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(Alliance News) - Stocks in London are called slightly lower on Friday, with investors having plenty to consider amid the week's swathe of corporate earnings and central bank decisions.
The yen strengthened as the Bank of Japan said it will allow "greater flexibility" in controlling bond yields, as it raised its full-year inflation forecast to 2.5% from its previous estimate of 1.8%.
It said it would continue to allow 10-year JGB yields to "fluctuate in the range of around plus and minus 0.5 percentage points from the target level, while it will conduct yield curve control with greater flexibility regarding the upper and lower bounds of the range as references, not as rigid limits," the central bank said in a statement. The bank also kept its short-term interest rate target unchanged at -0.1%.
Reports of a potential upcoming tweak by the BoJ had come on Thursday ahead of the meeting, pushing the Japanese yen higher against the dollar, and pushing US 10-year yields back above 4%, CMC Markets' Michael Hewson noted. This sent stocks in New York lower, after a mostly positive start, having been boosted by a strong economic growth print for the US.
"The late decline in the US looks set to translate into a weaker European open, even though confidence is growing that the Fed is more or less done when it comes to its rate hiking cycle. Nonetheless, investors will be looking for further evidence of this with the latest core [personal consumption expenditures] deflator, as well as personal spending and income data for June, later this afternoon to support the idea of weaker inflation," said CMC Markets' Michael Hewson.
In early UK company news, Natwest reported a strong first half, with customer deposits stabilising in the second quarter after outflows in the first. AstraZeneca reported a strong rise in interim profit, as revenue edged up and amid lower cost of sales. International Consolidated Airlines Group said it expects to be back to pre-pandemic capacity by the end of the year.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 17.0 points, 0.2%, at 7,675.76
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Hang Seng: up 1.4% at 19,918.53
Nikkei 225: closed down 0.4% at 32,759.23
S&P/ASX 200: closed down 0.7% at 7,403.60
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DJIA: closed down 237.40 points, or 0.7%, at 35,282.72
S&P 500: closed down 0.6% to 4,537.41
Nasdaq Composite: closed down 0.6% to 14,050.11
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EUR: down at USD1.0981 (USD1.0996)
GBP: down at USD1.2786 (USD1.2865)
USD: soft at JPY139.09 (JPY141.07)
Gold: up at USD1,952.24 per ounce (USD1,944.93)
Oil (Brent): up at USD83.85 a barrel (USD83.59)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
18:00 CEST EU bank stress test results
10:00 CEST EU consumer confidence
11:00 IST Ireland GDP
11:00 IST Ireland retail sales
10:00 EDT US Michigan consumer confidence survey
08:30 EDT US personal consumption expenditures
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The French economy saw a surprisingly robust performance in the second quarter of this year, growing by 0.5% from the first quarter, the statistics office announced. The figure was well above the INSEE statistics office's own forecast of 0.1% growth for April to June and the expectations of analysts. It was also ahead of the 0.2% quarter growth seen in the first quarter. The strong performance came despite a fall in household consumption in the period as shoppers struggled with in inflation but was boosted by exports, the manufacturing industry and energy production. The robust growth is set to be highlighted by the government of President Emmanuel Macron at a time of multiple domestic political challenges and Economy Minister Bruno Le Maire described the performance as "remarkable".
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BROKER RATING CHANGES
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RBC cuts PageGroup price target to 570 (610) pence - 'outperform'
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COMPANIES - FTSE 100
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Fresh from scandal, Natwest reported its interim results, touting its "robust balance sheet, with a high-quality deposit base, high levels of liquidity and a well-diversified loan book". In the first half of 2023, total income rose to GBP7.73 billion from GBP6.22 billion a year before, as net interest income came in at GBP5.73 billion from GBP4.33 billion. Operating pretax profit climbed to GBP3.59 billion from GBP2.62 billion. It declared an interim dividend of 5.5 pence and intends to begin a buyback of up to GBP500 million in the second half, in addition to the GBP1.3 billion buyback completed in the second quarter. Its CET1 ratio fell by 70 basis points to 13.5% at the end of June, mostly reflecting capital distributions. Customer deposit balances were stable in the second quarter after the outflows seen in the first quarter, it noted. Customer deposits excluding central items fell by GBP11.8 billion to GBP421.1 billion over the first half. It reiterated guidance provided in its annual report, but said 2023 bank net interest margin is now expected to be less than 3.20%, with a current view of around 3.15%. Senior bosses at the bank are set to face scrutiny from shareholders following the dramatic fallout in the row sparked by Nigel Farage over the closure of his Coutts bank account. The scandal culminated in the resignation of NatWest CEO Alison Rose and the boss of Coutts, which is owned by the banking group. The earnings report comes at a time of volatility for the bank with the two bosses resigning and the group's board facing pressure to explain the events leading up to the fallout.
