ADVFN Morning London Market Report: Thursday 2 February 2023

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London open: FTSE rises ahead of BoE, ECB rate decisions


London stocks rose in early trade on Thursday as investors mulled the latest policy announcement from the Federal Reserve and looked ahead to rate decisions from the Bank of England and European Central Bank.

At 0840 GMT, the FTSE 100 was up 0.5% at 7,800.28.

The Fed lifted interest rates by 25 basis points on Wednesday, as expected, but markets rallied after Chair Jerome Powell warned that more interest rate hikes were coming and said it would be “very premature to declare victory” on inflation but acknowledged that “the disinflationary process has started”.

Rate decisions are due from the Bank of England and ECB at midday and 1315 GMT, respectively.

The BoE is expected to lift rates for the tenth month in a row to 4% – the highest level since autumn 2008 – as it looks to tackle inflation. CMC Markets analyst Michael Hewson said: “The MPC is on the horns of a dilemma as the UK economy continues to struggle with double digit inflation, although the economy may well not be as bad as perhaps was thought at the end of last year, which could prompt a modest tweak to some of its economic forecasts.”

The ECB is also expected to raise rate by 50 basis points, even after data showed this week that consumer price inflation in the eurozone fell in January to 8.5% from 9.2% in December. This was ahead of expectations of 9% and the lowest level since last May.

In equity markets, online supermarket Ocado was the standout gainer on the FTSE 100, while advertising giant WPP rallied as French peer Publicis surged on the back of its full-year results.

Oil and gas giant Shell gained after it posted a record fourth-quarter profit of $9.8bn, driven by higher trading from its liquefied natural gas (LNG) operations.

Annual earnings doubled to $39.87bn, also a record, as the company cashed in on soaring energy prices inflamed by Russia’s invasion of Ukraine a year ago. The full-year dividend was lifted 16% to $1.03 a share.

Shell also announced a new share buyback programme of $4bn, which is expected to be completed by the first quarter 2023 results announcement.

Food producer Cranswick rallied as it said trading was in line with expectations, with a “particularly robust” performance in December.

BT Group was in the red as the telecoms company reiterated its full-year outlook despite seeing third-quarter revenues slip.

Adjusted revenues in the three months to 31 December fell 3% to £5.2bn, while adjusted earnings before interest, tax, depreciation and amortisation rose 2% to £2.01bn. In the nine months to 31 December, revenues fell 1% to £15.6bn, as price increases and improved trading in Openreach and its consumer division were offset by lower sales in the Global unit and the disposal of BT Sport.

Standard Chartered was knocked lower by a downgrade to ‘neutral’ at Goldman Sachs.

Cyber security firm NCC tumbled after it said that market headwinds were impacting current trading and that it expects to cut jobs.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Carnival Plc +6.34% +49.00 822.00
2 Ocado Group Plc +5.51% +36.40 696.60
3 Scottish Mortgage Investment Trust Plc +4.04% +30.20 777.40
4 Tui Ag +3.96% +6.75 177.30
5 Wpp Plc +3.65% +35.00 993.60
6 Marks And Spencer Group Plc +3.23% +4.85 154.95
7 Easyjet Plc +3.19% +15.40 498.40
8 Ashtead Group Plc +2.95% +158.00 5,518.00
9 Segro Plc +2.87% +24.40 874.40
10 Bt Group Plc +2.50% +3.10 127.00


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Bae Systems Plc -2.55% -21.80 832.20
2 Standard Chartered Plc -2.07% -14.20 673.20
3 Hsbc Holdings Plc -1.63% -9.80 591.50
4 Centrica Plc -1.57% -1.59 99.76
5 Coca-cola Hbc Ag -1.57% -31.00 1,946.00
6 Compass Group Plc -1.29% -24.50 1,870.00
7 Rio Tinto Plc -1.23% -76.00 6,126.00
8 Imperial Brands Plc -0.98% -20.00 2,030.00
9 British American Tobacco Plc -0.93% -29.00 3,088.00
10 Bp Plc -0.75% -3.70 488.75


US close: Stocks close higher after Fed raises rates

Wall Street stocks were in the green at the close of trading on Wednesday as market participants digested the outcome of the FOMC’s two-day policy meeting.

