FTSE 100 losses pared sharply, Hiscox and Rolls lead fightback By Proactive Investors

Proactive Investors –

• falls 5 points in morning trading
• Markets reacting to hawkish comments from Fed chief Powell
• Insurer Admiral leads fallers

Regulator steps in to dispute and broadband

UK communications industries regulator Ofcom has been busy, not only proposing new advertising rules for broadband providers but also being asked to resolve a dispute between Royal Mail and privately owned Whistl.

The dispute is about whether the terms offered by Royal Mail in response to a new access service request were fair and reasonable.

While Royal Mail has a countrywide letter delivery network as part of its universal service obligation, the rules allow other postal operators such as Whistl to collect and sort bulk mail such as bank statements and utility bills before handing it over to Royal Mail to complete delivery.

Whistl is accusing Royal Mail of offering terms that were not fair and reasonable for a new tracked large letter service, and commercial negotiations have failed to resolve the issue.

Ofcom has accepted to handle the dispute for resolution.

Royal Mail shares are down 2.4%.

Elsewhere the FTSE is only five points off parity for the day.

Losses being pared for Footsie

The FTSE’s losses are being pared, with the index back up to 7905, down 14 points or just under 0.2%.

is topping the leaderboard despite reporting a slump in full-year profit.

Analysts at UBS noted that PBT was much better than expected at US$45mln, beating consensus expectations, which were for a loss of US$88m.

The beat was “split broadly 50/50 between underwriting and investment result” and with solvency and dividend also better than expected, with guidance on investment yields also “very positive” versus consensus.

Second on the table is , with UBS the reason here as the Swiss bank upgraded to a ‘buy’, saying the shares are “abnormally cheap” despite the China re-opening boost already given to the shares in recent weeks.

9.55am: BoE rate setter suggests she will not be voting for more hikes

Bank of England monetary policy committee external member Swati Dhingra said this morning, “given little evidence of further cost-push inflation, further tightening is a bigger risk to output and the medium-term inflation target”.

Last month Dhingra, an associate professor of economics at the London School of Economics, voted to leave interest rates unchanged.

Her speech – ‘A cost-of-living crisis: Inflation during an unprecedented terms-of-trade shock’ – was given at the Resolution Foundation this morning, explaining how “trade shock” has affected inflation.

She said the sharp rise in the price of imports relative to the price of UK exports and the inflationary pressure arising from this shock are “unprecedented in the history of the MPC”.

There is an “absence of similar episodes to learn from”, she added, noting that while the oil shocks of the 1970s created larger deterioration in terms of trade, shocks are “likely to transmit differently” now due to the evolution of the global and domestic economy, and shifts in bargaining power between economic agents and the emergence of global value chains.

“In my view, a prudent strategy would hold policy steady amidst growing signs external price pressures are easing, and be prepared to respond to developments in price evolution,” she said.

“This would avoid overtightening and return the economy sustainably to our 2% inflation target in the medium-term.”

BOE’s Dhingra says overtightening would risk UK missing CPI target

Sees external price pressures easing

Prudent strategy would be to hold policy

UK economy is weak at the moment #GBP

— Michael Hewson ???????? (@mhewson_CMC) March 8, 2023

“Given little evidence of further cost-push inflation, further tightening is a bigger risk to output and the medium-term inflation target.”

Bank of England’s Swati Dhingra pretty clear that she won’t be voting for more rate hikes, in a speech at @resfoundation

— David Milliken (@david_milliken) March 8, 2023

FTSE remains on back foot, UK and US jobs in focus

UK jobs data was published overnight, with the REC/KPMG monthly permanent job placements index falling to 46.3 last month from 46.8 in January, falling for a fifth consecutive month.

There were elements that might be concerning to the Bank of England, ahead of the policy meeting the week after next.

The fall was at a slightly quicker pace than that seen in January, with many recruiters mentioning that clients adopted a more cautious approach to staff hires due to ongoing economic uncertainty. At the same time, billings for temporary workers continued to expand, albeit modestly.

The survey sent mixed messages, said Chris Scicluna, head of research at Daiwa Capital Markets, with strong wage pressures despite the further moderating in jobs growth.

“Given the BoE’s concerns about notable recent strength in wage growth, today’s REC/KPMG report on jobs offered mixed messages about labour market conditions in February.

“Overall, recruitment consultancies suggested a further loosening in the jobs market, reporting a fifth consecutive drop in new permanent hires last month, with only modest growth in temporary staff too, as firms remained cautious amid ongoing economic uncertainty. And while there was a pickup in the number of permanent vacancies, this remained softer than the historical average.

“Admittedly, staff availability for permanent roles again improved slightly last month, with some recruiters attributing this to a recent increase in redundancies. However, candidate shortages persisted. And the survey indicator for growth in starting salaries for new permanent staff edged slightly higher.”

Beyond the economic data, a speech is expected this morning from Bank of England monetary policy committee external member Swati Dhingra, who in February voted to leave interest rates unchanged.

With London’s equity benchmark firmly in the red this morning, let’s see what else the market commentariat are saying.

Victoria Scholar, head of investment at Interactive Investor says European markets are “taking their cues from last night’s Fed-driven sell-off on Wall Street… after Fed chair Powell indicated that there could be further and faster rate hikes to come.

“Risk-off sentiment is dragging oil prices lower with inching closer to breaking below $83 a barrel. Brent and suffered their biggest one-day drop since January while the dollar gained strength.”

Neil Wilson said this Friday’s US jobs report is now “huge” after the comments from Powell.

“Today is the nonfarm payroll data, hardly a great indicator but it will be watched closely. Also check the JOLTS job openings, which a month ago surged to 11m from 10.46m, cementing the Jan NFP report strength.”

He plucked out a quote from Ernest Hemmingway (“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly.”)

Wilson said many traders will understand Hemingway “and so too it is with rates and recession, at least in the US. Gradually we have seen rates and bond yields rise and then barely a month after Fed chair Jay Powell was talking about disinflation, he suddenly comes out with a renewed hawkishness that pushed bonds and stocks lower and put a fire under the US dollar.

“It could also see the Fed slam the economy hard just as rate hikes start to take effect. Powell opened the door to a 50bps move this month and raised the prospect of further outsize hikes just as markets had assumed we were on a 25bps course. The pilot cut the engines coming into the harbour but has had to fire them up again – the risk is slamming into the mole at full tilt.

“Fed hikes are about to catch up just as it reaccelerates.”

The FTSE is down 22 points at 7896 but coming back from a recent intraday low of 7892.

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