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LONDON MARKET CLOSE: Europe up but New York down on mixed bank results

18th Apr 2023 16:55

(Alliance News) - Stock prices in Europe perked up on Tuesday, supported by a better-than-expected Chinese gross domestic product reading, while the pound was on the up as red-hot UK wage growth put the Bank of England under the spotlight.

Across the Atlantic, the US banking sector was back under the microscope. The latest batch of corporate earnings were subject to the first tinge of disappointment, as Goldman Sachs reported a revenue and profit decline.

The FTSE 100 index rose 29.93 points, or 0.4%, at 7,909.44. The FTSE 250 edged up just 9.42 points at 19,296.32. The AIM All-Share closed down 0.93 of a point, or 0.1%, at 832.44.

The Cboe UK 100 ended up 0.3% at 791.39, the Cboe UK 250 lost 0.1% to 16,909.94, and the Cboe Small Companies fell 0.1% to 13,238.53.

In European equities on Tuesday, the CAC 40 index in Paris rose 0.5%, while the DAX 40 in Frankfurt climbed 0.6%.

China's economy grew 4.5% year-on-year in the first quarter, rebounding after the end of zero-Covid measures late last year, according to data published by the National Bureau of Statistics. Growth topped FXStreet cited consensus of a 4.0% rise.

The figures were the first snapshot since 2019 of a Chinese economy unencumbered by the strict health measures that helped keep the coronavirus in check but battered businesses and supply chains.

"China's GDP beat expectations amid mixed March activity data. The good news is consumers are starting to spend; the bad news is that soft industrial production and weaker fixed asset investment data for March point to a very uneven recovery," SPI Asset Management analyst Stephen Innes commented.

The GDP reading lifted mining stocks got a boost, as China is a major buyer of minerals. Anglo American ended among the best of the lot, up 2.8%.

The pound was quoted at USD1.2424 late Tuesday afternoon in London, higher than USD1.2364 at the equities close on Monday. The euro stood at USD1.0964, up against USD1.0919. Against the yen, the dollar was trading at JPY133.96, lower compared to JPY134.49.

Rising Federal Reserve rate hike bets, on the back of decent US banking sector earnings, which supported the dollar at the start of the week. The dollar surrendered some gains on Tuesday, however.

UK jobs data supported the pound. According to the Office for National Statistics, the UK jobless rate was 3.8% in the three months to February. This was higher than FXStreet-cited market consensus, which had expected the reading to remain unchanged from 3.7% in the three months to January.

However, wage growth topped expectations. In the three months to February, annual growth in average total pay, including bonuses, was 5.9%, unchanged from the upwardly revised figure in the three months to January. However, it was higher than the market consensus of 5.1%.

Excluding bonuses, average earnings rose 6.6%, also unchanged from the upwardly revised figure last month, and higher than the consensus of 6.2%.

"Average total pay growth is still way above levels the Bank of England would like to see as it fights to stop the scourge of 'stagflation' becoming ingrained in the system," AJ Bell analyst Danni Hewson commented.

Taking advantage of dollar weakness, gold was quoted at USD2,010.02 an ounce late Tuesday afternoon, higher against USD1,990.71. The precious metal has an inverse relationship with the greenback.

Tracking gold prices higher, FTSE 100-listed miner Fresnillo rose 3.2%.

Stocks in New York drifted largely lower. The Dow Jones Industrial Average was 0.3% lower at the time of the closing bell in London, while the S&P 500 index was down 0.2% and the Nasdaq Composite lost 0.1%.

Eyes were on Bank of America and Goldman Sachs, as the US earnings season continued. Shares in the duo both fell, though BofA's earnings received more effusive praise.

BofA fell 1.4% despite a top-line beat, while Goldman Sachs lost 1.8% as revenue and profit declined.

"A tale of two very different banking giants has unfolded as Goldman Sachs' was hit by a dent in dealmaking, while the good times rolled for Bank of America, which reaped big windfalls from higher interest rates," Hargreaves Lansdown analyst Susannah Streeter commented.

"The underlying story betrays more trickier times ahead for both banks. Volatility is expected to continue to affect the markets, which Goldman's business is so highly interlinked with, while Bank of America's net interest margins are set to be eroded as more customers scarper in the search for higher returns elsewhere, forcing it to offer better rates."

Back in London, Entain surged 8.0% as the Ladbrokes owner reported a decent start to the year. it said group net gaming revenue for the first quarter of 2023 was up by 15%. With the inclusion of Entain's 50%-owned BetMGM joint venture, net gaming revenue for the period was up by 22%.

Paddy Power owner Flutter Entertainment rose 2.6% in a positive read-across.

Mitie jumped 14% as it announced a GBP50 million share buyback programme and said revenue in the year ended March 31 is expected to climb.

The facilities management company said revenue for financial 2023 is expected to be slightly above the GBP4.0 billion achieved the year before, having "successfully replaced all revenue from short-term Covid-related contracts".

Operating profit before other items is expected to be at least GBP155 million, beating current guidance of at least GBP145 million. In financial 2022, operating profit before other items was GBP167 million.

Elsewhere in London, Halfords surged 9.3%. The motoring and cycling products retailer and services provider expects sharp profit growth over the medium-term.

At a capital markets day, it said it targets revenue of GBP1.9 billion over the medium-term, compared to the GBP1.6 billion expected for the year just ended March 31. It expects pretax profit of GBP90 million to GBP110 million over the medium term, up markedly from its forecast of GBP50 million to GBP60 million for the year just ended.

It plans to declare a final dividend of 7.0 pence per share for the year just ended, up annually from 6p. It would take its total payout to 10p, up from 9p.

Brent oil was quoted at USD84.56 a barrel at the time of the London equities close on Tuesday, down from USD84.99 late Monday.

Wednesday's economic calendar has a UK inflation reading at 0700 BST, before consumer price index data from the eurozone at 1000 BST.

The local corporate diary has trading statements from miner Antofagasta, delivery firm Just Eat and Liontrust Asset Management.

In New York on Wednesday, electric carmaker Tesla and carrier United Airlines post quarterly results. Still to come on Tuesday, streaming service Netflix reports.

By Eric Cunha, Alliance News news editor

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Copyright 2023 Alliance News Ltd. All Rights Reserved.

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