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London open: Stocks rise as investors mull Powell comments
London stocks hit a record high in early trade on Wednesday, having taken their opening cue from gains on Wall Street, as investors mulled the latest comments from US Federal Reserve chair Jerome Powell.
At 0830 GMT, the FTSE 100 was up 0.5% at 7,906.52.
Powell said on Tuesday that he was expecting to see “significant” declines in inflation this year, but also acknowledged that interest rates may need to rise further amid job market strength.
Victoria Scholar, head of investment at Interactive Investor, said: “The FTSE 100 has hit a fresh record high, surpassing its all-time peak from Friday with BP and Glencore leading the charge while Smurfit Kappa is dragging on the index.
“Following a wobbly start to the week in which global equities were hit by concerns about a more hawkish path from the Fed after a strong US jobs report as well as heightened US-Sino tensions, the UK large-cap index has restored its bullish momentum. Yesterday Fed Chair Jerome Powell said inflation is easing, raising hopes that the US could be approaching the peak for interest rates. A strong close on Wall Street with the Nasdaq ending the session up by 1.9% has helped drive a positive start to the European session.”
In equity markets, BP was the top performer on the index, advancing for the second day in a row after posting record profits on Tuesday.
Housebuilder Barratt Developments ticked higher as it posted a jump in profits but cut its dividend, as the housing market started to cool down in response to rising interest rates and mortgage costs.
The company reduced the interim dividend by 9% to 10.2p a share as it posted pre-tax profits of £501.5m, up 15.9%, with revenue up 24% to £2.8bn.
Elsewhere, transport operator FirstGroup gained after saying it had agreed to buy buy Essex-based bus group Ensignbus for an undisclosed sum.
On the downside, corrugated packaging company Smurfit Kappa slumped even as it posted a rise in full-year profit and revenue and lifted its final dividend, as it said that inflation had moderated in the latter part of the year. Peers DS Smith and Mondi also lost ground.
PZ Cussons was in the red as the Imperial Leather maker reiterated its outlook for FY23 “despite the challenging macro environment”.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Bp Plc | +3.00% | +15.50 | 531.90 |
| 2 |  |
Carnival Plc | +2.61% | +22.80 | 897.00 |
| 3 |  |
Halma Plc | +2.25% | +51.00 | 2,322.00 |
| 4 |  |
Marks And Spencer Group Plc | +2.22% | +3.50 | 161.50 |
| 5 |  |
Ocado Group Plc | +2.15% | +15.40 | 733.00 |
| 6 |  |
Persimmon Plc | +2.12% | +31.00 | 1,495.50 |
| 7 |  |
Itv Plc | +2.10% | +1.82 | 88.46 |
| 8 |  |
Tui Ag | +1.79% | +3.25 | 184.45 |
| 9 |  |
Barratt Developments Plc | +1.74% | +8.00 | 468.10 |
| 10 |  |
Flutter Entertainment Plc | +1.73% | +220.00 | 12,920.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Smurfit Kappa Group Plc | -2.49% | -87.00 | 3,401.00 |
| 2 |  |
Smith (ds) Plc | -1.65% | -6.00 | 358.70 |
| 3 |  |
Mondi Plc | -1.32% | -20.50 | 1,535.50 |
| 4 |  |
Fresnillo Plc | -0.39% | -3.20 | 826.20 |
| 5 |  |
Unilever Plc | -0.13% | -5.50 | 4,098.50 |
| 6 |  |
National Grid Plc | -0.10% | -1.00 | 1,034.50 |
| 7 |  |
Just Eat Plc | -0.00% | -0.00 | 861.00 |
| 8 |  |
Shell Plc | -0.00% | -0.00 | 1,894.60 |
| 9 |  |
Nmc Health Plc | -0.00% | -0.00 | 938.40 |
| 10 |  |
Royal Bank Of Scotland Group Plc | +0.00% | +0.00 | 120.90 |
US close: Stocks end session higher following Powell speech
Wall Street stocks closed higher on Tuesday as traders digested comments from the Fed’s Powell.
At the close, the Dow Jones Industrial Average was up 0.78% at 34,156.69, while the S&P 500 advanced 1.29% to 4,164.00 and the Nasdaq Composite saw out the session 1.90% firmer at 12,113.79.
The Dow closed 265.67 points higher on Tuesday as investors focussed zeroed in on a speech from Federal Reserve chairman Jerome Powell before the Economic Club of Washington.
The head of the US central bank told an audience that the “message” from its last policy meeting was that the “disinflation process” had begun. However, as Jerome Powell continued to speak he appeared to sound a more hawkish note, albeit alongside several more positive sounding remarks from the point of view of risk assets. Stocks, bonds and the US dollar all gyrated as the Federal Reserve chairman spoke with the former two initially gaining ground rapidly and then falling back.
Elsewhere on the macro front, America’s shortfall on trade with the rest of the world widened by less than expected at the end of 2022, as import growth picked up. According to the Department of Labor, in seasonally adjusted terms, the country’s foreign trade deficit in goods and services widened at a month-on-month pace of 10.5% in December to reach $67.4bn. Economists had pencilled-in a deficit of -$68.5bn.
On another note, consumer credit rose $11.65bn in December, according to the Federal Reserve, following a $27.96bn increase in November and falling well and truly short of market expectations for a print of $25.0bn. On an annual basis, consumer credit was up by 2.9% in December after a 7.1% gain in the prior month.
In the corporate space, Chipotle missed on earnings, revenues and same-store sales, while Spirit Airlines beat on earnings and posted revenues that came in line with expectations.
H&R Block earnings beat expectations as tax season kicks off, Western Union missed earnings estimates despite revenues topping forecast, and Royal Caribbean reported a fourth-quarter loss as it missed on revenues.
Wednesday newspaper round-up: Zoom, fraudulent loans, Starling Bank
Households in Britain will suffer a hit to their finances of up to £4,000 this year, according to a report warning that the economy could avoid recession but that, for millions, it will not feel like it has. Adding to pressure on Rishi Sunak as the government prepares to scale back its support for energy bills this spring, the National Institute for Economic and Social Research (NIESR) said low and middle-income households were facing the biggest financial hit from the cost of living crisis. – Guardian
Zoom is to make 1,300 layoffs, letting go of around 15pc of its workforce as the Covid-19 pandemic’s work-from-home culture comes to a crashing halt. Eric Yuan, the chief executive, said: “We have made the tough but necessary decision to reduce our team by approximately 15% and say goodbye to around 1,300 hardworking, talented colleagues.” – Telegraph
Lidl and Tesco are facing off in a High Court battle over a yellow circle logo. The two supermarkets are at loggerheads over claims by Lidl that Tesco infringed its copyright by using a yellow circle to promote its clubcard prices. Tesco has filed a counterclaim against Lidl in the dispute which started in April last year. – Telegraph
Loans that were potentially fraudulent accounted for close to £1 in every £6 paid by taxpayers to cover losses on a key pandemic finance scheme. New official figures show that of the £4.1 billion the government has paid to lenders for defaulted credit under the bounce back loan scheme, £640 million worth of facilities were marked as “suspected fraud”. – The Times
Funds managed by Jupiter Asset Management have sold their stakes in privately owned Starling Bank and sworn off buying any unlisted shares in future. Jupiter said its open-ended funds would make no further investments in unlisted shares. – The Times
