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London open: Stocks edge up amid earnings avalanche
London stocks edged higher in early trade on Thursday as investors mulled the latest policy announcement from the Federal Reserve and waded through an avalanche of earnings.
At 0910 BST, the FTSE 100 was up 0.2% at 7,692.61.
Steve Clayton, head of equity funds at Hargreaves Lansdown: “The US Federal Reserve raised interest rates by a further quarter point last night, to target a level of 5.25% to 5.5%, the highest level for 22 years.
“Markets took the view that this leaves US rates at or close to the top of this cycle, sending the dollar lower against other leading currencies. Speaking after the announcement, Fed chair Jay Powell would not be drawn on whether this marked the peak or not. The Fed’s next meeting is in September and Powell commented that it was certainly possible that they might raise rates again then, if the data warranted, but also certainly possible that they might not.
“Markets have called the top on numerous occasions already, only to rebase expectations higher later on. But inflation is now falling, and US rates are now significantly positive in real terms, unlike the position in the UK where inflation has proven more stubborn.”
At 1315 BST, the latest policy announcement from the European Central Bank will be in focus.
In equity markets, Centrica was sitting pretty at the top of the FTSE 100 after it posted a jump in interim profit as profits at British Gas surged amid rising energy prices.
In the six months to 30 June, adjusted operating profit rose to £2.1bn from £1.3bn in the same period a year earlier, while earnings per share rose to 25.8p from 11p. The group made a statutory operating profit of £6.5bn, versus a £1.1bn loss a year earlier.
Adjusted operating profits at British Gas Energy rocketed 889% to £969m amid changes to the energy price cap, which meant it was able to recover more costs.
Informa, Relx, Rentokil, Frasers Group, Jupiter Fund Management, Inchcape, Elementis and Mitchells & Butlers also gained after results.
On the downside, St James’s Place tumbled after the asset manager said interim profits fell amid market volatility, but still managed £3.4bn in net inflows.
Ocado slid as the online supermarket announced that Luke Jensen will step down as chief executive of Ocado Solutions. He will be replaced non-executive director by John Martin.
Barclays was in the red even as it became the second bank to post surging profits on the back of higher interest rates and lift its provisions for bad loans. The bank posted a 22% rise in pre-tax profit for the six months to June 30 to £4.5bn. Bad loan charges increased to £900m from £341m.
Mobico, Indivior and Drax also fell on results.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Centrica Plc | +5.36% | +6.65 | 130.65 |
| 2 |  |
Itv Plc | +4.26% | +2.96 | 72.52 |
| 3 |  |
Informa Plc | +4.00% | +29.80 | 775.40 |
| 4 |  |
Relx Plc | +3.86% | +98.00 | 2,640.00 |
| 5 |  |
Rentokil Initial Plc | +3.13% | +20.00 | 658.80 |
| 6 |  |
Melrose Industries Plc | +3.12% | +16.00 | 529.60 |
| 7 |  |
Crh Plc | +2.81% | +128.00 | 4,685.00 |
| 8 |  |
Carnival Plc | +2.00% | +24.50 | 1,249.50 |
| 9 |  |
Rolls-royce Holdings Plc | +2.00% | +3.70 | 188.70 |
| 10 |  |
Experian Plc | +1.96% | +59.00 | 3,065.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
St. James’s Place Plc | -15.47% | -183.00 | 1,000.00 |
| 2 |  |
Sse Plc | -4.57% | -82.50 | 1,724.50 |
| 3 |  |
Barclays Plc | -4.39% | -7.20 | 156.86 |
| 4 |  |
Bt Group Plc | -2.53% | -3.20 | 123.30 |
| 5 |  |
Shell Plc | -1.46% | -35.00 | 2,361.50 |
| 6 |  |
Persimmon Plc | -1.45% | -17.50 | 1,186.00 |
| 7 |  |
Vodafone Group Plc | -1.39% | -1.08 | 76.45 |
| 8 |  |
Aviva Plc | -0.62% | -2.50 | 399.50 |
| 9 |  |
British American Tobacco Plc | -0.59% | -15.50 | 2,617.00 |
| 10 |  |
Segro Plc | -0.48% | -3.80 | 782.20 |
US close: Stocks mixed as Fed takes interest rates to 22-year high
Wall Street’s main stock indexes closed in a mixed state on Wednesday, with the Dow extending its record-breaking streak to 13 consecutive winning sessions as the Federal Reserve took interest rates to their highest levels in more than 20 years.
At the close, the Dow Jones Industrial Average was up 0.23% at 35,520.12, while the S&P 500 dipped slightly by 0.02% to finish the day at 4,566.75.
The tech-heavy Nasdaq Composite Index also saw a marginal decline of 0.12%, settling at 14,127.28.
On the currency front, the dollar was last down 0.23% on sterling at 77.09p, while it slipped by the same rate to trade at 90 euro cents.
