FTSE down as US interest rate concerns and tensions in the Middle East continue to weigh

The FTSE 100 index stumbled at the opening bell on Friday, as concerns over US interest rates and escalating tensions in the Middle East continued to cast a shadow over global markets. The week has seen the FTSE 100 index decline by 1.8% since last Friday, with investors bracing for further volatility in the face of uncertain economic landscapes.

At the start of the trading day, the FTSE 100 index opened down by 32.82 points, a 0.4% decrease, settling at 7,466.71. Similarly, the FTSE 250 and AIM All-Share also faced losses, down 0.6% and 0.3% respectively. The ongoing unease was exacerbated by comments from Jerome Powell, Chairman of the US Federal Reserve, who highlighted concerns about persistently high inflation despite recent signs of a slowdown.

US Treasury yields saw a notable spike overnight, with the 10-year yield hovering just below the 5% threshold. This increase in yields could potentially relieve pressure on the Federal Reserve, lessening the urgency for immediate rate hikes. Analysts at Lloyds Banking Group noted that recent statements from Fed officials indicated a cautious approach, making a November rate increase highly unlikely.

On the domestic front, UK retail sales disappointed market expectations, denting consumer confidence and impacting the Pound. Retail sales volumes contracted by 1.0% year-on-year in September, a decline attributed to rising living costs and unseasonably warm weather. The weakening retail figures were accompanied by a downturn in consumer confidence, with GfK’s consumer confidence index dropping nine points to minus 30 in October. This decline, particularly in the major purchase measure, indicated a cautious approach from consumers ahead of the festive season.

In the London market, airline shares struggled, mirroring the broader market sentiment. Wizz Air fell 1.5%, while British Airways’ parent company, IAG, saw a decline of 1.9%. Events in the Middle East, especially the recent conflict in Israel, have dampened investor confidence, leading to an 18% drop in airline stocks since the incident earlier in October.

InterContinental Hotels Group faced a 2.4% decline despite reporting strong demand in the third quarter of 2023. While travel demand remained robust, concerns about the global economic backdrop tempered market enthusiasm. InterContinental Hotels Group’s CEO, Elie Maalouf, acknowledged macroeconomic uncertainties but expressed optimism about the company’s long-term prospects.

Meanwhile, property portal Rightmove managed to reclaim some of its recent losses, rising by 1.3%, emerging as the best-performing stock in the FTSE 100. On the other end, ProCook slumped by 16%, citing challenging market conditions and cautious consumer spending despite strong preparations for the upcoming Christmas season.