Newspaper article The Journal (Newcastle, England)

US Interest Rate Rise Threat Casts Shadow over Market

Newspaper article The Journal (Newcastle, England)

US Interest Rate Rise Threat Casts Shadow over Market

Article excerpt

Byline: SHARE WATCH Neil McLoram

SHARES got off to a poor start for the week amid fears that the Federal Reserve could raise US interest rates later this month.

The FTSE 100 Index was down more than 1% on Monday, led by a 2.4% decline in financial sector shares. Associated British Foods dropped 10.8% after a trading update warned that the weak pound could become a drag on profit margins.

Tuesday saw the FTSE 100 fall further to a one-month low, with a number of real estate developers down more than 2%. Online grocer Ocado fell more than 13% after warning of margin pressures. But JD Sports Fashion rose 5% after good interim results showed revenue up 20% to PS971m.

The run of losses for the FTSE 100 came to an end on Wednesday as positive economic data out of China bolstered commodity stocks and the UK's Office for National Statistics (ONS) released solid employment data. But housebuilders were lower after indications the government may change policy to expand rental supply.

Ocado fell a further 7.5% amid doubts that the firm will ever succeed in its aim to license its technology. EasyJet was also off 4.2%.

The FTSE 100 rose 0.9% on Thursday as the Bank of England left the door open for another rate cut later this year. Wm Morrison jumped 7.5% on forecast-beating results, but Next fell 4.9% as its latest update disappointed. Hargreaves Lansdown was also off 4.5% after Liberum analysts downgraded the fund supermarket to a "sell", pointing out interest rate cuts meant the firm will earn "considerably less" from clients' cash holdings. Shares were mixed in early trading on Friday ahead of the release of US inflation data.

Fears about the impact of the Brexit decision were highlighted again on Monday as ratings agency S&P warned against placing too much weight on the economic data issued since the referendum.

"While the news so far is encouraging, we believe it has no bearing on the cloudy longer-term outlook for the UK economy" said S&P economist Sophie Tahiri. "The uncertainty surrounding the UK's future outside of the EU, and the associated economic risks, which we think are predominantly skewed to the downside, will gradually take its toll, particularly on investment, as businesses start dealing with the new Brexit reality. …

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