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LONDON MARKET MIDDAY: Stocks fall ahead of busy week for central banks

30th Jan 2023 12:14

(Alliance News) - Stock prices in London were down on Monday around midday, as investors anxiously look ahead to three crucial interest rate decisions that will be announced later this week.

The US Federal Reserve will decide interest rates on Wednesday, while the European Central Bank and the Bank of England will have their turn on Thursday.

"For the most part 2023 has been smooth sailing for stocks but two icebergs lurk in the waters this week in the form of the Federal Reserve and Bank of England interest rate decisions. How far might they dial back rate hikes and the hints they might drop about the future trajectory of their policy decisions are the two things which will be keeping investors up at night," said AJ Bell investment director Russ Mould.

The FTSE 100 index was down 11.09 points, 0.1%, at 7,754.06. The FTSE 250 was down 231.86 points, 1.2%, at 19,803.53, and the AIM All-Share was down 3.56 points, 0.4%, at 865.68.

The Cboe UK 100 was down 0.1% at 775.37, the Cboe UK 250 was down 0.9% at 17,274.39, and the Cboe Small Companies was down 0.5% at 14,082.02.

Dealers at TreasuryOne in South Africa said central bank announcements this week "will shake the markets from their current lethargy", and provide "some fresh direction and movement".

Federal Reserve policy-setters are expected to slow the pace of US interest rate hikes to 25 basis points. The Fed hiked by 50 points - half a percentage point - in December, but had enacted four successive 75 basis point lifts in the meetings prior.

The BoE is expected to be more aggressive than the ECB, according to RMB Markets, with Bloomberg forecasting a 50bps hike for the BoE, while the ECB is predicted to announce a 25bps increase.

However, analysts at ING expect a 50-point hike from the ECB.

In European equities on Monday, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 0.8%.

Economic sentiment in the eurozone saw broad improvement in January, according a report on Monday.

Eurostat data showed a rise in eurozone economic sentiment for the third consecutive month in January. The economic sentiment indicator improved to 99.9, from an upwardly revised figure of 97.1 in December. December was initially reported as 95.8. The reading for January was ahead of FXStreet-cited market consensus of 97.

In Germany the mood was less optimistic, as preliminary figures showed that the economy contracted in the final quarter of 2022 from the third quarter.

According to the Destatis, Germany's gross domestic product shrank by 0.2% in the fourth quarter of 2022 from the third. Market consensus, according to FXStreet, had expected GDP to remain unchanged.

In the third quarter, GDP grew 0.4% from the second quarter. The German economy had grown 0.1% in the second quarter and 0.8% in the first.

On an annual basis, the German economy grew 1.1% in the fourth quarter, slowing from 1.3% annual growth seen in the third quarter. This was also lower than the market consensus of 1.3%.

The pound was quoted at USD1.2391 at midday on Monday in London, up compared to USD1.2383 at the close on Friday. The euro stood at USD1.0897, up against USD1.0857. Against the yen, the dollar was trading at JPY130.11, up compared to JPY129.87.

In London, board changes dominated Monday's news, with Unilever appointing a new boss, Legal & General's chief stepping down after ten years, and 888's CEO stepping down immediately.

In the FTSE 100, Unilever gained 0.5%.

The London-based consumer goods company said it has appointed Royal FrieslandCampina boss Hein Schumacher as its new chief executive.

Schumacher has been CEO of the Amersfoort, Netherlands-based dairy co-operative since 2018. He joined the Unilever board as a non-executive director in October last year.

He will begin as Unilever CEO on July 1, after a one-month handover period. Schumacher will replace Alan Jope, who announced in September 2022 his intention to retire from the London-based consumer goods company.

Chair Nils Andersen said: "Hein is a dynamic, values-driven business leader who has a diverse background of experiences and an excellent track record of delivery in the global consumer goods industry. He has exceptional strategic capabilities, proven operational effectiveness, and strong experience in both developed and developing markets."

