24th Jul 2024 08:59
(Alliance News) - European equities got off to an underwhelming start on Wednesday, as poorly-received tech earnings after the closing bell in New York overnight kept a lid on enthusiasm, and reports from the continent largely failed to inspire confidence either.
US earnings will be in focus later on Wednesday, with carmaker Ford and cloud software firm IBM among those reporting. European lenders took centre-stage in the morning, however, with Santander and Deutsche Bank moving in opposite directions following their earnings. A poor report from LVMH late Tuesday hurt luxury retail shares early Wednesday, meanwhile.
In London, numbers from easyJet impressed, while Reckitt's strategy update was well-received, as it put a host of brands on the chopping block.
Still, the FTSE 100 index traded down 38.31 points, or 0.5%, at 8,129.06. The FTSE 250 was down 41.30 points, 0.2%, at 21,050.19, while the AIM All-Share was down 1.24 points, 0.2%, at 778.93.
The Cboe UK 100 was down 0.4% at 811.48, the Cboe UK 250 was up marginally at 18,393.42, and the Cboe Small Companies was flat at 17,248.12.
The CAC 40 in Paris slumped 1.5%, while Frankfurt's DAX 40 traded 0.7% lower.
In New York on Tuesday, the Dow Jones Industrial Average ended down 0.1%, the S&P 500 down 0.2% and the Nasdaq Composite down 0.1%.
After hours in New York, Google owner Alphabet fell 2.2%, while electric carmaker Tesla slid 7.8%.
Tesla missed Wall Street profit estimates in the second quarter as it repeated guidance that vehicle growth in 2024 would be "notably lower" than 2023. Alphabet highlighted "ongoing strength" in its Search segment, as well as "momentum" in Cloud, after seeing both revenue and net income climb in the second quarter.
However, the YouTube division's advertising revenue fell short of estimates.
"The stock market rally faces a big hurdle this week, as it is the peak of earnings season for the S&P 500. The picture so far has been mixed. On Tuesday evening the focus was on the Magnificent 7. Tesla and Google both reported earnings. In post-market trading Tesla's share price is lower by 7%, and Alphabet's share price is also lower after eroding earlier gains. This suggests that the market is not impressed with the start of earnings season for the mega tech stocks," XTB analyst Kathleen Brooks commented.
In Frankfurt, Deutsche Bank traded 6.6% lower, while in Madrid, Santander rose 3.6%. Santander posted a second-quarter earnings hike and raised guidance, while Deutsche swung to a loss on litigation costs amid a Postbank lawsuit provision.
London-listed banking shares were lower. Standard Chartered fell 1.6%, while Barclays and HSBC each lost 1.0%.
Also hurting the FTSE 100, Scottish Mortgage Investment Trust, which invests in a who's who of US tech names, fell 1.8%.
Lingering China growth worries, meanwhile, hurt Asia-focused insurer Prudential. Pru shares fell 2.2%.
"Sentiment towards China is hardly inspiring," Pepperstone analyst Chris Weston commented.
In China on Wednesday, the Shanghai Composite fell 0.5% in afternoon trade. The Hang Seng in Hong Kong was 1.2% lower in late trade. Tokyo's Nikkei 225 fell 1.1%. The S&P/ASX 200 in Sydney ended down 0.1%.
An interest rate cut by the People's Bank of China has failed to stir up the Composite. The Shanghai benchmark has fallen nearly 3% this week.
Adding to the misery for the FTSE 100, Burberry fell 1.6% in tough morning dealings for luxury goods firms. LVMH fell 5.9% in Paris as it reported a decline in half-year profit.
Investors while be hoping for better from Kering, also a Paris listing, which reports later on Wednesday.
Back in London, easyJet and Reckitt led the way in the FTSE 100, rising 6.7% and 3.1%.
easyJet said it is set for a "record-breaking summer" as third-quarter earnings improved, calming some travel sector nerves after Ryanair's drab update earlier this week.
easyJet said revenue for the quarter ended June 30 rose 11% to GBP2.64 billion from GBP2.36 billion a year earlier. Headline pretax profit shot up 16% to GBP236 million from GBP203 million. Passenger numbers rose 8% during the period.
