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LONDON MARKET MIDDAY: Stocks up ahead of US Fed rate decision

3rd May 2023 12:06

(Alliance News) - Blue-chip equities in Europe were higher at midday on Wednesday, before the Federal Reserve takes centre-stage, as a key week for central bank decisions and US labour market data picks up speed.

The Federal Reserve announces an interest rate decision at 1900 BST, with the European Central Bank reporting its own on Thursday.

Still to come on Wednesday afternoon is the ADP US jobs report at 1315 BST, before the official nonfarm payrolls on Friday.

The FTSE 100 index was up 20.52 points, 0.3%, at 7,793.55 around midday on Wednesday. The FTSE 250 was up 118.80 points, 0.6%, at 19,433.03, and the AIM All-Share was up 0.60 of a point, 0.1%, at 828.80.

The Cboe UK 100 was up 0.2% at 779.12, the Cboe UK 250 up 0.3% at 17,054.69, and the Cboe Small Companies up 0.1% at 13,476.86.

Market focus for Wednesday is squarely on the Fed, which is set to announce its latest interest rate decision at 1900 BST.

Stocks in New York are called higher, ahead of the decision. The Dow Jones Industrial Average is called up 0.1%, whilst both the S&P 500 index and the Nasdaq Composite are called up 0.2%.

The market is expecting another 25 basis point hike from the Fed, bringing the federal funds target rate range to 5.00% to 5.25%. The US central bank is then expected to halt its rate hiking cycle.

At its last meeting in March, the central bank lifted interest rates by 25 basis points in a unanimous decision, taking the federal funds rate range to 4.75%-5.00%.

"The Fed is widely expected to deliver what could be its final rate hike in this cycle of 25 basis points, so barring any big shock on that score, the focus will fall on the comments which accompany the decision," AJ Bell analyst Russ Mould commented.

"Confirmation that rates will be put on hold after today, while largely anticipated in the market, could nonetheless give sentiment a bit of a boost. The reverse, on the other hand, could really knock confidence."

The dollar was weaker in afternoon exchanges in Europe.

The pound was quoted at USD1.2510 at midday on Wednesday in London, higher compared to USD1.2463 at the equities close on Tuesday. The euro stood at USD1.1034, up against USD1.0986. Against the yen, the dollar was trading at JPY135.69, down compared to JPY136.55.

After the Fed, the ECB takes to the podium on Thursday.

In March, the ECB lifted rates by 50 basis points. It took the interest rate on the main refinancing operations, the interest rate on the marginal lending facility, and the deposit facility to 3.50%, 3.75% and 3.00% respectively.

The eurozone's unemployment rate declined to a record low in March, beating the market forecast, figures on Wednesday showed.

According to Eurostat, the single currency area's jobless rate eased to 6.5% in March from 6.6% in February.

It had been expected to remain at 6.6%, according to consensus cited by FXStreet.

March's figure was a record low unemployment rate for the single currency bloc. Eurozone unemployment also was 6.6% in January, following nine-successive months at 6.7%.

In European equities on Wednesday, the CAC 40 in Paris was up 0.8%, while the DAX 40 in Frankfurt was up 0.7%.

On the FTSE 100 in London, Lloyds Banking shed 3.3%, making it one of the worst performers at midday on Wednesday.

In the three months that ended March 31, the Edinburgh-based bank said pretax profit was GBP2.26 billion, up 46% from GBP1.54 billion a year earlier.

Total income was GBP9.31 billion, swinging from a loss of GBP2.11 billion, while net interest income rose 18% to GBP3.43 billion from GBP2.90 billion.

Customer deposits fell by GBP2.2 billion to GBP473.1 billion. This was "including a reduction in Retail current account balances of GBP3.5 billion, partly driven by seasonal customer outflows, including tax payments, higher spend and a more competitive market," Lloyds said, noting it was partially offset by deposit increases in Commercial Banking.

AJ Bell's Mould said that it has "hard not to ignore the GBP2.2 billion reduction in customer deposits".

Looking ahead, Lloyds backed annual guidance of a banking net interest margin over 305 basis points, and return on tangible equity of around 13%.

In the FTSE 250, TI Fluid Systems jumped 16%.

The maker of storage, carrying and delivery systems for fluids backed its annual outlook, as first-quarter revenue rose 15% year-on-year to EUR869.8 million.

"The group's performance through Q1 2023 has been encouraging and our outlook for the year remains unchanged, with constant currency revenue growth outperformance compared to [light vehicle production] growth, adjusted [earnings before interest & tax] margins to expand above 6%," TI Fluid Systems explained.

On AIM, Mirriad Advertising shares more than doubled to 2.26 pence each. They closed at 1.10p on Tuesday.

The London-based in-content advertising company said it has worked with Microsoft to build a new application programming interface.

This is part of establishing a roadmap for "adopting Microsoft Azure and its AI capabilities for various use-cases". The company's new API is a first release within the collaboration with Microsoft.

"Microsoft is a leader in cloud technology, cognitive and generative AI, which are key elements to the new marketing frontier that we're building," said Chief Executive Officer Stephan Beringer.

"The new API is our first release in the collaboration with Microsoft and a main step on our path to scale through automation and integration with the programmatic ecosystem."

Argos Resources lost 51%. The Falkland Islands-based exploration firm said it has agreed to sell its PL001 production licence interests in the North Falkland Basin to JHI Associates.

Argos will receive 8.5 million JHI shares along will GBP303,500 cash.

Should the transaction be approved by shareholders, Argos's only asset would be the JHI shares. Consequently, it then would intend to wind up the company through a voluntary liquidation.

Brent oil was quoted at USD73.26 a barrel at midday in London on Wednesday, down from USD76.17 late Tuesday. Gold was quoted at USD2,015.82 an ounce, down against USD2,011.85.

By Sophie Rose, Alliance News reporter

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