27th Jul 2022 07:55
(Alliance News) - Stock prices in London are seen opening higher on Wednesday as investors prepare for an interest rate decision by the US Federal Reserve
The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1900 BST. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 BST.
The US central bank is widely tipped to announce a second successive 75 basis points increase to borrowing costs. However, the main focus will be the Fed's outlook for the economy and clues about the future path of interest rate moves.
US policy makers are hoping that their aggressive stance will start to cool inflation that hit 9.1% in June, the highest in more than 40 years, without derailing the world's largest economy.
In UK early company news, lender Lloyds Banking, British American Tobacco and miner Rio Tinto all reported a fall in interim profit.
IG futures indicate the FTSE 100 index is to open 30.22 points higher at 7,336.50. The index closed down just 0.02 of a point at 7,306.28 on Tuesday.
"As we look ahead to today's European open the main focus will be on this evening's Fed meeting. It's certain that the Federal Reserve will be hiking rates again today by another 75bps, with the only question being what comes next, and whether we see 50bps or another 75bps in September. Two weeks ago, there was some speculation that we might see a 100bps move today, however that seems much less likely now," said CMC Markets analyst Michael Hewson.
Lloyds Banking raised its annual guidance against a backdrop of rising UK interest rates.
For the six months to June 30, net income was GBP8.45 billion, up sharply from GBP7.56 last year, but pretax profit was GBP3.66 billion, down from GBP3.91 billion.
Lloyds said it set aside GBP377 million to cover a possible increase in loan defaults as UK interest rates rise to combat rampant inflation.
Underlying profit before the impairment was up 34% to GBP4.1 billion in the first half, driven by strong net income growth.
Lloyds's CET1 ratio - a key measure of a bank's financial strength - stood at 14.7% on June 30, down from 16.7% at the same time last year.
Turning to returns, Lloyds declared a 0.80p interim dividend, up 20% from last year and worth GBP550 million in total.
Looking ahead to 2022, Lloyds said its banking net interest margin is now expected to be greater than 280 basis points. It was 2.77% in the first half, up from 2.50% a year before.
Lloyds said its return on tangible equity is now seen at 13% in 2022. It was 13.2% in the first half, down from 19.2% a year ago.
British American Tobacco reported a strong first half operational performance and said it is transforming the business.
For the six months to June 30, revenue was GBP12.87 billion, up from GBP12.18 billion last year, but pretax profit was GBP3.06 billion, down from GBP4.38 billion.
The Dunhill and Lucky Strike cigarette maker said it has taken a GBP957 million impairment charge related to the transfer of its Russian business following Moscow's invasion of Ukraine.
During the period, BAT said it continued to invest in transformation, with over GBP1 billion invested in New Categories in the first half. In addition, it said it improved the contribution from New Categories, with losses down for the second consecutive period, reducing by a further GBP281 million, at constant rates.
"In summary, our robust first half results give us confidence in our full year guidance. We are making strong progress towards our 'faster transformation' and building a sustainable 'enterprise of the future'," said Chief Executive Officer Jack Bowles.
Rio Tinto cut its interim dividend following a fall in first-half profit, hurt by weaker iron ore prices.
For the six months to June 30, revenue fell to USD29.78 billion from USD33.08 billion last year, and pretax profit slumped to USD12.32 billion from USD18.05 billion.
Rio Tinto declared an interim dividend of 267.0 US cents, down from 376.0 cents last year.
The miner said operations and growth projects continue to be hurt by the "high unplanned absences", tight labour markets, rising input costs and supply chain disruptions.
"We continue to monitor areas of uncertainty in the short to medium term, namely the evolving situation with the war in Ukraine and potential further Russian sanctions, rising inflation and COVID-19 related disruptions," Rio said.
New York ended lower on Tuesday, with the Dow Jones Industrial Average down 0.7%, S&P 500 down 1.2%, and Nasdaq Composite down 1.9%.
Google-owner Alphabet on Tuesday recorded a second quarter profit fall, as it missed top- and bottom-line consensus.
In the second quarter to June 30, revenue improved 13% year-on-year to USD69.69 billion from USD61.88 billion. The revenue figure came in below a CNN-cited market forecast of USD69.9 billion. In addition, growth slowed markedly from a 62% surge in the second quarter of 2021.
Pretax profit declined 14% to USD19.01 billion from USD21.99 billion a year earlier. Basic earnings per share fell 12% to USD1.22 each, lagging a CNN-cited consensus of USD1.27.
Alphabet class A shares rose 4.9% in after-hours trade in New York.
Microsoft reported a strong rise in revenue in the final quarter of its financial year, thanks to continued strong Cloud services demand.
In the three months to June 30, revenue rose 12% to USD51.87 billion from USD46.15 billion a year before. Net income increased slightly to USD16.74 billion from USD16.46 billion. Diluted earnings per share improved to USD2.23 from USD2.17.
The stock rose 4.0% after-hours.
The pound was quoted at USD1.2050 early Wednesday, up from USD1.2021 at the London equities close Tuesday.
The euro was priced at USD1.0135, up from USD1.0120. Against the yen, the dollar was trading at JPY136.98, higher against JPY136.63.
Brent oil was quoted at USD104.47 a barrel Wednesday morning, down from USD105.24 late Tuesday. Gold stood at USD1,717.55 an ounce, slightly lower against USD1,717.77.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.2%. In China, the Shanghai Composite was up 0.1%, while the Hang Seng index in Hong Kong was down 1.2%. The S&P/ASX 200 in Sydney ended up 0.2%.
A busy US corporate earnings calendar continues on Wednesday with second-quarter numbers from automaker Ford, food company Kraft Heinz and Facebook owner Meta Platforms on Wednesday.
By Arvind Bhunjun; [email protected]
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