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LONDON MARKET OPEN: StanChart falls on China hit; WPP cuts outlook

26th Oct 2023 09:08

(Alliance News) - Stock prices in London were off to a shaky start on Thursday morning, as investors nervously look ahead to a key interest rate decision from the European Central Bank, as well as the US economic growth data.

The FTSE 100 index opened down 50.64 points, 0.7%, at 7,363.70. The FTSE 250 was down 72.15 points, 0.4%, at 16,798.56, and the AIM All-Share was down 1.76 points, 0.3%, at 672.06.

The Cboe UK 100 was down 0.7% at 734.72, the Cboe UK 250 was down 0.4% at 14533.86, and the Cboe Small Companies was virtually flat at 12659.34.

In European equities on Thursday, the CAC 40 in Paris was down 1.2%, while the DAX 40 in Frankfurt was down 1.3%.

The ECB announces its latest rate decision at 1315 BST on Thursday. A press conference with President Christine Lagarde follows half an hour later. It is expected to decide against a rate hike.

"Today's monetary announcement from the European Central Bank looks set to be uneventful. The ECB hinted at the time of its last policy update that its interest rates may have peaked," said Lloyds.

Its interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility stand at 4.50%, 4.75% and 4.00%, respectively. The ECB has speedily enacted 450 basis points of hikes. Its first in the current cycle was in July of last year, prior to that, rates had been unmoved since 2019.

The euro was weaker against the dollar in early exchanges in Europe.

The euro stood at USD1.0546 early on Thursday in London, lower against USD1.0590 at the equities close on Wednesday. The pound was quoted at USD1.2089, down compared to USD1.2143.

Meanwhile, the dollar passed the JPY150-mark, meaning the yen was "trading very close to its lowest level since August 1990", Deutsche Bank analysts noted. This could trigger "the possibility of intervention from Japanese authorities", and is likely to put pressure on the Bank of Japan to consider tightening monetary policy, Deutsche added.

Against the yen, the dollar was trading at JPY150.53, higher compared to JPY149.93.

Gold was quoted at USD1,989.52 an ounce, up against USD1,982.33.

In the US on Wednesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.3%, the S&P 500 down 1.4% and the tech-heavy Nasdaq Composite down 2.4%.

It was the Nasdaq's worst day since February, while the S&P hit its lowest level since June.

The tech sell-off was led by Google parent Alphabet, as its shares plunged 9.5% after disappointing cloud sales offset an earnings and revenue beat.

A US gross domestic product print will also be in focus later in the day.

Figures could come in strong. According to FXStreet market consensus third-quarter annualized GDP is expected to be 4.2%, picking up from 2.1% the previous quarter.

Also still to come on Thursday's economic calendar, there is the US unemployment insurance weekly claims report.

Sentiment was also hit by the latest developments in the Middle East, which helped to drive oil prices higher.

Brent oil was quoted at USD88.95 a barrel early in London on Thursday, up from USD87.71 late Wednesday.

Israel said Thursday that a column of tanks and infantry had launched an overnight raid into Hamas-controlled Gaza, striking "numerous" targets before retreating to home soil.

The military announced the incursion into the north of the Palestinian territory hours after Prime Minister Benjamin Netanyahu declared preparations for a ground war were underway.

In Asia on Thursday, the Nikkei 225 index in Tokyo closed down 2.1%. In China, the Shanghai Composite closed up 0.5%, while the Hang Seng index in Hong Kong was own 0.3% in late trade. The S&P/ASX 200 in Sydney closed down 0.6%.

Standard Chartered plummeted 10% in London and dropped 9.8% in Hong Kong.

The Asia-focused lender said operating income rose 4.5% to USD4.52 billion from USD4.33 billion a year before. However, pretax profit dropped 54% to USD633 million from USD1.39 billion, well below the USD1.41 billion pencilled in by analysts, according to company-compiled consensus.

The bottom-line hit came as credit impairments increased to USD292 million from UD227 million, which included further charges related to the Chinese commercial real estate sector. The firm also booked an impairment of around USD700 million related to the reduction in the carrying value of its holding in China Bohai Bank.

WPP lost 3.3%, after it cut is guidance again.

WPP said third-quarter revenue declined 1.8% on-year to GBP3.51 billion, but rose 2.3% like-for-like. Revenue less pass-through costs was 5.0% weaker at GBP2.84 billion, and down 0.6% like-for-like.

"Our top-line performance in Q3 was below our expectations and continued to be impacted by the cautious spending trends we saw in Q2, particularly across technology clients with more impact from this felt in GroupM over the summer than the first half," Chief Executive Officer Mark Read said.

Looking ahead, WPP now expects 2023 like-for-like revenue, less pass-through costs, to grow between 0.5% and 1.0%. It had previously predicted a rise between 1.5% and 3.0%. That earlier guidance came as a result of WPP cutting its growth guidance from a 3% to 5% range back in August.

In the FTSE 250 index, Renishaw was down 4.3%.

The provider of manufacturing technologies, analytical instruments and medical devices provided a trading update for the three months ended September 30.

In the period, Renishaw said pretax profit fell 27% to GBP28.0 million, whilst revenue dropped 9% to GBP164.5 million.

"Trading conditions remain challenging due to subdued demand, most notably from the semiconductor sector. We continue to see positive investment trends in robotics, defence, low emission transportation and additive manufacturing," Renishaw said.

Amongst London's small caps, Bloomsbury rose 4.8%.

The London-based publisher reported that revenue in the six months ended August 31 rose 11% to GBP136.7 million from GBP122.9 million a year earlier. Pretax profit was up to GBP14.0 million from GBP12.9 million.

On the back of the results, Bloomsbury lifted its interim dividend to 3.70p per share from 1.41p.

On AIM, Safestyle UK plummeted 61%.

The retailer and manufacturer of PVCu replacement windows and doors said that it does not expect to receive a capital injection or new financing.

Earlier this month it said it was considering a number of options which could include the sale of some subsidiary businesses. However, the firm said it was in "active discussions" regarding the sale of some or all of its assets, but noted there could be no certainty of a sale, nor of the level of return to shareholders.

By Sophie Rose, Alliance News reporter

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