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(Alliance News) - Stocks are called higher in London on Thursday, as investors anticipate the end to the Federal Reserve's monetary tightening cycle.
In a move priced in by financial markets, the central bank's Federal Open Market Committee raised its funds rate by a quarter percentage point to a target range of 5.25%-5.50%. Wednesday's increase followed a brief reprieve at the previous meeting in June, when the FOMC held the benchmark rate steady.
Federal Reserve Chair Jerome Powell did not commit to another hold in September, but did not really choreograph another hike either, as he affirmed a "data-dependant" approach to future decisions. While leaving the door open for future hikes this year, Powell ruled out cuts until the next at the earliest. "We will be comfortable cutting rates when are comfortable cutting rates", he said.
"Powell was non-committal on whether the Fed would raise rates again in September, merely restating that if the data warranted the central bank would do so," CMC Markets' Michael Hewson noted.
According to CME's FedWatch tool, the market is pricing in a 78% chance that rates will be held at the September meeting.
The market focus now moves to the European Central Bank's meeting this afternoon. The bank is widely expected to enact a 25 basis point hike to interest rates. In June, it had lifted rates by 25bp, as had been expected. The attention will be on the ECB's forward guidance, to see if recent weak economic data from the eurozone will see the bank's policymakers strike a more dovish tone.
In early UK company news, Anglo American said weaker commodity prices weighed on its first-half performance. Shell disappointed with a lower profit and announced a USD3 billion share buyback programme. Wizz Air received a slap on the wrist from the UK aviation regulator over not correctly handling customer complaints. Lookers received an increased offer from Global Auto, after the planned takeover fell apart last week.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 18.7 points, 0.2%, at 7,695.59
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Hang Seng: up 1.0% at 19,557.47
Nikkei 225: closed up 0.7% at 32,891.16
S&P/ASX 200: closed up 0.7% at 7,455.90
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DJIA: closed up 82.05 points, 0.2%, at 35,520.12
S&P 500: closed little changed at 4,566.75
Nasdaq Composite: closed down 0.1% at 14,127.28
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EUR: up at USD1.1095 (USD1.1074)
GBP: up at USD1.2951 (USD1.2931)
USD: down at JPY140.19 (JPY140.33)
Gold: up at USD1,975.90 per ounce (USD1,974.44)
Oil (Brent): up at USD83.45 a barrel (USD83.16)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
14:15 CEST EU interest rate decision
08:30 EDT US GDP
08:30 EDT US initial jobless claims
10:00 EDT US pending home sales
13:30 EDT US durable goods orders
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BROKER RATING CHANGES
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RBC raises RHI Magnesita price target to 3,100 (2,600) pence - 'sector perform'
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Shore Capital cuts AO World to 'sell' (hold) - price target 80 pence
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COMPANIES - FTSE 100
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Shell failed to deliver another bumper crop of profits in the last quarter, with the business falling short of market expectations. The oil company said on Thursday that it had seen its adjusted earnings more than halve in the three months to the end of June when compared with the same period a year ago.A drop had been expected, but markets failed to forecast just how far earnings would fall. Adjusted earnings reached just under USD5.1 billion during the quarter, down from USD11.5 billion a year earlier. Analysts had expected the figure to reach almost USD5.6 billion, according to a consensus compiled by the company. Further, Shell announced a USD3 billion share buyback programme and said it completed its USD4 billion share buyback programme from the second quarter. Chief Executive Wael Sawan said: "Shell delivered strong operational performance and cash flows in the second quarter, despite a lower commodity price environment."
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Barclays said that in the first half, its total income edged up 2% year-on-year to GBP13.52 billion from GBP13.20 billion, while pretax jumped 22% to GBP4.56 billion from GBP3.73 billion. The bank's bottom line was aided by just GBP32 million in Litigation & Conduct expenses, compared to GBP1.86 billion in the first half of 2022. It announced a dividend of 2.7 pence per share alongside a GBP750 million share buyback programme. The bank expects it UK net interest margin to be less than 3.2%, with a current view of around 3.15%. "Guidance remains sensitive to product dynamics including the trajectory of deposit balances and further macroeconomic developments," it noted. It achieved a return on tangible equity of 13.2% in the first half, leaving it well-positioned to achieve the above 10% target for the whole year.
