FTSE 100 weak with Wall Street seen lower; ECB joins Fed and hikes rates

© Reuters. FTSE 100 weak with Wall Street seen lower; ECB joins Fed and hikes rates

Proactive Investors -

• FTSE 100 well off session opening peak of 7,788.37
• US stocks to fall as banks weak on PacWest tumbles
• Shell (LON:RDSa) higher as profit tops forecast, launches US$4bn buyback

US jobs next milestone

Ahead of tomorrow's April non-farm payrolls report, US initial jobless claims rose by 13,000 to 242,000 in the week ending April 29, 2023, above market expectations for 240,000, suggesting the labour market is gradually slowing. The four-week moving average, which removes week-to-week volatility, rose by 3,500 to 239,250.

Tom Hopkins, Portfolio Manager at BRI Wealth Management, commented: “Today’s data is more evidence that rapid rise in interest rates is having consequences. The labour market has stayed surprisingly resilient however we are now seeing signs of softening as job openings in the economy have fallen to their lowest levels since May 2021, with recent layoffs totalling the highest number since 2020.

"The Federal Reserve is aware that it's raising interest rates to a level that may cause discomfort and unemployment to rise, but in a sense, that's precisely the objective as it attempts to combat inflation.”

ECB edges it

As expected, following yesterday's Federal Reserve rate hike, the European Central Bank (ECB) has raised its deposit rate by 25 basis points (bps) to 3.25%, matching the consensus. The refinancing rate also will be increased by 25 bps, to 3.75%, also in line with the consensus.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics commented: "Monetary policy is still being tightened in the Eurozone in response to an inflation which in the ECB’s view is still on track 'to be too high for too long'. We see little guidance for future rate decisions in the press release, consistent with the ECB’s shift in March to a data-dependent approach.

"The ECB states that future rate decisions 'will continue to be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission'. Put differently, the central bank is now looking at a broader palette of data than inflation, though it is safe to assume that the core inflation print remains the key input, for now. The ECB also admits that past rate increases are now being transmitted “forcefully” through to the economy."

He added: "Overall, our call for a 25 bps hike in June to be the final hike in this cycle depends on the economic survey data, which we expect to soften over summer, and core inflation, which we think is now stabilising before falling from Q3 onwards."

Some of the top risers and fallers on the junior market

Trainline PLC (LON:TRNT) shares jumped 15% in early trade after the company reported ticket sales of £4.3bn for the last 12 months, a 72% year-on-year increase and 16% higher than pre-Covid levels.

Merit Group PLC (LON:MRIT) shares surged 39% higher after the data and intelligence business issued a positive post-year-end trading update.

Zytronic (LON:ZYT) fell 27% after the touch-screen manufacturer issued a profit warning.

CT Automotive Group PLC (LON:CTA) dropped 10% after the company warned that its underlying loss before tax for the year ended 31 December 2022 could be around US$15mln.

Mothercare PLC (LON:MTC) shares dropped more than 21% after the parent and baby retailer warned it may require waivers for future debt covenant tests.

Orosur Mining Inc (LON:OMIN) shares plummeted over 28% on Thursday following the release of today’s operational update. Investors appeared concerned over the progress of the Anzá Project in Colombia.

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