UK and US equities face pressure amid valuation concerns

​​​FTSE 100 and FTSE 250 retreat on mixed earnings

​The UK's benchmark indices faced headwinds as the FTSE 100 slipped 0.3% while the FTSE 250 declined 0.4%. This broad-based weakness reflected investor caution following a series of mixed corporate updates and ongoing concerns about economic momentum.

​Banking stocks weighed heavily on the main index, with investors showing particular sensitivity to exposure in challenging regions. Healthcare names also contributed to the decline, offsetting some resilience from mining companies that benefited from commodity price strength.

​Individual UK stock stories dominate headlines

​Mitchells & Butlers emerged as one of the day's biggest fallers, dropping more than 8% after reporting slowing like-for-like sales growth of 3.1% in the fourth quarter (Q4). The pub and restaurant operator faces particular challenges in London and premium sites where consumer spending appears to be moderating.

​DFS provided a mixed update, with the furniture retailer reporting 4.4% revenue growth for fiscal year 2025 (FY25) but remaining cautious on the subject of dividend payments. Management maintained their profit growth targets for fiscal year 2026 (FY26), suggesting confidence in the medium-term outlook despite near-term pressures.

HSBC faced selling pressure, falling 1.6% as reports emerged of the bank pushing its Hong Kong subsidiary to reduce bad property debt. These developments highlight ongoing concerns about the region's real estate sector and its potential impact on major UK banks with significant Asian exposure.

Babcock International offered some positive news, with the engineering group describing trading as "encouraging" and highlighting strong performance in nuclear and aviation divisions. The company left its full-year outlook unchanged, providing stability in an otherwise mixed session.

​Wall Street slides as Fed warnings weigh on sentiment

​US equities extended their decline for a second consecutive session as investors digested Federal Reserve (Fed) Chairman Powell's comments about stretched market valuations. The warning prompted profit-taking across major indices, with technology and growth stocks bearing the brunt of the selling pressure.

​The S&P 500's decline reflected broader concerns about whether current price levels adequately reflect underlying economic fundamentals. Powell's remarks served as a reminder that central bank officials remain watchful of asset price developments and their potential impact on financial stability.

​Sectoral shifts reveal underlying market dynamics

​Materials emerged as the weakest S&P 500 sector, declining 1.6% led by a dramatic 17% plunge in Freeport-McMoRan following a force majeure declaration at its key Grasberg mine. This development highlights how operational disruptions can quickly impact commodity-focused companies and their share prices.

​Energy bucked the broader trend, rising 1.2% as crude oil prices hit a seven-week high following an unexpected drop in US inventories. The sector's outperformance demonstrates how commodity price movements can drive significant sectoral rotation within equity markets.

​Individual stock movements told compelling stories, with Lithium Americas nearly doubling on reports that the Trump administration might take a 10% stake and provide a $2.26 billion loan for its lithium project. Such developments underscore the intersection between policy and market performance.

​Defensive moves were evident elsewhere, with Oracle falling 1.7% on reports of a planned $15 billion bond sale, while Micron slipped 2.8% following its latest results. These moves reflect ongoing scrutiny of technology valuations and earnings quality.

​Global markets show cautious approach

​Asian markets displayed mixed sentiment, with Japan's Nikkei 225 managing a modest 0.2% gain supported by dip-buying activity. However, the underlying tone remained cautious as investors weighed the implications of Fed commentary alongside regional economic data.

​European futures pointed to a flat opening, reflecting the broader hesitancy among global investors. Stretched valuations and central bank caution have created an environment where market participants are increasingly selective about taking on new positions.

​The cautious approach extends beyond equity markets, with investors showing increased interest in defensive assets and strategies. This shift suggests that market participants are preparing for potential volatility even as they seek opportunities in oversold areas.