The FTSE 100 slipped on Thursday as attention started to shift from inflation and interest rates to global growth.

Cyclical sectors were hit on Thursday as recent data from China and concerns about growth rates in Europe and the US drove home the fragile state of the global economy.

Optimism around falling inflation rates and a possible slow down in rate hikes showed the first signs of fading as the FTSE 100 fell below 7,800 and retreated from the verge of record highs.

“US Recession fears are resurfacing as Federal Reserve policymakers flagged that more rate rises are ahead, even though inflation is coming down from dizzying heights and slowing activity is taking a toll on big companies. U.S. manufacturing output dropped in December and retail sales are now on the slide, falling at the sharpest rate in a year,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

Equities have gained steadily in 2023 and Thursday’s decline is the first significant bout of selling this year.

Cyclical retreat

As one would expect, cyclical companies experienced the heaviest selling on Thursday. Miners were the biggest drag on the FTSE 100 with Antofagasta, Glencore, and Fresnillo among the top fallers.

There was also profit taking in some of 2023’s top performers. Ocado was down 3% while JD Sports and IAG both slipped. IAG is the FTSE 100’s top riser in 2023, adding 22% in the early stages of the new year.

Following the announcement of 6% revenue growth in the year ended December 2022, Melrose dipped 1.5% as investors booked profits after a strong start to the year for shares.

Dr Martens shares tanked on Thursday after the footwear company said revenue had missed expectations due to disruption and disappointment in their US operations.

The footwear brand has faced disruption at their LA-based distribution centre which led to bottlenecks and ultimately a reduction in FY23 EBITDA by £16-25m due to lower wholesale revenue.

There was overall group revenue growth of 5% for the year-to-date, but the disappointing events in the wholesale unit meant a sharp miss of estimates.

Dr Martens shares were down 25% to 155p at the time of writing.

‘’Dr Martens has been caught seriously on the back foot with operational problems at its new distribution centre in Los Angeles, piling yet more problems on the beleaguered bootmaker. The transfer of inventory to the new hub was faster than planned, causing a bottleneck of stock, and the chaos is set to reduce wholesale revenues by up to £25 million,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

“It’s forced the company to take on new space and an extra shift of staff to sort out the problems which will also push up costs. This is another big migraine for the company, which was also dealing with the headache of disappointing US sales in the fourth quarter, which is viewed as a key market for growth for the company.”

The premium British chocolatier had a very business festive season at its shops across the UK.

In the nine weeks to Christmas Day its store sales reported by the Hotel Chocolat Group (LON:HOTC) were up 10%, setting a new record for its Christmas campaign sales across its UK store estate.

Particular hits with the shoppers were the Velvetiser in-home drinking chocolate system, while its new Mince Pie drinking chocolate also went down a storm.

However, elsewhere within the group, including both its international and wholesale business did not perform to plan.

Co-founder and CEO Angus Thirlwell stated that:

“A late festive surge delivered sparkling store performances.  When times are tough, shoppers prioritise quality products that are really worth it. Hotel Chocolat will continue to live up to these expectations: investing in more cacao and less sugar, funding nature-positive cacao farming, and championing British-made quality.

“We have grown Hotel Chocolat by 65% over the period since the start of the pandemic, adapting to some of the most difficult economic conditions on record. Taking a year, over FY23, to sharpen-up our operating model is the right thing to do, before we embark on further pursuit of the multiple growth opportunities ahead for our brand.”

Analyst Wayne Brown at brokers Liberum Capital was impressed by the group’s retail sales at Christmas, while maintaining his Buy rating on the shares.

For the current year to end June he is going for a £13m sales slip to £213m, while pre-tax profits could be just £8.3m (£21.7m), dropping earnings by more than two thirds to 4.8p (15.3p) per share.

However he anticipates a bounce-back in the coming year to £224m sales and £20.5m profits, worth 11.2p in earnings.

Even better sales and profits are expected the following year.

He has a 300p Target Price on the group’s shares, which are currently trading at around 185p.

Brick-maker Ibstock displayed remarkable resilience in 2022 and now expects revenue to be £510m, an increase from £409m a year prior.

Despite and increasingly negative outlook on the housing market, Ibstock’s focus on cost management has maintained EBITDA margins and helped cash generation. The company said they saw EBITDA ahead of their previous expectations.

Ibstock did warn of a more challenging year ahead and said volumes in the fourth quarter 2023 were lower than 2021.

Ibstock shares reversed early losses on Wednesday to trade marginally positive at the time of writing.

“Two upgrades in as many trading updates is no mean feat for Ibstock in the current environment.  But 2023 is likely to see some bumps in the road. We are already seeing signs that construction activity is being held back among the housebuilders,” said Derren Nathan, Head of Equity Research at Hargreaves Lansdown.

“However, Ibstock has shown that it is an excellent operator, and its focus on innovative products, such as the recent launch of the UK’s first net zero bricks should help soften the impact from a weaker housing market. The balance sheet is also in relatively good shape following the disposal of non-core property assets.”