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London open: Stocks rise ahead of Fed announcement
London stocks rose in early trade on Wednesday following heavy losses in the previous session, as investors eyed the latest policy announcement from the US Federal Reserve.
At 0840 BST, the FTSE 100 was up 0.6% at 7,816.00.
Victoria Scholar, head of investment at Interactive Investor, said: “US markets sold off on Tuesday with regional banks bearing the brunt of the declines following JPMorgan’s rescue deal for First Republic earlier this week. Comments from the Wall Street giant’s CEO Jamie Dimon saying ‘there may be another smaller one’ referring to a risk of another potential banking collapse ahead, appear to have accelerated the declines with the SPDR S&P Regional Banking ETF shedding over 6% and PacWest and Western Alliance sliding double digits in percentage terms.
“Focus turns to the conclusion of the Fed’s two-day policy meeting today when the central bank is expected to raise rates by a further 25-basis points, despite uncertainty in the US mid-size banking sector. US job openings hit a near two-year low in March and the consumer price index for March dropped to 5% year-on-year, slowing for the ninth consecutive period suggesting the Fed’s hawkish agenda is beginning to take hold in the economy.”
In equity markets, education publisher Pearson rose, having tumbled on Tuesday after US peer Chegg warned over the impact of AI on its homework-help services.
Coca-Cola HBC fizzed higher as it reported first-quarter organic revenue growth of 22.2%, excluding Russia and Ukraine, led by price mix and offset by declines in stills due to an anticipated weakness in water.
Paddy Power owner Flutter Entertainment gained after it hailed a “very strong” US performance as it posted a rise in first-quarter revenues.
TI Fluid Systems surged to the top of the FTSE 250 after it reported a 15.2% jump in first-quarter revenues and said it was outperforming markets in all regions.
On the downside, RS Group was weaker as it said that chief financial officer David Egan was leaving the business with immediate effect after admitting a relationship with a colleague that fell “short of the high standards expected” of the company.
Haleon lost ground as the consumer health company said first-quarter profits came in below expectations as higher costs hit earnings margins.
Lloyds edged lower as it became the latest UK lender to beat quarterly profit forecasts as earnings surged on the back of higher interest rates, although deposits fell sharply. The bank posted first-quarter pre-tax profit of £2.26bn, up 46% and better than the £1.95bn average of analyst forecasts. Net income, generated after deposit payouts, rose 15% to £4.7bn.
Customer deposits fell by £2.2bn to £473.1bn, including a reduction in retail current account balances of £3.5bn, partly driven by seasonal customer outflows, including tax payments, higher spend and a more competitive market, Lloyds said.
Aston Martin fell despite posting a narrowing of its first-quarter losses, with strong growth in deliveries of its sport utility vehicle DBX, and backing its full-year guidance.
Watches of Switzerland was also down as it announced the departure of chief financial officer Bill Floydd by mutual agreement.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Pearson Plc | +8.89% | +67.00 | 821.00 |
| 2 |  |
Burberry Group Plc | +2.36% | +60.00 | 2,603.00 |
| 3 |  |
Rentokil Initial Plc | +1.92% | +12.20 | 646.80 |
| 4 |  |
Intertek Group Plc | +1.81% | +75.00 | 4,211.00 |
| 5 |  |
Anglo American Plc | +1.60% | +38.00 | 2,408.50 |
| 6 |  |
Experian Plc | +1.44% | +40.00 | 2,821.00 |
| 7 |  |
Spirax-sarco Engineering Plc | +1.39% | +155.00 | 11,325.00 |
| 8 |  |
Halma Plc | +1.37% | +32.00 | 2,362.00 |
| 9 |  |
Diageo Plc | +1.35% | +49.00 | 3,680.00 |
| 10 |  |
Bunzl Plc | +1.28% | +40.00 | 3,168.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Lloyds Banking Group Plc | -2.63% | -1.26 | 46.43 |
| 2 |  |
International Consolidated Airlines Group S.a. | -2.47% | -3.75 | 148.30 |
| 3 |  |
Direct Line Insurance Group Plc | -1.59% | -2.70 | 167.30 |
| 4 |  |
Bp Plc | -1.30% | -6.35 | 482.00 |
| 5 |  |
Shell Plc | -1.07% | -25.00 | 2,317.50 |
| 6 |  |
Kingfisher Plc | -0.93% | -2.40 | 254.80 |
| 7 |  |
St. James’s Place Plc | -0.88% | -10.50 | 1,180.00 |
| 8 |  |
Flutter Entertainment Plc | -0.85% | -135.00 | 15,655.00 |
| 9 |  |
Barclays Plc | -0.85% | -1.32 | 153.62 |
| 10 |  |
Barratt Developments Plc | -0.71% | -3.60 | 501.60 |
US close: Stocks weaker on banking concerns, jobs data
Stocks on Wall Street closed significantly lower on Tuesday, with regional bank shares in focus after the failure of First Republic over the weekend.
