead continues to achieve strong sales and earnings growth and its latest results are a reminder of how the business is top of its class when it comes to generating strong returns,” said Mould.