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Standard Chartered launched a new USD1 billion share buyback programme, as it reported a 20% rise in profit in the first half of 2023 and raised its guidance for the full year. The London-based, Asia-focused bank said it is "strongly profitable, highly liquid, and well capitalised". Pretax profit in the six months that ended June 30 was USD3.32 billion, up 20% from USD2.77 billion a year before. Operating income increased by 11% to USD9.13 billion from USD8.23 billion, and StanChart also benefitted from a reduced credit impairment of USD161 million, down from USD263 million a year before. StanChart declared a 6 cents per share ordinary interim dividend, up 50% from a year before. Looking ahead to all of 2023, StanChart said it expects income to increase by 12% to 14% at constant currency. It expects net interest margin to average about 170 basis points over the full year, and it expects a return on tangible equity of 10%.
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AstraZeneca said pretax profit surged to GBP4.35 billion in the first half 2023, from just USD800 million a year before. Revenue rose edged up to USD22.30 billion from USD22.16 billion. "Each of our non-Covid-19 therapy areas saw double-digit revenue growth, with eight medicines delivering more than USD1 billion of revenue in the first half, demonstrating the strength of our business," said CEO Pascal Soriot. He also noted strong growth in medicines including Ultomiris, Imfinzi/Imjudo and Farxiga, with revenue growth 64%, 57% and 40% respectively. Astra maintained its interim dividend at USD0.93. The company reiterated annual guidance, expecting revenue to increase by a low-to-mid single-digit percentage at constant exchange rates. Excluding Covid-19 medicines, revenue is expected to increase by a low double-digit percentage at CER. It also expects revenue to return to growth in China, and rise by a low-to-mid single-digit. Core earnings per share are expected to increase by a high single-digit to low double-digit percentage.
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The parent company of British Airways made a record operating profit between January and June, it has announced. International Consolidated Airlines Group said its operating profit in the first half of 2023 reached EUR1.3 billion, up from a loss of EUR446 million in the same period last year. Revenue reached EUR13.6 billion, an increase of nearly 45% year-on-year. IAG said the capacity of its flights has been restored to 94% of pre-pandemic levels, and it expects to be back to pre-pandemic capacity by the end of the year. It attributed this to a "strong leisure traffic recovery", noting the premium leisure segment "continued to perform very well".
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COMPANIES - FTSE 250
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Jefferies said that Summit DT Equity Holdings completed the sale of 20.8 million shares in Darktrace to a "limited number of institutional investors". The shares represent a 3.0% stake in the cybersecurity company. Darktrace will not receive any proceeds from the placing.
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OTHER COMPANIES
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Chip company TSMC said it is determined to "keep its roots in Taiwan", as it launched a massive new research and development facility in the northern city of Hsinchu on Friday. Taiwan Semiconductor Manufacturing Co controls more than half the world's output of microchips, which are the lifeblood of the modern global economy, powering everything from coffee machines and smartphones to cars and missiles. Much of its manufacturing base is in Hsinchu, where its state-of-the-art facilities are producing ever-smaller silicon wafers that have skyrocketed in demand, especially due to the recent boom in AI-related technology. CEO CC Wei said Friday that TSMC intends to keep the heart of its technological prowess in Taiwan. "We want to use this opportunity to show Taiwanese people TSMC's determination to keep its roots in Taiwan," Wei said at the Friday launch of its R&D facility.
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By Elizabeth Winter, Alliance News senior markets reporter
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