London stocks edged lower in early trade on Wednesday as caution set in ahead of rate announcements from the US Federal Reserve and the Bank of England, while results from Microsoft and Alphabet failed to impress.
At 0830 GMT, the FTSE 100 was down 0.2% at 7,650.35.
Jim Reid, head of global economics and thematic research at Deutsche Bank, said: “The main event over the last 24 hours occurred after the US closing bell as results from Microsoft and Alphabet last night soured risk sentiment.
“Both of the tech giants narrowly beat revenue and earnings estimates, but saw an underwhelming reaction in after-hours trading. Alphabet slid more than 5% amid lower-than-anticipated advertising revenues for Google. Microsoft declined by as much as 3% initially, arguably signalling some overextension of the recent strong rally, but largely reversed this decline after its outlook call later in the evening.”
Investors were looking ahead to the Fed’s latest policy announcement, due after the close of European markets, with the BoE set to announce its decision on Thursday.
They were also mulling figures from Nationwide released earlier, which showed that UK house prices rose more than expected in January as mortgage rates trended lower.
House prices were up 0.7% on the month, having been flat in December and versus expectations for a 0.1% jump. The average price of a home now stands at £257,656.
On the year, prices were down just 0.2% in January following a 1.8% decline the month before. This marked the strongest outturn since January 2023.
Nationwide chief economist Robert Gardner said: “There have been some encouraging signs for potential buyers recently with mortgage rates continuing to trend down. This follows a shift in view amongst investors around the future path of Bank Rate, with investors becoming more optimistic that the Bank of England will lower rates in the years ahead.
“These shifts are important as this led to a decline in the longer-term interest rates (swap rates) that underpin mortgage pricing around the turn of the year. However, the partial reversal in recent weeks in response to stronger than expected inflation and activity data cautions that the interest rate outlook remains highly uncertain.
“While a rapid rebound in activity or house prices in 2024 appears unlikely, the outlook is looking a little more positive. The most recent RICS survey suggests the decline in new buyer enquiries has halted, while there are tentative signs of a pickup in the number of properties coming onto the market.”
Andrew Wishart, senior economist at Capital Economics, said the larger-than-expected monthly gain in house prices reflected improving public sentiment about the economy and the housing market, and supports CE’s above-consensus forecast that house prices will rise by 3% this year.
“While the cost of the mortgage needed to buy the average home remains high by historical standards, the rise in house prices at the start of the year shows that declines in mortgage rates have been sufficient for house prices to eke out further gains,” he said. “Alongside improving public sentiment about the outlook for house prices according to YouGov, we are content with our above-consensus forecast that they will rise by 3% this year, reversing the 2.4% fall in 2023.”
In equity markets, Vodafone fell after French telecoms firm Iliad said it had rejected a revised offer to merge the two companies’ Italian businesses. The revised offer would have given Vodafone €6.6bn in cash and a €2bn shareholder loan. Meanwhile, Iliad would have received €400m in cash and a €2bn loan.
GSK nudged lower despite lifting its sales outlook for the next seven years.
Professional IT services provider FDM Group was also in the red after saying it expects annual revenues to be flat, confirming the warning it issued in November about the hit from geopolitical uncertainties and clients deferring project decisions.
Market Movers
FTSE 100 (UKX) 7,650.35 -0.21%
FTSE 250 (MCX) 19,292.52 -0.29%
techMARK (TASX) 4,370.87 -0.14%
FTSE 100 – Risers
Croda International (CRDA) 4,720.00p 2.92%
Flutter Entertainment (DI) (FLTR) 16,310.00p 1.49%
Taylor Wimpey (TW.) 148.65p 0.78%
Pearson (PSON) 970.60p 0.71%
Antofagasta (ANTO) 1,717.50p 0.67%
Aviva (AV.) 434.50p 0.53%
Smiths Group (SMIN) 1,650.50p 0.52%
Rightmove (RMV) 563.60p 0.50%
CRH (CDI) (CRH) 5,668.00p 0.50%
Compass Group (CPG) 2,191.00p 0.46%
FTSE 100 – Fallers
Airtel Africa (AAF) 111.20p -2.71%
Vodafone Group (VOD) 67.10p -2.40%
Smurfit Kappa Group (CDI) (SKG) 2,952.00p -1.86%
Fresnillo (FRES) 529.40p -1.82%
Associated British Foods (ABF) 2,339.00p -1.76%
Lloyds Banking Group (LLOY) 42.42p -1.38%
Marks & Spencer Group (MKS) 251.20p -1.37%
Burberry Group (BRBY) 1,306.00p -1.36%
Standard Chartered (STAN) 595.00p -1.36%
Intermediate Capital Group (ICP) 1,754.50p -1.35%
FTSE 250 – Risers
Supermarket Income Reit (SUPR) 82.90p 2.85%
Genuit Group (GEN) 429.00p 2.51%
Virgin Money UK (VMUK) 158.75p 2.35%
Vesuvius (VSVS) 489.00p 2.34%
Ashmore Group (ASHM) 217.80p 2.25%
Trustpilot Group (TRST) 182.00p 2.19%
Elementis (ELM) 144.60p 1.97%
Indivior (INDV) 1,378.00p 1.47%
Urban Logistics Reit (SHED) 125.00p 0.97%
JPMorgan Indian Investment Trust (JII) 916.00p 0.88%
FTSE 250 – Fallers
Harbour Energy (HBR) 281.00p -4.68%
Hochschild Mining (HOC) 101.30p -3.52%
Coats Group (COA) 71.70p -2.98%
Pets at Home Group (PETS) 285.00p -2.86%
Discoverie Group (DSCV) 760.00p -2.81%
Jupiter Fund Management (JUP) 77.45p -2.39%
Spirent Communications (SPT) 119.60p -2.37%
Victrex plc (VCT) 1,330.00p -2.35%
Watches of Switzerland Group (WOSG) 362.20p -2.21%
Britvic (BVIC) 867.00p -2.14%
