29th Oct 2021 12:18
(Alliance News) - Stock prices in London were down at midday on Friday amid growing expectations of interest rate hikes to counter rising inflation and after results from the middle two 'Faangs', Apple and Amazon, lacked bite.
The large-cap FTSE 100 index was down 40.07 points, or 0.5%, at 7,209.40. The mid-cap FTSE 250 index was down 116.70 points, or 0.5%, at 23,083.34. The AIM All-Share index was down 0.1% at 1,222.90.
The Cboe UK 100 index was down 0.4% at 714.21. The Cboe 250 was down 0.4% at 20,715.41 and the Cboe Small Companies down 0.1% at 15,409.04.
In mainland Europe, the CAC 40 stock index in Paris was down 0.3%, while the DAX 40 in Frankfurt was down 0.8%.
AJ Bell's Russ Mould said: "Underwhelming corporate news on both sides of the Atlantic saw the FTSE 100 get off to a sluggish start on Friday. For now investors appear to have shrugged off a long list of concerns taking in Chinese property, inflation, Covid, a fully blown supply chain crisis and an increase in interest rates, largely climbing this wall of worry in recent weeks.
"The next key test of the market's mountaineering skills could come next Wednesday as the US Federal Reserve is widely expected to begin tapering its financial stimulus and the Bank of England potentially looking to raise rates."
The US Federal Reserve announces its latest policy decision on Wednesday next week, followed by the BoE on Thursday.
In the FTSE 100, NatWest was the worst performer on Friday, down 4.8%, after the state-backed lender posted quarterly results that disappointed investors.
The bank saw a bump in profit in the recent quarter thanks to the release of impairment provisions. In the three months to September 30, it recorded a pretax operating profit of GBP1.07 billion, up sharply from GBP355 million. NatWest made a credit release of GBP242 million versus a GBP254 million provision the year before.
Third-quarter attributable profit rose 10-fold to GBP674 million from GBP61 million.
However, the bank's third-quarter net interest margin was 1.54%, down from 1.65% at the same time last year.
NatWest's litigation and conduct costs were GBP294 million, which included provisions for an anticipated fine pertaining to breaches of UK money laundering regulations and "other matters".
The UK Financial Conduct Authority had charged the bank, formerly known as Royal Bank of Scotland, over failure to monitor money laundering activity by a client that deposited GBP365 million in its accounts over five years.
"Investors will be a little frustrated to see the profit and loss account burdened by a further GBP294 million in litigation and conduct costs, to take the total to GBP22.5 billion over the past decade, and concerned to see the net interest margin slide again, down to just 1.54%," said AJ Bell's Mould.
"Both weighed on profits between July and September, although bulls of the stock will argue that litigation costs are still much lower than they used to be and that interest rate rises could help lending margins, if and when the Bank of England gets around to it," Mould added.
Conversely, NatWest's rivals were among the best blue-chip performers, with Lloyds up 1.0%, Barclays up 0.9% and Standard Chartered up 0.8%. Lloyds and Barclays already have reported their third-quarter results, and StanChart follows on Tuesday next week.
In the FTSE 250, ConvaTec was the top gainer, up 5.0%, after the wound dressings maker said it was on track to hit the upper-end of its full-year revenue guidance.
The medical products and technologies company reported revenue of USD511 million in the third quarter of 2021, up 3.7% year-on-year from USD493 million.
In the nine months to September 30, revenue was up 5.4% on an organic and constant currency basis.
Looking ahead, Convatec expects to be towards the upper end of its organic revenue growth guidance of 3.5% to 5.0% for the full year. Constant currency adjusted earnings before interest and taxes margin is expected to be between 18% and 19%. Last year, the company reported revenue of USD1.89 billion.
The dollar was higher across the board. The pound was quoted at USD1.3798 at midday on Friday, down from USD1.3808 at the London equities close Thursday.
The euro was priced at USD1.1655, down from USD1.1682. Against the yen, the dollar was trading at JPY113.72 in London, up from JPY113.29.
In economic news on the continent, annual inflation in the eurozone rose to its highest level in 13 years, while the bloc's economic growth slowed, figures from Eurostat showed.
On an annual basis, eurozone's gross domestic product grew 3.7% in the three months to September, slowing sharply from 14% growth in the previous quarter. The print beat the market forecast, cited by FXStreet, of 3.5%.
Meanwhile, the eurozone consumer price index rose 4.1% annually in October, accelerating from 3.4% in September. The latest reading showed prices rising faster than market expectations, cited by FXStreet, of 3.7%.
Core consumer prices, which strips out food and energy, jumped 2.1% on an annual basis, quickening from 1.9% in September.
Both prints were higher than the European Central Bank's inflation target of below, but close to, 2.0% over the medium term. The central bank on Thursday kept monetary policy unchanged.
"With inflation above 4% and core inflation above 2%, the breeding ground for second round effects on inflation becomes more fertile. Whether it is fertile enough for inflation to turn structural remains to be seen, but the ECB will have to keep a close eye on it," said analysts at ING.
Brent oil was quoted at USD84.43 a barrel Friday at midday, up from USD83.94 late Thursday. Gold stood at USD1,796.40 an ounce, down from USD1,802.81.
US stock market futures were pointed to lower start after disappointing earnings from mega-cap tech names overnight.
The Dow Jones Industrial Average was called down 0.1%, the S&P 500 down 0.5% and Nasdaq Composite down 0.9%.
After the New York market close, Amazon reported earnings that missed market forecasts, as the pandemic, hiring and product shortages drove up costs ahead of the key holiday shopping season.
Pretax profit in the three months to September 30 fell 37% year-on-year to USD4.32 billion from USD6.81 billion. That was despite total net sales increasing 15% to USD110.81 billion from USD96.15 billion. Sales missed CNN-cited forecasts of USD111.6 billion. Amazon's total operating expenses increased 18% to USD105.96 billion.
Amazon shares were down 4.6% in pre-market trade in New York.
Apple said a strong fourth quarter "capped off a remarkable fiscal year", but shares slipped after-hours on a revenue miss.
Shares in Apple were off 3.4% in pre-market trade on Wall Street.
Total revenue for the three months to September 25 jumped 29% year-on-year to USD83.36 billion from USD64.70 billion. Net income strengthened 62% to USD20.55 from USD12.67 billion, and diluted earnings per share grew 70% to USD1.24 from USD0.73.
While the Cupertino, California-headquartered iPhone maker's quarterly EPS figure was spot-on consensus, the sales figure - while a September quarter record - missed the mark, with analysts having pencilled in nearly USD85 billion.
In addition, shares in Starbucks were 4.8% lower in pre-market trade despite the coffee-house chain reporting upbeat earnings late Thursday.
Starbucks said it rounded off its financial year with record revenue, outlined an aim to return USD20 billion to shareholders over the next three years and earmarked plans to lift the wages of its workers.
The Seattle, Washington-based firm said revenue in the 14 weeks ended October 3 rose 31% to USD8.15 billion from USD6.20 billion a year earlier. It helped push annual revenue 24% higher to USD29.06 billion, from the USD23.52 billion achieved in the Covid-hit prior year.
Facebook shares were up 0.9% in the pre-market after the embattled social media firm announced plans to change its name to Meta.
The technology and social networking company embarks on a "new chapter", while it continues to grapple with a whistleblower's allegations, as well as the looming threat of regulation.
Meta will bring the firm's "apps and technologies under one new company". Meta was introduced by Chief Executive Mark Zuckerberg at Facebook's Connect 2021 conference.
The economic events calendar on Friday has US personal consumption expenditures due at 1330 BST.
By Arvind Bhunjun; [email protected]
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