FTSE 100 closes in the red as Wall Street slips amid inflation jitters

·Finance Reporter, Yahoo Finance UK
·4-min read
FTSE 100 John C. Williams, president and chief executive officer of the Federal Reserve Bank of New York, Lael Brainard, vice chair of the Board of Governors of the Federal Reserve, and Jerome Powell, chair of the Federal Reserve, walk in Teton National Park where financial leaders from around the world gathered for the Jackson Hole Economic Symposium outside Jackson, Wyoming, U.S., August 26, 2022. REUTERS/Jim Urquhart
The FTSE 100 and Wall Street are still digesting the hawkish speech Powell gave at Jackson Hole. Photo: Jim Urquhart/Reuters

The FTSE 100 and global stocks were in the red as a sharp rise in job openings added to worries about the Federal Reserve's aggressive approach to bring down inflation.

The FTSE 100 (^FTSE) lost early gains and closed in the red, losing 0.95% to 7,356 points, while the CAC (^FCHI) in Paris advanced 0.36% to 6,199 points. In Germany, the DAX (^GDAXI) gained 0.38% to 12,941.

US stocks fell for a third day as investors look to take in their stride the stark warning from Powell that interest rates will have to continue rising.

Meanwhile, demand for labour showed no sign of cooling as data showed US job openings rose to 11.239 million in July.

On Wall Street, the Dow Jones (^DJI) lost 0.78% to 31,847. The S&P 500 (^GSPC) was retreated 0.96% to 3,991 points and the tech-heavy Nasdaq (^IXIC) fell 1.19% to 11,874 as trading ceased across Europe.

In London, banking stocks gains prevented biggest loses for the blue-chip index, with HSBC (HSBA.L) up 1.41%, Lloyds (LLOY.L) gaining 0.27% and Barclays (BARC.L) advancing 1.59%.

"Despite the general pessimism pervading sentiment, the FTSE100 managed to limit eke out a small if unconvincing gain in opening exchanges. Not having had the chance to react to the sharp falls at the end of last week due to yesterday’s Bank Holiday, the index was nonetheless helped by a strengthened oil price, and now stands ahead by a marginal 0.6% in the year to date. Early movers included unsurprising rises for the oil majors as well as the banks, the latter of which would traditionally benefit from the rising interest rate environment which looks likely to stay for the time being," Richard Hunter, head of markets at Interactive Investor.

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"Any number of challenges remain on a global basis, however, and further volatility is likely over the coming weeks. Quite apart from the continuing monetary tightening from central banks, inflation remains a persistent problem with the likelihood of earnings downgrades growing as the third quarter enters its final month. While the UK’s premier index has generally weathered the storm given its idiosyncratic composition, the more domestically-focused FTSE250 has taken the brunt of worsening economic prospects in the UK and is now down by 18.5% so far this year," he added.

Oil majors Shell (SHEL.L) recovered from earlier losses and climbed its way back to parity while BP (BP.L) lost 1.88%. Rio Tinto (RIO.L) and Glencore (GLEN.L) were also in the red amid concerns of an economic slowdown.

“Powell’s message from last week’s speech at Jackson Hole on Friday, couldn’t have been any clearer, that the Fed would keep going until the job is done, the pity being it took so long for investors to take notice, as stock markets dropped, and bond yields spiked higher,” Michael Hewson, chief market analyst at CMC Markets UK, said.

“With the European Central Bank also indicating that it was considering going in for a 75bps rate move next week, markets are slowly realising that their ideal scenario of rate cuts in 2023, was wishful thinking at best, and that higher rates are here to stay for some time to come,” he added.

Meanwhile, Brent crude (BZ=F) is still over the $100/barrel mark, even as it slipped 3.63%.

"The FTSE 100 has meandered higher in early trade, helped by energy stocks, which have been buoyed by the higher oil price of recent days. Traders have been assessing what moves the mighty oil cartel OPEC might make to stop prices falling significantly, after members warned a production cut was possible," Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said.

"A barrel of Brent crude raced higher yesterday and although it’s fallen back slightly it has still been trading above $105 dollars, dashing hopes that sustained lower prices could feed through to the pumps. The DAX in Frankfurt and CAC 40 in Paris, have also edged higher in early trade, with gains in financial stocks providing support, as investors expect interest rates to continue rising," she added.

In Asia, Tokyo’s Nikkei 225 (^N225) climbed 1.14% to finish at 28,195 while the Hang Seng (^HSI) in Hong Kong slipped 0.69% to 19,885. The Shanghai Composite (000001.SS) also closed in the red, falling 0.42% to 3,277 points.

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