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Frasers Group reported a strong performance in the financial year ended April 30. The retail group said revenue grew 16% year-on-year to GBP5.57 billion from GBP4.81 billion, thanks to a 53rd week in the year as well as acquisitions. Meanwhile, pretax profit rocketed 97% to GBP660.7 million from GBP335.6 million. "We were bold in setting our full year guidance twelve months ago, before the full impact of the cost-of-living crisis was clear, but our business has remained resilient, and we have met these expectations," said CEO Michael Murray. Frasers noted a strong performance across the group, which was boosted in particular by profitable growth in Sports Retail - this shows elevating Sports Direct was "the right strategy", Murray maintained. In financial 2024, it expects further strong profit progress, but a "significantly lower" level of profit from property. Adjusted pretax profit will be in a range of GBP500 to GBP550 million, compared to GBP478.1 million in financial 2023.
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British Gas-owner Centrica reported a strong first half, as revenue jumped to GBP16.52 billion from GBP10.32 billion a year before. The utility firm also swung to a pretax profit of GBP6.43 billion from a loss of GBP1.18 billion. It hiked interim dividends by 33% to 1.33 pence per share. However, Centrica expects growth to slow and 2023 to be heavily weighted towards the first half, thanks for seasonality driving lower underlying profit in the second half. "As usual, uncertainties remain over the balance of the year, including the impacts of weather, commodity prices, the economic and regulatory backdrop and the competitive environment. This results in a range of possible outcomes for the full year," it said.
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Anglo American reported that its interim dividend more than halved as profit tumbled due to lower commodity prices and higher input costs thanks to inflationary pressures. For the six months that ended June 30, the London-based mining company posted a 55% drop in pretax profit to USD3.03 billion from USD6.80 billion in the corresponding period last year. In the January-June period, revenue fell by 13% to USD15.67 billion from USD18.11 billion. Anglo American declared an interim dividend of USD0.55, down 56% from USD1.24, following sharply lower earnings. Earnings per share declined by 66% to USD1.04 from USD3.03. "Macro headwinds - principally, weaker prices for our products and input cost inflation - certainly weighed on our first half financial performance," Anglo American Chief Executive Duncan Wanblad said.
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COMPANIES - FTSE 250
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The UK Civil Aviation Authority said it has taken enforcement action against Wizz Air due to significant concerns stemming from "high volumes of complaints about the airline not paying passengers what they are owed". The regulator said it has been in contact with the company over several months in relation to the complaints from passengers, who say their rights had not been met when flights faced cancellations or delays. "The UK Civil Aviation Authority has now instructed Wizz Air to make changes to its policies and procedures to ensure consistent compliance with its re-routing and care obligations. Wizz Air has engaged with the regulator and has committed to introduce changes to its policies, procedures and passenger communications," the CAA said. Wizz Air has agreed to take another look at passenger claims for replacement flight costs, transfer costs, and items such as hotel stays.
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OTHER COMPANIES
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Global Auto Holdings said it has agreed with the board of Lookers on an increased cash offer of 130 pence in cash for the company. Global Auto is the bidding vehicle of Alpha Auto Group Holdings LP, a Toronto-based operator of auto retail dealerships across North America. It had previously offered to pay 120 pence per share for Lookers, which is based outside of Manchester. A week ago, the agreed takeover offer was declared dead in the water, as Lookers' largest shareholder withdraws the letter of intent it had given to the bidder. On Thursday, it confirmed it has reached an agreement with the board of Lookers for the increased offer. "As the increased offer is to be implemented by way of a takeover offer, the board of Lookers will propose a resolution to adjourn the court meeting and general meeting which are due to take place today in connection with the Scheme indefinitely and they will not be rescheduled," Lookers said.
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By Elizabeth Winter, Alliance News senior markets reporter
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