1st Aug 2024 07:50
(Alliance News) - London's FTSE 100 is called to open higher on Thursday, after the Federal Reserve Chair Jerome Powell said a September US rate cut is a possibility.
Powell said the central bank's "confidence is growing because we are seeing good data".
"We think the time is approaching....and a rate cut could be on the table at the September meeting," Powell added.
The US central bank left rates unmoved on Wednesday, but the Bank of England is predicted to cut on Thursday, though the decision may be a close call.
"This is an important one, as markets are pricing in a decent chance that the BoE will deliver the first rate cut of this cycle, with overnight index swaps pricing in a 64% probability of a cut by the close last night. If the BoE did cut, that would see them join other central banks who've started to ease policy, including the ECB, the Bank of Canada and the Riksbank. But the move is still viewed as a close one, because even though headline inflation is at 2.0% right now, core CPI was still at 3.5% in June, and services CPI was even higher at 5.7%," Deutsche Bank analysts commented.
In early UK corporate news, Barclays raised its net interest income guidance, while Next said full price sales were better than forecast in its second-quarter. Shell's profit beat consensus and it announced a new USD3.5 billion share buyback. Elsewhere, recruiter Robert Walters posted a swing to loss and warned an uptick in sector confidence will "likely not occur before 2025".
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 0.4% at 8,403.98
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Hang Seng: up 0.1% at 17,363.26
Nikkei 225: down 2.5% at 38,126.33
S&P/ASX 200: up 0.3% at 8,114.70
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DJIA: closed up 99.46 points, 0.2%, at 40,842.79
S&P 500: closed up 1.6% at 5,522.30
Nasdaq Composite: closed up 2.6% at 17,599.40
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EUR: down at USD1.0815 (USD1.0826)
GBP: down at USD1.2810 (USD1.2844)
USD: down at JPY150.13 (JPY150.36)
GOLD: up at USD2,445.92 per ounce (USD2,423.09)
OIL (Brent): up at USD81.38 a barrel (USD80.37)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
09:00 BST eurozone manufacturing PMI
10:00 BST eurozone unemployment
08:55 BST Germany manufacturing PMI
09:30 BST UK manufacturing PMI
12:00 BST UK interest rate decision
13:30 BST US initial jobless claims
14:45 BST US manufacturing PMI
15:00 EDT US ISM manufacturing PMI
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UK house prices picked up in July, numbers from mortgage lender Nationwide showed. House prices rose 0.3% in July from June, Nationwide said, beating the FXStreet cited consensus of a 0.1% rise. Growth picked up from 0.2% registered in June from May. Year-on-year, house prices rose 2.1% in July, beating consensus of 1.8%, and picking up speed from 1.5% in June. The annual rise was the sharpest since December 2022, Nationwide analyst Robert Gardner said. "However, prices are still around 2.8% below the all-time highs recorded in the summer of 2022," Gardner added. "Housing market activity has been holding relatively steady in recent months with the number of mortgages approved for house purchase at around 60,000 per month. While this is still [around] 10% below the level prevailing before the pandemic struck, it is still a respectable pace given the higher interest rate environment."
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BROKER RATING CHANGES
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DZ Bank raises Anglo American to 'buy' (hold) - fair value 2,900 (2,700) pence
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COMPANIES - FTSE 100
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Oil major Shell announced a new USD3.5 billion share buyback and its second-quarter profit beat expectations. Shell said total revenue in the second-quarter of 2024 amounted to USD75.06 billion, a decline of 1.3% year-on-year from USD76.02 billion. Pretax profit, however, improved 38% to USD7.40 billion from USD5.35 billion. Second-quarter adjusted earnings totalled USD6.29 billion, rising 24% from USD5.07 billion, and topping the Vara-cited consensus of USD6.01 billion. "Shell delivered another strong quarter of operational and financial results. We further strengthened our leading LNG portfolio, and made good progress across our capital markets day 2023 financial targets, including USD1.7 billion of structural cost reductions since 2022," Chief Executive Officer Wael Sawan commented. Shell announced a USD3.5 billion buyback for the next three months. Shell noted it has just completed its buyback announced in the first-quarter results, also worth USD3.5 billion. In addition, it lifted its second-quarter dividend to USD0.3440 per share, from USD0.3310 a year prior.