"Our strong performance in the quarter has been driven by more customers choosing easyJet for our unrivalled network of destinations and value for money. This result was achieved despite Easter falling into March this year, demonstrating the continued importance of travel and this means we remain on track to deliver another record-breaking summer, taking us a step closer to our medium term targets," CEO Johan Lundgren said.
Reckitt Benckiser posted weaker half-year earnings, and said it will look to divest its portfolio of "leading home care brands", including Air Wick and Calgon.
The consumer goods and hygiene products maker also said it deems Mead Johnson Nutrition, the business behind Enfamil infant nutrition, to be non-core. Reckitt said it will consider "all strategic options" for that division.
"The core Reckitt portfolio will be a uniquely attractive consumer health and hygiene business, with premium, high-growth and high-margin Powerbrands, including Mucinex, Strepsils, Gaviscon, Nurofen, Lysol, Dettol, Harpic, Finish, Vanish, Durex and Veet. Over the last five years this portfolio has delivered strong growth and high margins," it added.
Reckitt's net revenue in the first-half of 2024 declined 3.7% to GBP7.17 billion from GBP7.45 billion. Pretax profit fell 7.3% to GBP1.52 billion from GBP1.64 billion.
It raised its interim dividend by 5.0% to 80.4 pence from 76.6p. It also announced its next GBP1 billion share buyback programme will "commence imminently".
Informa fell 0.8%, while Ascential jumped 26%. Informa reported an increase in half-year revenue, and the business information publisher and events organiser struck a deal to acquire Cannes Lions operator Ascential. It will pay 568 pence in cash per Ascential share. The deal values Ascential's equity at GBP1.2 billion.
"Informa is in the business of creating, nurturing and growing world class B2B brands. Lions and Money20/20 are outstanding examples of such brands. Combined, we can expand them into more sectors, accelerate growth and take advantage of new opportunities," Informa Chief Executive Stephen Carter said.
Ascential CEO Philip Thomas said the deal will "deliver substantial value for our shareholders".
Informa also said revenue in the first half of 2024 totalled GBP1.70 billion, a rise of 12% year-on-year from GBP1.52 billion. Pretax profit declined by a quarter, however, to GBP237.4 million from GBP314.6 million.
Informa upgraded revenue guidance, and now expects revenue for 2024 to be above its previously stated guidance range of GBP3.45 billion to GBP3.50 billion. Revenue in 2023 totalled GBP3.19 billion.
Informa upped its interim dividend by 10% to 6.4 pence per share from 5.8p.
Elsewhere in London, Nichols shares rose 6.8% as the Vimto owner reported a profit improvement, raised guidance and announced a special dividend.
In the half-year to June 30, revenue fell 1.8% to GBP84.0 million from GBP85.5 million 12 months earlier. Pretax profit, however, rose 5.8% to GBP11.8 million from GBP11.2 million.
Nichols raised its ordinary interim dividend by 18% to 14.9p per share from 12.6p. It announced a 54.8p special dividend, which will return GBP20 million in total to shareholders.
Looking ahead, it said: "The company has begun trading in Q3 positively and in line with management expectations. Reflecting the progress made in H1 and underpinned by the group's ongoing focus on driving margin improvement, the board now expects to report full year adjusted profit before tax slightly ahead of current market expectations."
It puts market expectations for adjusted pretax profit at GBP28.8 million.
The pound was quoted at USD1.2892 early Wednesday in London, down from USD1.2915 at the London equities close on Tuesday. The euro stood at USD1.0832, falling from USD1.0855. Against the yen, the dollar was trading at JPY154.67, fading from JPY155.98.
Brent oil was quoted at USD81.26 a barrel early Wednesday, rising from USD80.95. Gold was quoted at USD2,413.54 an ounce, a rise from USD2,406.10.
By Eric Cunha, Alliance News news editor
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