UK equity markets eased on Wednesday with the FTSE 100 dipping 0.5% to 7,450.7 as European and Asian markets also took a hit, reflecting investor positioning ahead of the Jackson Hole convention.
“Markets seem to have lost their momentum following the rally since mid-June. Investors have become nervous once again, with all eyes on Federal Reserve chair Jerome Powell and what he says this coming Friday,” said AJ Bell investment director Russ Mould.
“Investors are worried that the US central bank will continue to raise interest rates at a rapid pace, despite lower-than-expected inflation figures in July. If this happens, we could well see another leg down in global markets as the summer draws to a close.”
The US saw lower inflation results in July at 8.5%, falling from its June height of 9.1%. The drop in inflation sparked some hope the US Fed would ease up on inflation rate hikes, however the markets are currently gearing up for a hawkish response from Powell on Friday.
The Hang Seng slid 1.2% to 19,268.7 and the SSE Composite fell 1.8% to 3,215.2.
The German DAX dipped 0.1% to 13,171.1, the French CAC was flat at 6,363 and the Italian FTSE MIB dipped 0.1% to 22,348.8. European indices recovered from these early losses to trade in positive territory just after midday.
Meanwhile, US markets remained flat in pre-open trading, with the Dow Jones at 32,874, the S&P 500 at 4,127.5 and the NASDAQ at 12,884.5.
Miners
Miners fell after a series of poor manufacturing data from major economies suggested demand for natural resources was starting to wane.
Anglo American shares dropped 1.9% to 2,887, Antofagasta fell 2.1% to 1,137.5p, Endeavor declined 0.8% to 1,794.5p, Glencore slid 0.9% to 501.1p and Rio Tinto decreased 1.6% to 4,960.7p.
UK manufacturing reached a 27-month low at 46 in August against 52.1 in July, denting hopes across the mining sector.
The news certainly added pressure to the sector amid wider fears of an international production slowdown as the cost of living crisis and falling consumer demand continued to bite.
Whitbread
Whitbread shares dipped 0.6% to 2,519p following its surprising move to invest £200 million into a new hotel development in Central London.
The bold commitment marks an unexpectedly risky decision in light of the current macro-economic uncertainty.
“Whereas many companies will be battening down the hatches for fear that a recession will hurt their business, Whitbread has done the opposite by committing £200 million to a new hotel development in central London,” said Mould.
“Its purchase of 5 Strand will provide the opportunity to build accommodation in prime tourist territory, using its ‘hub by Premier Inn’ concept which features compact rooms.”
“Interestingly, the building was sold four years ago to an Indian property developer with the intention of creating a luxury 200-bedroom hotel. Now it’s going to be Whitbread’s latest project in squishing in as many rooms in as possible.”