The latest jobs data also fueled speculation that the US economy was slowing down.
At the close, the Dow Jones Industrial Average was down 1.08% at 33,684.53, while the S&P 500 decreased 1.16% to 4,119.58.
The Nasdaq Composite finished 1.08% weaker to finish the day at 12,080.51.
In currency markets, the dollar weakened slightly against sterling and the euro, last falling by 0.04% on the former to 80.18p, and decreasing 0.09% against the latter to 90.83 euro cents.
The greenback also fell slightly against the yen, dropping by 0.02% to change hands at JPY 136.52.
“Last week saw risk appetite revive on better earnings from tech giants, but a host of worries about interest rates, further bank crises, the US debt ceiling and of course pre-Fed nerves have conspired to prompt a reversal in equity markets,” said IG chief market analyst Chris Beauchamp.
“European and US indices are down sharply, as investors’ nerves get the better of them.”
Beauchamp added that those same concerns seemed “ready-made” for gold to move higher, calling it a “perfect safe haven” from the turmoil of the US debt ceiling.
“After the choppy trading of the last month a clearer path higher now beckons for the commodity.”
Job openings and quits decline in March
In economic news, the Department of Labor reported a decline in job openings and voluntary separations, or ‘quits’, in March.
The number of job openings fell by 3.9% in March to reach 9.59 million in seasonally adjusted terms.
At the same time, voluntary separations fell by 3.2%, pushing the quits rate down by a tenth of a percentage point to 2.5%.
Despite the decline in job openings and quits, hiring remained relatively steady at 6.149 million.
Chegg tumbles, Restaurant Brands serves up first-quarter beat
On the equities front, Morgan Stanley fell 1.87% after announcing 3,000 job cuts.
Chegg, which provides online guidance for students preparing for tests, plunged 48.41%, after the company warned about the impact of artificial intelligence (AI) chatbots on its homework-help services.
The company said it had seen a significant spike in student interest in ChatGPT since March.
“We now believe it’s having an impact on our new customer growth rate,” it said.
Pfizer experienced a slight decline of 0.38% after results, while DuPont de Nemours fell 6.27% after missing analysts’ sales forecasts for the latest quarter.
On the upside, Uber Technologies rose by 1.55% on the back of well-received first-quarter numbers.
Restaurant Brands International, the parent company of Burger King and Popeyes, advanced 2.81% after beating expectations on first-quarter profit and sales.
Wednesday newspaper round-up: Energy suppliers, Carl Icahn, Dyson
Energy suppliers will be forced to offer vulnerable households dedicated phone lines in a drive by the regulator Ofgem to improve poor treatment of the most disadvantaged customers. The regulator is planning a crackdown on suppliers’ conduct after a slump in customer service during the energy crisis with long call waiting times and difficulty contacting companies. – Guardian
Ministers have announced a clampdown on the use of cold calls to sell financial products and on technology which allows mass texting of numerous phones as part of a strategy to combat fraud, now the UK’s most common crime. The new fraud strategy, a response to the massive growth of web- and phone-based scams, will alsoresult in what was billed as 400 new specialist investigators across police and the National Crime Agency recruited as part of a revamp for how the the crime is investigated. – Guardian
Carl Icahn, one of Wall Street’s best-known activist investors, has become the target of a short-seller which has accused the billionaire of inflating the value of his empire. Hindenburg Research accused the hedge fund manager of operating a “ponzi-like economic structure” through his $15bn fund, Icahn Enterprises, and claimed its value had been inflated by at least 75pc. – Telegraph
Dyson is to spend £100 million on a new technology centre in Bristol as part of a five-year programme of investments totalling £2.75 billion. Sir James Dyson’s vacuum cleaner and home appliances business said it would employ hundreds of software and artificial intelligence engineers at the centre to develop new products and apps. Dyson’s UK operations are already staffed with more than 3,500 engineers working in research and development across sites in London and Malmesbury in Wiltshire. – The Times
Sir Martin Sorrell pocketed less than half of the bonus he could have earned last year for running S4 Capital, the digital advertising business he founded. Sorrell, 78, was paid a basic salary of £250,000 in 2022 and could have received the same amount again in bonuses. However, S4’s annual report shows that he only received £100,000. – The Times
