MARKET REPORT: US interest rate fears put miners in a hole

The hangover from the US Federal Reserve was being felt across trading floors in London yesterday as the FTSE 100 languished in the red.

On Wednesday the Fed said interest rates would rise by 2023 – a year earlier than planned – amid fears inflation could spiral, and that the US economy is running hot. Stocks in New York sold off and the negative sentiment spilled over into London.

The Fed believes a strong recovery should be good for the economy and corporate profits, but the prospect of tightening monetary policy led to investors pulling out of stock markets and into less risky assets like bonds as interest rates rise.

Inflation fears: The US Federal Reserve (pictured) said interest rates would rise by 2023 – a year earlier than planned – amid fears inflation could spiral and that the US economy is running hot

The biggest losers were the miners. Glencore was down 2.8 per cent, or 11.45p, to 305.6p, Anglo American plummeted 3.4 per cent, or 101p, to 2862.5p and BHP was down 3.3 per cent, or 69.5p, to 2059.5p.

Joshua Mahony, analyst at online trader IG said: ‘The Fed meeting served as a rude awakening for the markets and the presumption that monetary policy would remain accommodative in spite of rising inflation.’

Overall the FTSE 100 was down 0.4 per cent, or 31.52 points, at 7153.43

Stock Watch – Lekoil 

London-listed oil minnow Lekoil has delayed the publication of its annual results for up to three months amid a spat with the company’s former chief executive.

Lekoil said it would exercise its rights to not publish the results for 2020 until September 30 at the latest.

Two weeks ago the company fired its chief executive Olalekan Akinyanmi after he was, without its consent, appointed boss of Lekoil Nigeria, an associate company part-owned by Lekoil.

In an unusual twist, Akinyanmi said that he would stay as the chief executive of Lekoil Nigeria despite being fired.

Lekoil Nigeria is now fully controlled by the London-listed entity and removing Akinyanmi may prove difficult

Banks, however, were up as higher interest rates mean good returns for lenders in the long run.

Barclays moved up 1 per cent, or 1.7p, to 178.82p, HSBC added 0.3 per cent, or 1.35p, to close at 439.4p and Natwest climbed by 0.2 per cent, or 0.3p, to 205.5p.

But the major risers were the airlines, days after brokers predicted another lost summer for travel stocks amid hopes that Britons might enjoy an overseas getaway. 

Easyjet and British Airways owner IAG surged as it emerged that ministers are considering quarantine-free travel to summer holiday hotspots for those who have had both Covid-19 vaccine doses.

Easyjet, which has said it can flex up quickly to operate 90 per cent of its fleet over the peak period, rose 2.4 per cent, or 23.2p, to 973.6p.

IAG was 1.9 per cent, or 3.66p, higher at 200.3p and Wizz Air improved 1pc, or 48p, to 4837p, while tour operator Tui rallied 2.4 per cent, up 9.6p, to 405.2p.

Private equity giant 3i was also getting warm words from brokers as they digested an open day it held this week.

Numis pointed out that 3i’s stellar investment, the budget European retailer Action, had continued to trade strongly in recent weeks and the scope for store openings remained strong.

3i is years away from selling out of the investment, meaning shareholders will be benefiting from Action’s continued strong growth story, Numis said.

However, with 3i’s shares gaining recently, Numis kept its price target at 1360p, and downgraded its advice to clients from ‘buy’ to ‘add’. Shares dropped 1.4 per cent, or 17.5p, to 1219.5p.

Further down the market, soaring sales of electric bicycles and scooters helped Halfords notch up a 72 per cent jump in annual profits, but the group warned over an ‘acute’ global bike shortage.

The cycling and motoring specialist reported profits of £96.3million for the year to April 2, up from £55.9million last year.

Halfords saw surging demand for electric scooters and bikes – up 94 per cent. But it cautioned supply issues ‘remain acute’, having been affected by booming demand, Brexit disruption and the blockage of the Suez Canal. It climbed 5 per cent, or 20.4p, to 426.2p.

Shares rose 3.7 per cent, or 10p, at 277.5p for cafe, bar and restaurant group Loungers, which revealed strong sales in the period since lockdown as restrictions for indoor diners were eased.

The company, which has 168 sites, said sales in the four weeks between May 17 and June 13 were up 26.6 per cent compared with two years ago. Bosses said the group benefited from pent-up demand.