28th Jan 2021 12:14
(Alliance News) -Â Markets in Europe were awash in red on Thursday, and New York was set for further losses at the opening bell after caution from the US Federal Reserve and underwhelming tech earnings.
Dragging on the FTSE 100 was Prudential as it revealed it is mulling an equity raise worth as much as USD3 billion, counteracting gains by Diageo after an interim rise in organic net sales.
The FTSE 100 index was down 53.80 points, or 0.8%, at 6,513.57 on Thursday at midday in London. The mid-cap FTSE 250 index was down 122.10 points, or 0.6%, at 20,156.25. The AIM All-Share index was down 1.4% at 1,159.79.
The Cboe UK 100 index was down 0.9% at 647.70. The Cboe 250 was down 0.7% at 17,573.73, and the Cboe Small Companies down 1.0% at 12,076.38.
In mainland Europe, the CAC 40 in Paris was down 0.2% while the DAX 30 in Frankfurt was 0.6% lower Thursday afternoon.
"Stock markets have continued their run of losses from yesterday, as the market rally faces its first real test," said Chris Beauchamp, chief market analyst at IG.
"The overall rally had slowly lost momentum in recent weeks, and the laws of physics have finally taken effect – what can't keep going higher has to fall," said Beauchamp. "Last night's Fed meeting failed to provide any excitement and certainly no indication of any more direct support from Powell and the rest of the team, while earnings season is falling into the 'good enough' category."
The Federal Open Market Committee on Wednesday decided to keep the target range for the federal funds rate unchanged at 0.00% to 0.25%.
"A resurgence in recent months of Covid-19 cases, hospitalizations and deaths is causing great hardship for millions of Americans and weighing on economic activity and job creation," Fed Chair Jerome Powell said, adding the outlook is "highly uncertain".
Powell said he was not worried about being able to unwind the loose monetary policy enacted since the beginning of last year, and stressed his goal remains on supporting the economy and ensuring maximum employment.
The combination of the Fed meeting and some lacklustre earnings has left markets vulnerable to some near-term weakness, said IG's Beauchamp.
Wall Street is set to pick up where it left off on Wednesday, with the Dow Jones pointed down 0.2%, the S&P 500 down 0.5% and the tech-heavy Nasdaq Composite down 1.2%.
Apple shares were trading 2.7% lower pre-market, weighing on the Nasdaq, despite notching an all-time revenue record as iPhone sales alone jumped by nearly 20%.
In the three months to December 27, the first of its financial year, total net sales soared 21% to USD111.44 billion, a company record, from USD91.82 billion 12 months earlier. The figure easily topped market forecasts, cited by CNN, of sales amounting to USD103.3 billion. Earnings per share jumped 35% to USD1.68, also beating market forecasts which tipped an EPS of USD1.42.
However, UBS said: "Despite a solid iPhone revenue beat relative to both our estimate and consensus, FY1Q iPhone data doesn't support a "super cycle" in our view."
Tesla shares fell 5.2% pre-market as its results disappointed.
For the fourth quarter to December 31, revenue rose 46% to USD10.74 billion from USD7.38 billion in the fourth quarter of 2019. Gross profit was USD2.07 billion, up 49% from USD1.39 billion the year before.
"Revenues are more or less in line with what the market had expected, but profits are some way below. We think that reflects the shift from premium Model S and X vehicles to lower priced Model 3s and Model Ys," said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
At USD820.00, Tesla shares remain many multiples of their price of USD113.38 a year ago, while Apple remains up 79% over the past 12 months.
In London, Diageo got a positive reception to its half-year numbers even as profit fell.
The brewer and distiller said sales for the six months to December 31 edged down 3.6% to GBP10.44 billion from GBP10.83 billion a year ago, with pretax profit falling 11% to GBP2.20 billion from GBP2.46 billion. However, organic net sales rose 1.0%, the Smirnoff vodka maker noted, despite a hit to Travel Retail and on-trade restrictions.
"We rapidly pivoted to the channels and occasions most relevant to consumers and invested behind new opportunities. This more than offset the impact of on-trade restrictions and the decline in Travel Retail," Chief Executive Ivan Menezes explained.
At the bottom of the FTSE 100 was Prudential, sinking 9.1% as it mulled raising around USD2.5 billion to USD3 billion in equity in Hong Kong or London, or both, with the hope or increasing its investor base in Asia.
The insurer confirmed its overall Asian quarterly sales trajectory has continued improving in the second half of 2020, with 2020 operating performance expected to align with current market expectations. Prudential expects to post its 2020 preliminary results on March 3.
The London-headquartered financial services firm has also opted to pursue separation of its Jackson Financial business in the US in the second quarter of 2021 via a demerger. This will lead to a much earlier separation than a minority initial public offering and future sell-downs could have achieved.
In the FTSE 250, Wizz Air rose 3.7% after the airline said a sharp fall in passengers in its third quarter resulted in revenue taking a significant blow, but it hopes vaccines will bring a gradual end to the Covid-19 crisis.
For the three months to December 31, the budget airline posted revenue of EUR149.9 million, down a whopping 77% from EUR673.3 million the year prior. This was as passengers carried also fell 77% to 2.3 million from 10.0 million. Wizz swung to an underlying loss before interest, tax, depreciation and amortisation of EUR40.9 million from earnings of EUR130.8 million a year ago.
Tate & Lyle advanced 3.3% on news it expects annual profit to modestly exceed the prior year after an improved revenue performance in its third quarter.
The London-headquartered food and beverage ingredients firm said its revenue rose 8% year-on-year for the three months ended December 31, its third financial quarter.
For its financial year ending March 31, Tate & Lyle expects to report a modest improvement in adjusted pretax profit in constant currency, thanks to continued Food & Beverage Solutions momentum, as well as sharply higher commodities prices and cost discipline.
The economic events calendar on Thursday has German inflation at 1300 GMT and US GDP and jobless claims at 1330 GMT.
The dollar was mostly higher against major currency pairings ahead of the US data.
Sterling was quoted at USD1.3666 at midday, lower than USD1.3698 at the London equities close on Wednesday.
The euro traded at USD1.2103 early Thursday, flat on USD1.2100 late Wednesday. Against the yen, the dollar was quoted at JPY104.31, up from JPY104.07.
Precious metal gold suffered amid the strong dollar, quoted at USD1,840.34 an ounce Thursday, falling from USD1,848.50 on Wednesday. Brent oil was trading at USD55.84 a barrel, down from USD56.27 late Wednesday amid Thursday's wider risk-off move.
By Lucy Heming;Â [email protected]
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