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(Alliance News) - Stock prices in Europe closed largely lower on Wednesday, with elevated US interest rate expectations hitting equities again, while share price slides for the London-listed mining sector ensured the FTSE 100 suffered steeper a decline than its peers.
The FTSE 100 index ended down 47.12 points, or 0.6%, at 7,930.63. The FTSE 250 closed down 170.56 points, or 0.8%, at 19,688.98. The AIM All-Share ended down 9.88 points, or 1.2%, at 852.28.
The Cboe UK 100 ended down 0.7% at 793.35, the Cboe UK 250 dropped 0.9% to 17,166.30. The Cboe Small Companies fell 0.8% to 13,936.84.
"A bucket of cold water was poured on the market last week when two Federal Reserve members indicated they would support a 50 basis-point hike in the next US interest rate decision. In essence, a larger hike than some expected, and a signal that the Fed would be nowhere near the end of its rate hike cycle, let alone the prospect of seeing rates come down later in the year," AJ Bell analyst Russ Mould commented.
Minutes from the Fed's last meeting, which concluded on February 1, are reported at 1900 GMT.
While equity market traders will be hoping there are not any hawkish surprises, data since that meeting may make the minutes somewhat out of date.
Since that last meeting, several Fed officials in recent speeches have offered a hawkish stance. When the Fed meets next month, most expect it to raise rates by 25 basis points, though the prospect of a stronger half-point hikes increases every time US data comes in hot.
"Investors are clearly hoping that the Fed minutes will rescue them from this outbreak of bearishness over interest rates, but given the data we've had since then the minutes might not be able to do much to retrieve the situation," IG markets analyst Chris Beauchamp.
Ahead of the minutes, stocks in New York were largely higher at the time of the closing bell in London. The Dow Jones Industrial Average and Nasdaq Composite were up 0.1%, while the S&P 500 was flat.
The dollar was firm. The pound was quoted at USD1.2066 late Wednesday in London, lower compared to USD1.2121 at the close on Tuesday.
The euro stood at USD1.0629, lower against USD1.0673 late Tuesday. Against the yen, the dollar was trading at JPY134.67, down slightly compared to JPY134.74.
In London, mining shares ended lower.
"The risk-off mentality explains why miners were among the biggest fallers. An assumption that rates could continue to rise theoretically raises the risk of more damage to the economy, and commodity producers' fortunes are highly sensitive to economic activity," AJ Bell's Mould commented.
Rio Tinto dropped 3.6%.
The miner, which has numerous assets worldwide, reported pretax profit of USD18.66 billion, down 39% from USD30.83 billion a year prior.
Revenue decreased to USD55.55 billion, 12% lower than USD63.50 billion in 2021, but marginally above JPMorgan analyst expectations of USD52.49 billion. It reported a steep drop in annual profit due to falling prices for iron ore.
Anglo American shares closed down 2.2%. It reports annual earnings on Thursday. Its revenue for 2022 is forecast to be USD36.88 billion, according to company compiled consensus, down from USD41.55 billion in 2021.
Lloyds Banking shares recovered from an intraday low, ending 0.6% higher. Its net interest income rose 49% to GBP13.96 billion in 2022 from GBP9.37 billion in 2021. It noted this was "supported by higher interest rates and solid business volumes".
Pretax profit, however, was little changed at GBP6.93 billion, compared to GBP6.90 billion.
The bank proposed a final dividend of 1.60 pence, bring the total to 2.40p, in line with market expectations and up 20% from 2.00p in 2021. Lloyds also announced the launch of a GBP2.0 billion share buyback.
Its outlook was less-than-stellar, however. Lloyds expects a banking net interest margin of 305 basis points for 2023. Though this would be a rise from the 2.94% achieved for the whole of 2022, it would be down on the 3.22% Lloyds reported for the fourth-quarter alone.
Elsewhere in London, Cineworld dropped 10%. It is yet to receive any full takeover offers, the Financial Times reported on Wednesday, as the cinema chain's bankruptcy hearings in the US continue.
A lawyer representing Cineworld told a Texas court that it has contacted a "broad universe" of about 40 possible suitors, the FT reported.
While the company has received a number of bids for its operations outside of the US and UK, a firm offer for the full business was not forthcoming.
The FT reported that the lawyer said no bid has come "anywhere near" the USD6 billion of secured indebtedness on the struggling cinema chain's balance sheet.
In European equities on Wednesday, the CAC 40 in Paris lost 0.1%, while the DAX 40 in Frankfurt closed marginally higher.
In Paris, Danone shares ended 4.5% higher. It rounded off 2022 with a fourth-quarter sales hike, and it predicts a margin improvement in 2023.
The Paris-based firm, which operates brands such as Actimel and Volvic, said net sales surged 12% to EUR7.01 billion in the final quarter of 2022, from EUR6.24 billion a year earlier.
Annual sales amounted to EUR27.66 billion, a 14% rise from EUR24.28 billion in 2021. On a like-for-like basis, sales were 7.8% higher.
Net income weakened 49% however, to EUR1.02 billion from EUR1.99 billion. Its operating margin weakened to 7.7% from 9.3% as the company faced rampant inflationary pressures in 2022. Its recurring operating margin dropped to 12.2% from 13.7%.
It put the margin fall to "the strong negative impact of input-cost inflation". It expects a "moderate improvement in recurring operating margin" for 2023, however.
Gold was quoted at USD1,835.00 an ounce at the time of the London equities close on Wednesday, down from USD1,837.01 late Tuesday. Brent oil was quoted at USD81.16 a barrel, down from USD82.73.
Thursday's economic calendar has a eurozone inflation reading at 1000 GMT, before the latest US jobless claims data at 1330 GMT.
The local corporate calendar has annual results from defence contractor BAE Systems, jet engine maker Rolls-Royce and advertising company WPP.
Financial markets in Tokyo are closed on Thursday for the Emperor's Birthday holiday.
By Eric Cunha, Alliance News news editor
Comments and questions to newsroom@alliancenews.com
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