27th Jul 2023 08:52
(Alliance News) - Stock prices in London opened in the green on Thursday, as investors digested the latest swathe of corporate earnings, as well as Wednesday's interest rate announcement from the Federal Reserve.
The FTSE 100 index opened up 19.54 points, 0.3% at 7,696.43. The FTSE 250 was up 123.39 points, 0.6%, at 19,309.93, and the AIM All-Share was up 2.0 points, 0.3%, at 768.15.
The Cboe UK 100 was up 0.3% at 767.50, the Cboe UK 250 was up 0.8% at 16,986.93, and the Cboe Small Companies was up 0.1% at 13,756.96.
In European equities, the CAC 40 in Paris was up 0.6%, while the DAX 40 in Frankfurt was 0.2%.
The FTSE 100 was weighed down by share price falls for St James's Place, Barclays and Shell, partially mitigated by a better performance from the likes of Centrica.
However, global market sentiment was positive, with investors forecasting that Wednesday's interest rate hike from the Federal Reserve would be the last in this cycle of monetary tightening.
In a move priced in by financial markets, the central bank's Federal Open Market Committee raised its funds rate by a quarter percentage point to a target range of 5.25%-5.50%. Wednesday's increase followed a brief reprieve at the previous meeting in June, when the FOMC held the benchmark rate steady.
Federal Reserve Chair Jerome Powell did not commit to another hold in September, but did not really choreograph another hike either, as he affirmed a "data-dependant" approach to future decisions.
While leaving the door open for future hikes this year, Powell ruled out cuts until the next at the earliest. "We will be comfortable cutting rates when are comfortable cutting rates", he said.
According to CME's FedWatch tool, the market is pricing in a 78% chance that rates will be held at the September meeting.
The dollar was weaker in early exchanges in Europe.
Sterling was quoted at USD1.2963 early Thursday, higher than USD1.2931 at the London equities close on Wednesday. The euro traded at USD1.1106, higher than USD1.1074. Against the yen, the dollar was quoted at JPY139.97, down versus JPY140.33.
"If the Fed is close to the end of its rate hiking cycle which appears to be looking increasingly likely, despite Powell’s determination to keep markets guessing, the pressure on the ECB to be more aggressive in its own battle against inflation, is also looking as if it might recede," predicted CMC Markets' Michael Hewson.
Thursday's economic calendar has the European Central Bank interest rate decision at 1315 BST, before a press conference with President Christine Lagarde. The bank is widely expected to enact a 25 basis point hike to interest rates. In June, it had lifted rates by 25bp, as had been expected.
The attention will be on the ECB's forward guidance, to see if recent weak economic data from the eurozone will see the bank's policymakers strike a more dovish tone.
In the US on Wednesday, Wall Street ended mixed, with the Dow Jones Industrial Average up 0.2%, the S&P 500 flat and the Nasdaq Composite down 0.1%.
In Asia on Thursday, the Nikkei 225 index in Tokyo closed up 0.7%. In China, the Shanghai Composite closed down 0.2%, while the Hang Seng index in Hong Kong was up 1.4%. The S&P/ASX 200 in Sydney closed up 0.7%.
In the FTSE 100, St James's Place dropped 10%, despite swinging to an interim profit and increasing its funds under management.
Barclays shed 5.1%.
Barclays said that in the first half, its total income edged up 2% year-on-year to GBP13.52 billion from GBP13.20 billion, while pretax jumped 22% to GBP4.56 billion from GBP3.73 billion.
The bank's bottom line was aided by just GBP32 million in Litigation & Conduct expenses, compared to GBP1.86 billion in the first half of 2022. The previous year it had suffered a hit from a trading blunder in its US structured products division.
However, it set aside GBP900 million in an impairment charge to cover expected loan losses.
Shell fell 2.0%, as the oil major failed to deliver another bumper crop of profits in the last quarter, with the business falling short of market expectations.
Shell said adjusted earnings more than halved in the three months to the end of June when compared with the same period a year ago. A drop had been expected, but markets failed to forecast just how far earnings would fall. Adjusted earnings reached just under USD5.1 billion during the quarter, down from USD11.5 billion a year earlier. Analysts had expected the figure to reach almost USD5.6 billion, according to a consensus compiled by the company.
Shell announced a USD3 billion share buyback programme and said it completed its USD4 billion share buyback programme from the second quarter.
Centrica was the top bluechip performer, adding 4.8%.
The British Gas-owner reported a strong first half, as revenue jumped to GBP16.52 billion from GBP10.32 billion a year before. The utility firm also swung to a pretax profit of GBP6.43 billion from a loss of GBP1.18 billion. It hiked interim dividends by 33% to 1.33 pence per share.
Among London's small-caps, Lookers jumped 27% to 124.60 pence.
Global Auto Holdings said it has agreed with the board of Lookers on an increased cash offer of 130p in cash for the company.
Global Auto is the bidding vehicle of Alpha Auto Group Holdings LP, a Toronto-based operator of auto retail dealerships across North America. It had previously offered to pay 120p per share for Lookers, which is based outside of Manchester.
A week ago, the agreed takeover offer was declared dead in the water, as Lookers' largest shareholder withdraws the letter of intent it had given to the bidder. On Thursday, it confirmed it has reached an agreement with the board of Lookers for the increased offer.
"As the increased offer is to be implemented by way of a takeover offer, the board of Lookers will propose a resolution to adjourn the court meeting and general meeting which are due to take place today in connection with the Scheme indefinitely and they will not be rescheduled," Lookers said.
In addition to the ECB announcement, there is also US gross domestic product reading at 1330 BST.
Gold was quoted at USD1,976.16 an ounce early Thursday, edging up from USD1,974.44 on Wednesday. Brent oil was trading at USD83.45 a barrel, higher than USD83.16.
By Elizabeth Winter, Alliance News senior markets reporter
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