The greenback experienced a more significant drop against the yen, dropping 0.51% to change hands at JPY 139.53.
“The Fed has nodded in agreement with market expectations, and as a result, a symphony of harmony has resonated in the financial world,” said Zaye Capital Markets chief investment officer Naeem Aslam.
“Like a perfectly orchestrated melody, today’s synchronised move stroked a chord of confidence among traders, and it is guiding them through the economic crescendo.
“Basically, the Feds know that with their aligned steps, they can dance towards stability and embrace the rhythm of progress.”
Interest rate hikes and home sales slump stir economic waters
On the economic front the Federal Reserve, sticking to its monetary tightening agenda, increased interest rates on Wednesday, paving the way for possible further hikes if deemed necessary.
The primary lending rate experienced a jump of 25 basis points, setting the new bar between 5.25% and 5.50% – a level unseen in the past 22 years.
The Federal Open Market Committee (FOMC) expressed its commitment to persistently evaluate additional data and its implications on the monetary policy.
In recent months, the FOMC had characterised the jobs market as “resilient,” recognized low unemployment rates, and acknowledged the prevalence of “elevated” inflation.
The committee declared its unwavering commitment to guide inflation back to its targeted 2% in its decision.
However, it did caution over the potential negative impact of stricter credit conditions on economic activities, with the extent of the effect still being “uncertain”.
It also confirmed the continuation of the reduction of the Fed’s Treasury securities, agency debt, and agency mortgage-backed securities as planned earlier.
Wednesday’s decision had the full support of all the participants.
Earlier in the day, new home sales figures for the last month fell noticeably short of economists’ predictions.
The Department of Commerce reported that new home sales, adjusted for seasonal variations, dropped by 2.5% month-on-month, resulting in an annual rate of 697,000, which undercut the anticipated figure of 721,000.
That surprising downturn followed a downward correction of May’s figure from 763,000 to 715,000.
Despite that, the volume of new homes ready for sale edged up to the equivalent of 7.4 months’ worth of sales, from 7.2 in May.
Median sales price for new homes slightly dipped from $417,300 to $415,400, while the average price saw a slight increment, moving from $488,700 to $494,700.
On a regional basis, the Northeast and South experienced a surge in new home sales compared to the previous month, while the Midwest and West saw a dip.
PacWest and Alphabet soar as Microsoft slips
In equity markets, PacWest Bancorp surged 26.92% following the announcement of its merger with Banc of California, which itself saw a modest increase of 0.62%.
Google’s parent company Alphabet saw its shares rise 5.59%, spurred by the release of its latest quarterly numbers.
Aerospace giant Boeing ticked 8.72% higher after it announced second-quarter free cash flow totalling $2.58bn, substantially exceeding market expectations.
On the downside, Microsoft fell 3.76% in the wake of its first quarter figures, which failed to meet market expectations.
Thursday newspaper round-up: City AM, motor industry, Freshfields
Lawyers for the British billionaire Joe Lewis have accused prosecutors of making an “egregious” mistake, as the 86-year-old pleaded not guilty to multiple counts of securities fraud and conspiracy. Lewis, who heads the family that owns Tottenham Hotspur FC, was arraigned on Tuesday in Manhattan federal court with 16 counts of securities fraud and three of conspiracy to commit fraud, which prosecutors called a “brazen” insider trading scheme to enrich his friends, lovers and employees, including two private jet pilots. – Guardian
City AM, the free London-based business newspaper, has been sold to THG, the online health and beauty retail platform run by the multimillionaire businessman Matthew Moulding. The 18-year-old freesheet, which had been on the brink of collapsing into administration, announced on Wednesday that it had been bought by THG for an undisclosed sum. – Guardian
The chief executive of Lloyds Banking Group has said he is in no rush to sell The Telegraph after seizing control from the Barclay family in a dispute over debts secured against the business. Charlie Nunn, the lender’s chief executive, made Lloyds’ first public comments on the situation since he sent in receivers and ousted Barclay family representatives from the board of The Telegraph last month. – Telegraph
The British motor industry is back in business, the Society of Motor Manufacturers and Traders claimed yesterday, after Tata’s commitment to invest £4 billion in an electric car battery “gigafactory” and with new figures set to show an 11 per cent rebound in vehicle production. The industry body will release assembly line data today that suggests 860,000 vehicles will be produced in Britain in 2023, an improvement of 85,000 on last year. However, the industry is coming back from a bad place. Last year’s production numbers of 775,000 were the worst since 1956. – The Times
Partners at Freshfields have edged out “magic circle” rivals to top the City law firm earnings table with average pay of £2.09 million. Pay for full equity partners at the firm inched up last year by 1 per cent, enough to nudge ahead of Clifford Chance, which recently unveiled average partner pay of £2 million. – The Times