At the close, the Dow Jones Industrial Average was up 0.02% at 34,092.96, while the S&P 500 advanced 1.05% to 4,119.21 and the Nasdaq Composite saw out the session 2.00% firmer at 11,816.32.

The Dow closed just 6.92 points higher on Wednesday, barely extending gains recorded in the previous session.

Wednesday’s primary focus was news that the US central bank raised the range for its benchmark interest rate by 25 basis points to 4.5-4.75% and said it foresaw further hikes. In his press briefing following the Federal Open Market Committee‘s meeting, chairman Jerome Powell explained that with inflation running at multi-decade highs the job was “not yet fully done”. At one point during the question and answer session, he also said that it was “very difficult” to manage the risk of doing too little, to then only see inflation spring back a few quarters down the road.

On the macro front, US mortgage applications tumbled 9% in the week ended 27 January, according to the Mortgage Bankers Association of America, with applications for refinancing falling 7.1% and purchase applications slumping 10.3%. The fall comes despite the average contract interest rate for 30-year fixed-rate mortgages slipping one basis lower to 6.19% – the lowest level seen since September 2022.

Elsewhere, hiring in the US private sector slowed significantly at the start of 2023, according to the results of consultancy ADP‘s tally of private sector payrolls, which printed at 106,000 for January, well and truly short of consensus estimates for a reading of 160,000.

Moving on, labour demand in the States remained high at the end of 2022, according to the Department of Labor, which revealed that in seasonally adjusted terms, the number of job openings jumped at a month-on-month pace of 5.5% in December to reach approximately 11.01m.

Still on data, US factory activity at the start of 2023 declined a tad less than previously thought, according to S&P Global. S&P’s manufacturing sector PMI improved from a reading of 46.2 in December to 46.9 in January – ahead of preliminary expectations for a reading of 46.8.

On another note, the Institute of Supply Management said factory sector activity in the US shrank more quickly than expected at the beginning of 2023, with its manufacturing sector PMI slipping from a reading of 48.4 in December to 47.4 in January. Economists had pencilled-in a print of 48.1.

Finally, construction spending fell by 0.4% month-on-month to $1.81trn in December, according to the Census Bureau, swinging from an upwardly revised 0.5% expansion in November but missing market forecasts of a stall.

In the corporate space, T-Mobile posted fourth-quarter earnings of $1.48bn and said it expects to add at least 5.0m new customers in 2023, while Boston Scientific fell just shy of earnings estimates in Q4 but delivered revenues that were bang in line with estimates.

After the close, Facebook parent company Meta Platforms Q4 earnings rocketed past expectations as it announced a massive $40.0bn stock buyback and Netgear posted quarterly earnings that beat Wall Street estimates by $0.05 per share and revenues that topped guidance.


Thursday newspaper round-up: Water bills, British Gas, Meta

Households in England and Wales are facing the biggest increase to water bills in almost two decades from April, putting further pressure on budgets already weathering the cost of living crisis. The industry body Water UK said the typical water bill will increase to an average of £448 a year from April, a hike of 7.5%. – Guardian

British Gas has suspended the use of court warrants to force the installation of prepayment meters after evidence that agents working on its behalf ignored customers’ vulnerabilities. MPs and consumer groups had raised concerns that elderly and disabled people were being forced on to prepayment meters and then routinely cut off from heat and power as they could not afford to top up. – Guardian

BT rival Cityfibre is to cut up to 400 jobs amid rising costs and growing competition between the UK’s high-speed broadband providers. The telecoms firm, which is backed by Goldman Sachs, is reducing its 2,000-strong workforce by up to a fifth in a bid to cut costs. – Telegraph

Mark Zuckerberg has announced plans for a $40bn share buyback at his embattled social media group after the company posted its first ever drop in annual revenue. Meta, which owns Facebook, Instagram and WhatsApp, said it would spend billions more buying up its own shares after a historic slump last year. – Telegraph

Airbus and Qatar Airways have settled a dispute over surface damage on the airline’s grounded A350 jets, the companies said yesterday, averting a potentially damaging UK court trial. The “amicable settlement” ends a $2 billion row over the safety of Europe’s premier long-haul jet — an unprecedented public rift that had led Airbus to revoke dozens of other jet orders from Qatar ahead of a scheduled June London court trial. – The Times


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