The FTSE 100 fell on Wednesday as traders reduced their risk exposure ahead of a string of central bank meetings this week, as Brent oil prices rose to $114.
London’s leading index was trading down 0.6% at the time of writing.
Although the FTSE 100 and global equities indices have generally displayed a degree of resilience in the face of inflationary pressures and possible interest rate cuts, cracks are starting to appear.
No one really wants to be long stocks if the Federal Reserve or the Bank of England make hawkish statements this week, and the declines in equities we’re seeing are traders reducing their exposure ahead of the key meetings.
The Federal Reserve will announce its rate decision, followed by a press conference this evening. It will be the turn of the Bank of England tomorrow.
For now, rising oil prices are enough to unnerve investors worried about the extent of possible interest rate hikes.
“Despite a decent showing from Asian markets, Europe was on the back foot as yesterday’s dip in oil prices reversed, reminding investors that inflation risks are still elevated,” says Dan Coatsworth, head of markets at AJ Bell.
FTSE 100 movers
AstraZeneca dragged on the FTSE 100, falling 1.4% despite beating Q1 earnings estimates.
Adam Vettese, market analyst for eToro, explained: “AstraZeneca has delivered an impressive set of Q1 results this morning, comfortably beating expectations on revenue and core earnings while fully reaffirming its full year guidance. Group revenue rose 8% at constant exchange rates to $15.3 billion, with core EPS increasing 5% to $2.58.
Polar Capital Technology Trust was among the gainers on Wednesday after a strong couple of sessions for US tech shares. Polar Capital Technology Trust is arguably the premier large-cap option for UK investors seeking exposure to the AI story, with holdings in Nvidia, Alphabet, Broadcom, and TSMC. Shares in the investment trust were 1% higher on Wednesday and have added around 30% from March lows, with momentum firmly on its side.
Lloyds shares were down 1% after the bank reported a 33% increase in underlying profits, driven by higher net interest margins. Guidance was reiterated, leaving little reason for shares to move in either direction.
“There are still areas to watch, particularly impairments and the wider impact of a weaker UK consumer backdrop, but this was a solid update overall,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“Lloyds looks to be entering the rest of the year with momentum, a strong capital position, and profit metrics running ahead of its own targets.”
Next, Persimmon, Land Securities, and Burberry were among the fallers as interest rate-sensitive stocks were hit.
It was a good day for DCC, gaining 15% after confirming an all-cash takeover offer from KKR. It will be another kick in the teeth for London if DCC is the next high-quality FTSE 100 company to be taken private by US private equity.