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LONDON MARKET MIDDAY: FTSE 100 trades flat but European peers rise

14th Mar 2024 12:09

(Alliance News) - London's FTSE 100 underwhelmed on Thursday, weighed down by some of its stocks going ex-dividend, though trade was more confident in Paris and Frankfurt ahead of the afternoon's US data.

Among individual shares elsewhere in London, Trainline jumped as it expects revenue growth to beat its expectations. OSB slumped, however, with the lender setting out a tepid net interest margin outlook.

The FTSE 100 index fell just 3.77 points to 7,768.40. The FTSE 250 climbed 58.38 points, 0.3%, to 19,622.30, and the AIM All-Share was flat at 738.82.

The Cboe UK 100 was down 0.1% at 777.94, the Cboe UK 250 added 0.4% at 17,001.13, and the Cboe Small Companies was down 0.2% at 14,683.40.

In European equities on Thursday, the CAC 40 in Paris surged 0.8%, while DAX 40 in Frankfurt rose 0.3%.

The pound was quoted at USD1.2808 early Thursday afternoon, up from USD1.2798 at the London equities close on Wednesday. The euro stood at USD1.0940, down from USD1.0945. Against the yen, the dollar was trading at JPY147.71, largely flat from JPY147.70.

Eyes turn to a batch of US data and what it can mean for Federal Reserve interest rates.

There will be a customary update on the jobs market, through the initial jobless claims reading at 1230 GMT, as well as an insight into the health of the consumer, with retail sales data. In addition, the latest producer price reading is reported in the early afternoon.

The next Federal Reserve decision is on Wednesday.

"There is no chance that the Fed cuts rates next week," Brown Brothers Harriman analysts commented.

"Odds of a May cut are now below 15% while odds of a June cut are below 75%. Furthermore, markets are basically back to matching the Fed's outlook for three cuts this year. The momentum in the US economy remains pretty strong, but a lot can happen between now and May or June that could impact boost those odds."

BBH analysts continued: "A couple of soft CPI prints would change things but as we pointed out earlier this week, low base effects suggest upside risks for year-on-year inflation over the next 3-4 months. Rather, it would probably take some weakness in the real economy to have an impact on Fed easing expectations, perhaps from some further softening of the labour market and/or weakness in consumption. Today's retail sales data will be important."

Retail sales are expected to have risen 0.8% on month in February, following a 0.8% fall in January from December, according to consensus cited by FXStreet.

Ahead of the US data, gold prices traded slightly lower. Gold was quoted at USD2,168.68 an ounce early Thursday afternoon, down from USD2,173.55 at the time of the London equities close on Wednesday.

Tickmill analyst Joseph Dahrieh commented: "The asset could continue to trade sideways overall ahead of the Federal Reserve's meeting next week but could see some volatility as traders react to the data releases expected in the coming days. However, gold could see some price corrections if new data reinforces expectations that the Federal Reserve could keep its interest rates unchanged for a longer period of time, in particular as traders could move to secure their profits after the strong gains recorded since the beginning of this month."

Brent oil was quoted at USD84.64 a barrel on Thursday afternoon, climbing from USD83.50 at the time of the London equities close on Wednesday.

In London, Miner Anglo American fell 4.9%, lender NatWest declined 4.3% and property investor Segro lost 2.4%. The trio went ex-dividend, meaning new buyers do not qualify for their latest payouts.

OBS Group plunged 16%. The Chatham, England-based mortgage lender, formerly known as OneSavings Bank, said pretax profit fell 30% to GBP374.3 million in 2023 from GBP531.5 million in 2022, as net interest income declined by 7.2% to GBP658.6 million down from GBP709.9 million.

Chief Executive Andy Golding explained that, as previously disclosed, the results were significantly hurt by the adverse effective interest rate adjustment, relating primarily to a shorter time spent on the reversion rate by its Precise Mortgages customers.

Despite the lower profit, OSB increased its annual dividend to 32.0p per share from 30.5p, though in 2022 OSB also paid a special dividend of 11.7p. OSB said it would launch a new share buyback programme of GBP50 million.

Looking ahead, OSB said it expects its underlying net interest margin to be broadly flat compared to the 2023 underlying NIM of 251 basis points, reflecting the impact of a higher cost of funds and the full-year impact of some lower margin lending in 2023.

Analysts at Shore Capital Markets commented: "OSB's has reported full year results to 31 December 2023 that were ahead of expectations, but net interest margin guidance is lower than we and consensus had expected, which is likely to drive sizeable forecast downgrades."

Trainline said its revenue growth will beat its forecast, giving the shares another spring to their step. The stock rose 12%.

Revenue in the financial year that ended February 29 rose 21% to GBP397 million from GBP327 million. Trainline previously had guided for a rise between 15% and 20%.

"We are 'buy' rated on Trainline shares because we feel positive investment attributes (strong UK market position, digital channel shift, strong ESG credentials, European prospects) outweigh associated risks and valuation considerations," Stifel analysts said.

One such risk that has faded is one in the UK. Shares in Trainline have risen roughly 30% since mid-December, when the UK government announced it will no longer pursue creating a ticket retailing website and app.

The proposal for a Great British Railways app was first mooted in May 2021 as part of a white paper. GBR is a planned state-owned body that will oversee UK rail transport.

Elsewhere in London, International Personal Finance jumped 12%. The company, which offers unsecured consumer credit in nine countries, said 2023 pretax profit landed ahead of its "internal plans", rising 8.4% to GBP83.9 million from GBP77.4 million.

Revenue rose 19% to GBP767.8 million from GBP645.5 million. IPF lifted its final dividend by 11% to 7.2p per share from 6.5p. Its annual dividend was 12% higher at 10.3p from 9.2p.

In New York, the Dow Jones Industrial Average is called up 0.1% on Thursday. The S&P 500 is called to open 0.1% lower, and the Nasdaq Composite down 0.3%.

The US House of Representatives overwhelmingly approved a bill that would force TikTok to sever ties with its Chinese parent company or be banned in the US.

"News that the Republican-controlled House of Representatives overnight overwhelmingly passed a bill, with bipartisan support, to enforce the sale of TikTok by parent company ByteDance to an American company, or risk seeing it banned, is likely to trigger a renewed spat between the US and Chinese government in the run-up to the presidential election," Quilter Investors analyst Lindsay James commented.

"The site is increasingly used for news, leaving it ripe for misuse ahead of the election, and there have been widespread concerns by US politicians about data harvesting by the Chinese government. This would however set an uncomfortable precedent for other foreign-owned entities operating in the US. The message being that if the US government doesn't approve, expect to experience a forced divestiture – challenging somewhat its image for free enterprise and free speech. With this now moving to the Senate the debate will continue, with diplomatic ties with China likely to be collateral damage amidst this latest turn inwards by America."

By Eric Cunha, Alliance News news editor

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