Fellow FTSE 100 constituent Legal & General lost 2.9%. L&G said CEO Nigel Wilson plans to step down after over a decade in post.

Wilson joined the company in 2009 as chief financial officer and was appointed to CEO in 2012. L&G shares have more than doubled since the start of 2012, when they stood around 112p, compared to 253.30p on Monday.

Legal & General said it has begun the process to appoint a successor, considering both internal and external candidates. It added that Wilson has agreed to continue as CEO until his successor starts. The process will take around a year, L&G said.

In the FTSE 250 index, the worst performer was 888 Holdings, down 27% at midday, after the online gaming operator said CEO Itai Pazner has left the company immediately.

The departure of Pazner as CEO comes just over two weeks after 888 announced that Yariv Dafna would step down as chief financial officer. Dafna was expected to leave 888 at the end of March. However, 888 on Monday said he will remain in the post until the end of 2023.

Non-Executive Chair Jonathan Mendelsohn will take over as executive chair on an interim basis while the gambling firm hunts for a new CEO. 888 did not give a reason for Pazner's immediate departure.

888 also reported it has suspended some activities in the Middle East amid a customer compliance probe. Following an initial review, 888 said some of its units in the Middle East region have fallen short in know your client and anti-money laundering compliance measures. 888 said it currently believes the issues are "isolated to this region only".

"While further internal investigations are underway, the board has taken the decision to suspend VIP customer accounts in the region, effective immediately. The board currently estimates that the impact is less than 3% of group revenues, should the suspensions remain in place," 888 said.

AJ Bell's Mould said: "Gambling stocks are under enough regulatory scrutiny as it is without inviting reasons for further attention and yet that's exactly what 888 has done. News it is suspending VIP accounts in the Middle East over best practices not being followed over money laundering is incredibly damaging. Combine that with the announcement of CEO Itai Pazner's immediate departure and the market is likely to draw its own conclusions."

IT services firm Computacenter gained 8.7%, after it said it ended 2022 with a "record" fourth quarter.

The Hatfield, Hertfordshire-based firm said it expects full-year results to slightly ahead of its guidance.

Computacenter said total revenue, on a gross invoiced income basis, grew by more than 30%, including the effects of acquisitions made in the middle of 2022, and by over 27% in constant currency. It said adjusted pretax profit in the first half of the year against the first half of 2021 was down by 6%; however over the year as a whole pretax profit grew. In 2021, Computacenter brought in GBP248.0 million of pretax profit on GBP6.73 billion in revenue.

"We saw strong demand in all countries from Technology Sourcing product sales which remained extremely buoyant to the end of the year. Our Services revenue performance was strong, whilst our Services margin performance was impacted by the unwinding of Covid-related benefits during the year, and inflationary pressures which we expect to continue into 2023," Computacenter said.

Looking ahead, the company said it is "bullish" about target market and competitive positioning.

On AIM, Monday's worst performer at midday was Rosslyn Data Technologies, plummeting 24%.

The Portsmouth, England-based data management and analytics service provider posted revenue of GBP1.4 million for the six months ended on October 31, slightly down from GBP1.5 million a year before.

However, pretax loss narrowed to GBP1.8 million from GBP2.2 million, as administrative expenses are trimmed to GBP2.2 million from GBP2.4 million a year before.

Looking ahead, Rosslyn said it has entered the new financial year with "increasing revenue momentum". It expects annual results to be in line with market expectations, with a year-on-year increase in revenue for continuing operations of 14%.

Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 1.0%.

Brent oil was quoted at USD86.32 a barrel at midday in London on Monday, down a bit from USD86.78 late Friday. Gold was quoted at USD1,942.71 an ounce, up against USD1,930.80.

The week picks up pace with a eurozone gross domestic product reading on Tuesday and inflation data from the single currency area on Wednesday, in addition to the central bank decisions.

There also are a host of services PMIs, including from the UK, eurozone, US and China, due on Friday. The US nonfarm payrolls report for January also will be issued on Friday.

By Sophie Rose, Alliance News reporter

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