Business

UK shares fall ahead of Fed decision as Irish and most European markets closed

Markets digesting that rate cuts could be lower and slower than anticipated in US

The tech-heavy Nasdaq and S&P 500 were lower in mid-afternoon trading in New York as chip stocks led losses ahead of the Fed interest rate decision. Photograph: Michael M Santiago/Getty Images

Joe Brennan
Wed May 1 2024 - 18:44

UK shares declined on Wednesday as the Irish market and most exchanges in Europe remained closed for May Day public holidays across the continent, with investors cautious ahead of the US Federal Reserve’s policy decision later in the day, hoping for hints on its interest rate path.

The Irish market was closed because it is owned — and its systems are run — by pan-European bourse operator Euronext. The Dublin market will also be closed next Monday because of the bank holiday here.

London

The UK’s FTSE 100 slipped 0.3 per cent, led by declines in energy stocks.

Heavyweight oil and gas shares slipped 1.7 per cent as oil prices fell over 2 per cent to a seven-week low, weighed down by a surprise build in US crude stocks, the prospect of a Middle East ceasefire agreement and persistent US inflation.

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As inflation remains stubbornly above the US central bank’s 2 per cent annual target, investors were almost certain in London that the Fed was going to hold its benchmark overnight interest rate steady later on Wednesday.

However, investors were awaiting comments from Fed chairman Jerome Powell that could give clearer insights into the central bank’s view on potential rate cuts.

“The question is what the Fed can say to boost hopes … even the optimism of the FTSE 100 was no match for the familiar weight of weary expectation,” said Danni Hewson, head of financial analysis at AJ Bell.

Money markets now anticipate 0.3 percentage points of US rate cuts this year, down from the initial estimate of 1.5 points in 2024, according to LSEG data.

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Traders expect about 0.38 of a point reduction from the Bank of England and nearly 0.6 of a cut from the European Central Bank this year, easing pressure on European stock markets compared to those in the US.

Meanwhile, UK manufacturing fell back into contraction in April and cost pressures escalated, though the pace of decline was a little less marked than first feared, a survey showed.

In corporate updates, GSK advanced 1.9 pre cent after the drugmaker raised its full-year profit forecast and said its sales would be higher in the first half of the year.

Shell has exited China’s power markets as part of chief executive Wael Sawan’s drive to focus on more profitable operations, taking its shares down 1.5 per cent.

Haleon fell 2.5 per cent after the consumer healthcare firm’s first-quarter revenue missed estimates.

Dragging UK midcap stocks lower, Aston Martin slumped 6.7 per cent after the luxury carmaker posted a bigger-than-expected first-quarter pretax loss.

New York

The tech-heavy Nasdaq and the benchmark S&P 500 were lower in midafternoon trading in New York as chip stocks led losses on downbeat results and markets weighed fresh economic data ahead of the Fed interest rate decision.

The ADP National Employment report showed US private payrolls increased more than expected in April, while a separate reading showed US manufacturing contracted. A measure of prices paid by factories for inputs approached a two-year high.

On the company earnings front, Advanced Micro Devices declined after its forecast for AI chip sales failed to impress investors, while Super Micro Computer was also out of sorts as the artificial intelligence server maker reported third-quarter revenue below estimates.

Helping the blue-chip Dow advance, Amazon.com rose on better-than-expected quarterly results as interest in artificial intelligence helped drive cloud-computing growth.

Johnson & Johnson advanced after saying it is moving forward with a $6.48 billion proposed settlement of tens of thousands of lawsuits alleging that its baby powder and other talc products contain asbestos and cause ovarian cancer.

Starbucks dropped as the coffee giant cut its annual sales forecast and reported a fall in same-store sales for the first time in nearly three years.

CVS Health plunged after the healthcare giant slashed its annual profit forecast and missed Wall Street estimates for first-quarter earnings.

— Additional reporting, Reuters

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times

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