Global equities were deep in the red on Thursday after the Federal Reserve Chair concluded a materially hawkish testimony to Congress and raised concerns of higher interest rates for longer.
The FTSE 100 was down 0.7% to 7,876 at the time of writing while the German DAX shed 0.4%. US futures were pointing to a lower open.
“The FTSE 100 took another step back on Thursday as a second day of testimony in front of Washington lawmakers by Federal Reserve chair Jerome Powell largely stuck to the hawkish tone of the previous day,” said AJ Bell investment director Russ Mould.
“While Powell softened things a little by saying nothing is decided yet, the clear message is future rate decisions will be dependent on the data and for now that seems to be tilting things more towards a 50-basis point rather than 25 basis point rate rise later this month.
“This would shatter the market’s comfortable illusion at the start of the year that rates were about to pivot and a soft landing for the US economy could be engineered.”
US 10-year Bond yields briefly touched 4%, before falling. A higher yield in US treasuries made the FTSE 100’s bond proxy stocks seem less attractive with companies including British Land, Land Securities, SSE and Whitbread falling.
Aviva
Through the gloom of the UK’s miserable weather conditions and generally negative stock markets, Aviva was a ray of light after reporting strong results for 2022. Operating profit jumped 35% to £2.2bn and the company rewarded investors with a share buyback and dividend hike.
“For investors, news of a £300m buyback was welcomed with open arms – the capital position remains strong, and the potential for further buybacks alongside a 7.8% forward yield looks attractive,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
Cyclical selloff
It was a tough day for the FTSE 100’s cyclical stocks. The prospect of tighter monetary policy for an extended period damped demand for companies reliant on stronger economic conditions. The miners were down heavily. Rio Tinto dropped 4.8% while Endeavour Mining tanked 5.6% after reporting 2022 results.