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Barclays reported second-quarter top line growth, with revenue in its investment bank seeing a 10% rise, though group profit declined. Barclays said total income in the second-quarter rose 0.6% to GBP6.32 billion from GBP6.29 billion a year prior. Pretax profit, however, fell 1.3% to GBP1.94 billion from GBP1.96 billion. By unit, the chunkiest revenue growth came in the Barclays Investment Bank. Revenue there surged 10% to GBP3.02 billion. In the US Consumer Bank, revenue rose 6.8%, and it climbed 7.0% in the Private Bank & Wealth Management arm. However, revenue fell 3.8% in Barclays UK. "We are making good progress on our three-year plan, with a return on tangible equity of 11.1% in the first half of 2024, which puts us on track for our target of greater than 10% RoTE in 2024. We completed the sale of the performing Italian mortgage book, announced the sale of the German consumer finance business, and are on track to complete the acquisition of Tesco Bank in November 2024," CEO CS Venkatakrishnan said. Barclays lifted its interim dividend by 7.4% to 2.9 pence per share from 2.7p. It announced a new share buyback of GBP750 million, the same size as a year ago. Looking ahead, it upped its outlook. It predicts 2024 net interest income, excluding the investment bank and head office, of GBP11.0 billion. The outlook was increased from GBP10.7 billion. Net interest income in the second-quarter amounted to GBP3.06 billion, a decline of 6.5% from GBP3.27 billion a year prior.
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Next said full price sales in second-quarter beat expectations, and the clothing and homewares retailer as lifted yearly profit guidance. In the 13 weeks to July 27, full price sales rose 3.2% on-year, "exceeding our expectations by GBP42 million". It had predicted second-quarter full price sales would fall 0.3% during the quarter, "given the exceptional summer last year". Next raised its annual pretax profit outlook to GBP980 million, which would represent a 6.7% rise from the prior year. It had previously predicted profit of GBP960 million. "We are maintaining our guidance for full price sales in the second half to be up 2.5% versus last year. This might seem cautious when compared with the performance in the first half, which was up 4.4%. However, when compared to two years ago, growth in the first half and the forecast for the second half are almost identical," Next added. The firm announces half-year results on September 19.
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COMPANIES - FTSE 250
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Budget carrier Wizz Air reported first-quarter revenue growth, though a swing to loss amid a rise in financing expenses and a foreign exchange hit. In the first-quarter ended June 30, total revenue improved 1.8% to EUR1.26 billion from EUR1.24 billion a year prior. It reported a EUR4.5 million pretax loss, however, swinging from profit of EUR67.1 million. Its total operating expense was 5.0% higher at EUR1.21 billion from EUR1.16 billion. It reported a net foreign exchange loss of EUR10.1 million, compared to a gain of EUR17.1 million a year prior. In addition, net financing expenses climbed to EUR49.0 million from EUR12.8 million. "Our performance this quarter demonstrates the resilience of Wizz Air's ultra-low-cost business model. Despite the competitive landscape and ongoing supply chain challenges, our strategic focus on delivering the lowest fares, improving our route network, and maintaining high operational efficiency has yielded results," CEO Jozsef Varadi says. "Looking ahead, capacity is stabilizing and we are focusing on further optimizing our operations, with an emphasis on improving our most profitable bases and enhancing efficiency. We remain optimistic about the demand outlook, with both ticket and ancillary [revenue per available seat kilometres] expected to be up year-on-year while load factor is maintained above 90%."
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OTHER COMPANIES
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Recruiter Robert Walters reported a swing to interim loss as it grappled with "challenging market conditions". Revenue in the six months to June 30 fell 16% to GBP459.3 million from GBP548.3 million a year prior. It posted a pretax loss of GBP2.3 million, swinging from profit of GBP8.1 million. Robert Walters left its dividend unmoved at 6.5p per share. "During the first half, the business continued to experience challenging hiring market conditions. This reflects the sustained period of lower client and candidate confidence impacting the sector since hiring markets reached their most recent peak in the second quarter of 2022. This had a marked impact on our financial performance during the first half," CEO Toby Fowlston said. "Our near-term planning assumes that any material improvement in confidence levels will be gradual, and likely not occur before 2025, however 2024 is not a lost year. We are implementing the key elements of our medium-term plan to further strengthen the business. We are pursuing the right actions to continue to differentiate Robert Walters on the quality of its service, drive higher penetration in our existing markets, and improve productivity and people efficiency. We look forward to sharing fuller details on our activities at our capital markets event in September."
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By Eric Cunha, Alliance News news editor
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