Stocks red as rate rise fears continue to grow

(Alliance News) - Stocks in London were lower at the close on Tuesday after unexpectedly strong US job openings data added to fears that interest rates in the world's largest economy will stay higher for longer.

The FTSE 100 index closed down 40.56 points, or 0.5% at 7,470.16 on Tuesday. The FTSE 250 ended 299.53 points, or 1.7%, at 17,677.76. The AIM All-Share closed down 14.20 points, or 2.0%, at 703.44.

The Cboe UK 100 ended down 0.5% at 745.71, the Cboe UK 250 closed down 1.9% at 15,385.90, and the Cboe Small Companies ended down 0.6% at 12,977.63.

The number of US job openings increased 690,000 to 9.61 million on the last business day of August, from 8.92 million at the end of July, data from the US Bureau of Labor Statistics showed on Tuesday.

The print came well above market expectations, which had been expecting the number of job openings to dip to 8.8 million at the end of August, according to FXStreet-cited consensus.

The big jump in August indicated that the US labour market remains robust and further fuelled the higher for longer interest rate fears.

Nancy Vanden Houten, US lead economist at Oxford Economics, said that while the US Federal Reserve won't make policy decisions based on one JOLTS report, it does keep the risks "tilted toward another rate hike".

Currently, markets see a 30% chance of the Fed raising rates by 25 basis points at its next meeting in November, according to the CME FedWatch Tool. Just one week ago, markets saw a 16% chance of this outcome.

Hawkish comments from a senior Federal Reserve official on Monday have also helped fuel the higher for longer narrative around US interest rates.

"The most important question at this point is not whether an additional rate increase is needed this year or not, but rather how long we will need to hold rates at a sufficiently restrictive level to achieve our goals," Fed Vice Chair for Supervision Michael Barr told a conference in New York in prepared remarks.

"I expect it will take some time," he continued, adding that his decision would be guided by "a range of incoming data."

The Fed has raised its key lending rate 11 times since March 2022, lifting rates to a 22-year high as it looks to bring inflation down to its long-term target of two percent.

The dollar was stronger on Tuesday against the uncertain interest rate backdrop.

The pound was quoted at USD1.2065 at the London equities close on Tuesday, down from USD1.2143 at the London equities close on Monday. The euro stood at USD1.0459, lower against USD1.0508.

Against the yen, the dollar was trading at JPY149.22, lower compared to JPY149.78 late Monday. However, earlier on Tuesday, the dollar topped JPY150 for the first time in a year.

In London, AstraZeneca lost 0.3% after it announced it has settled legal matters involving its Nexium acid reflux and Prilosec heartburn products, parting with USD425 million.

The pharmaceutical maker said the agreement resolves the product liability claims pending in the US District Court for the District of New Jersey, as well as in the Delaware Superior Court and the New Jersey Superior Court.

However, AstraZeneca maintains its belief that the claims are "without merit" and doesn't admit any wrongdoing in its settlement.

In the FTSE 250, Greggs closed 3.5% lower despite reporting third-quarter sales growth, thanks to a boost from its evening trading and its digital channels in the 13 weeks to September 30.

The bakery chain said total sales rose 21% year-on-year during the period, while company-managed shop like-for-like sales were up 14%.

Looking ahead, Greggs a full-year outcome in line with expectations.

RBC Brewin Dolphin analyst John Moore commented: "Greggs is proving it can be a beneficiary in tougher times, offering a price competitive option for lunch and, increasingly, evenings. The business has a strong balance sheet and is highly cash generative, which not only puts it in a good position to weather tough periods but also continue to deliver returns to shareholders...If it continues on its current roll, Greggs could find itself on the FTSE 100 in the next couple of years."

Elsewhere in London, Alfa Financial Software tumbled 12% after it announced it has terminated talks for a potential takeover by Thomas H Lee Partners.

Last Wednesday the software developer announced that it was in preliminary talks for a potential takeover with the Boston, Massachusetts-based private equity firm.

Alfa Financial did not state a reason and highlighted that the termination announcement had been made without the consent of THL.

"The board remains confident in the company's strategic direction including continued investment into the software and in high-quality people. The inherent robustness of the asset finance market, seen in the exceptionally strong late-stage pipeline, underpins our strong confidence in the outlook for the business," Alfa Financial said.

On AIM, Belluscura jumped 5.7% after it announced that it had reached an agreement with TMT Acquisition to buy the company for around GBP6.0 million.

The deal would value TMT's shares at 21.82 pence each, a 25% premium to the three-month volume weighted average price for TMT acquisition shares calculated for the period that ended on Monday.

TMT is a London-based acquisition vehicle in technology, media and telecommunications sector. Shares in firm surged 21% to 20.50p at the London equities close on Tuesday.

In European equities on Tuesday, the CAC 40 in Paris ended down 1.0%, while the DAX 40 in Frankfurt ended down 1.1%.

Stocks in New York were firmly in the red at the London equities close, with the Dow Jones Industrial Average down 1.2%, the S&P 500 index down 1.3%, and the Nasdaq Composite down 1.7%.

Brent oil was quoted at USD91.00 a barrel at the London equities close on Tuesday, up from USD90.70 at the close on Monday. Gold was quoted at USD1,824.87 an ounce, lower against USD1,833.40 at the close on Monday.

In Wednesday's UK corporate calendar, there are half-year results from grocer Tesco and a trading statement from tile retailer Topps Tiles.

The economic calendar has the latest services purchasing managers' index prints from the EU, UK and US from 0900 BST.

By Heather Rydings, Alliance News senior economics reporter

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