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London open: Stocks fall ahead of ECB; StanChart tumbles on results
London stocks fell in early trade on Thursday, as investors eyed the latest policy announcement from the European Central Bank and US GDP data, with Standard Chartered under the cosh after third-quarter results.
At 0830 BST, the FTSE 100 was down 0.7% at 7,363.35, taking its cue from downbeat sessions in the US and Asia.
CMC Markets analyst Michael Hewson said: “While ECB President Lagarde has been at pains to insist that the ECB isn’t done on the rate hike front, the ECB would be foolhardy in the extreme to hike rates again in a week that has seen economic data show little signs of picking up.
“It’s already almost certain that Q3 saw the EU economy slide into contraction, and the latest October data has shown little sign that is likely to change.”
The ECB announcement is at 1315 BST, while Q3 US GDP figures are due out at 1330 BST.
In equity markets, Standard Chartered tumbled after it posted a drop in third-quarter pre-tax profit, as it took a hit from its exposure to the Chinese property and banking sectors.
In the three months to the end of September, pre-tax profit fell to $633m from $1.4bn a year earlier. Analysts were expecting pre-tax profit of $1.44bn.
The bank said credit impairment charges in the quarter were $294m, up $62m on the same period a year earlier, and $186m of which related to the Chinese commercial real estate sector.
In addition, StanChart said it reduced the carrying value of its investment in China Bohai Bank by $697m. This reflected subdued earnings and a challenging macroeconomic outlook, it said.
Richard Hunter, head of markets at Interactive Investor, said: “China remains both a blessing and a curse for Standard, with the country’s faltering economic recovery weighing heavily on these results.
“The currently parlous state of developments in China are an inevitable concern, although Standard is adequately capitalised to withstand such challenges.
“Indeed, in the medium and longer-term the Chinese economy should provide some significant opportunities, and in a region where the bank has a well-established and trusted presence. Despite any disappointment which this latest update has delivered, the market consensus of the shares as a cautious buy encapsulates both current challenges and future prospects.”
WPP slumped after it cut its full-year guidance as technology clients continued to curtail spending. The advertising firm, the world’s largest, reported a 5% fall in third-quarter net revenues to £2.84m. On an underlying basis, revenues fell 0.6%.
The blue chip also more than halved its forecast for annual net revenue to between 0.5% and 1%, from previous guidance for between 1.5% and 3%.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “Usually high-spending technology clients in North America have applied the brakes amid an uncertain economic backdrop. China’s also dragging performance down as the macro environment doesn’t lend itself to loose corporate spending. This has culminated in another reduction in full year expectations. While seeing growth go into reverse isn’t ideal, it’s not wholly unexpected given that advertising activity is a clear-cut barometer of the economy.
“WPP is doing what it can to combat these challenges, including consolidating and streamlining its offering. That could mean the business that emerges from all this could be stronger than what it started with, but there are considerable speed bumps to traverse first. As the digital world transforms at pace, this giant will have to move as nimbly as it can if it wants to thrive.”
Unilever was also in the red as the consumer goods giant laid out plans to boost growth and posted a dip in third-quarter revenues.
Renishaw retreated as the engineering technology group reported a decline in first-quarter profit, pointing to “challenging” market conditions.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Compass Group Plc | +2.64% | +54.00 | 2,100.00 |
| 2 |  |
Ocado Group Plc | +2.63% | +12.10 | 472.10 |
| 3 |  |
Tui Ag | +1.95% | +7.80 | 408.80 |
| 4 |  |
Sainsbury (j) Plc | +1.27% | +3.20 | 255.50 |
| 5 |  |
Smith (ds) Plc | +1.23% | +3.30 | 272.40 |
| 6 |  |
International Consolidated Airlines Group S.a. | +1.07% | +1.50 | 141.85 |
| 7 |  |
Taylor Wimpey Plc | +0.94% | +1.00 | 107.40 |
| 8 |  |
Fresnillo Plc | +0.90% | +4.80 | 536.80 |
| 9 |  |
Barratt Developments Plc | +0.67% | +2.70 | 403.90 |
| 10 |  |
Pearson Plc | +0.65% | +6.00 | 928.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Standard Chartered Plc | -11.34% | -81.00 | 633.00 |
| 2 |  |
Rentokil Initial Plc | -5.85% | -26.60 | 428.00 |
| 3 |  |
Wpp Plc | -3.15% | -21.80 | 669.20 |
| 4 |  |
Unilever Plc | -3.13% | -125.50 | 3,888.00 |
| 5 |  |
Intertek Group Plc | -2.38% | -95.00 | 3,894.00 |
| 6 |  |
3i Group Plc | -2.30% | -46.00 | 1,950.00 |
| 7 |  |
Hsbc Holdings Plc | -2.16% | -13.30 | 601.80 |
| 8 |  |
Scottish Mortgage Investment Trust Plc | -1.97% | -12.80 | 638.20 |
| 9 |  |
Lloyds Banking Group Plc | -1.83% | -0.76 | 40.70 |
| 10 |  |
St. James’s Place Plc | -1.80% | -11.00 | 599.80 |
US close: S&P 500, Nasdaq at five-month low as Alphabet shares tank
US equity markets dropped on Wednesday, though the Nasdaq bore the brunt of the selling pressure after the tech-heavy index was hammered by disappointing results from Google parent Alphabet.
The Nasdaq was down 2.4% by the close, while the S&P 500 fell 1.4% – with both indices dropping to levels not seen since late-May.
However, the Dow Jones Industrial Average held up well, slipping just 0.3%. The DJIA is relatively immune to the tech sector due to its heavy exposure to the consumer, retail and finance sectors.
With economic data on the quiet side on Wednesday – ahead of key GDP and inflation figures later in the week – investors were firmly focusing on earnings.
Shares in Alphabet dropped over 9% after the company underwhelmed the market with its cloud-computing sales. Third-quarter revenues were up 11% at $77bn, but top-line growth in cloud slowed to a worse-than-expected 22%.
“Investors are worried that Alphabet is losing out to Microsoft and Amazon in a sector deemed to have enormous growth potential due to the future uptake of generative AI,” said David Morrison, senior market analyst at Trade Nation.
In contrast, Microsoft rose 3% after the company reported a 13% jump in revenues for its fiscal first quarter to $56.5bn, helped by strong demand for cloud computing services. The company also guided to $60.4-61.4bn in revenues for the second quarter, well ahead of the $58.7bn consensus estimate.
After spending most of the morning in the red, shares of the big three automakers raced ahead on afternoon reports that they were nearing a potential deal with the United Auto Workers union to end factory strikes. Ford, General Motors and Chrysler owner Stellantis all finished over 1% higher.
The only major economic data release of the day were US new home sales, which unexpectedly surged 12.3% to 759,000, well ahead of the 680,000 consensus forecast.
Commenting on the data, analysts at Oxford Economics said: “New home sales have been resilient despite a rise in mortgage rates to a 23-year high of 7.6%. With the supply of existing homes for sale extremely tight, homebuilders continue to see an opportunity to generate sales by providing incentives such as price cuts or mortgage rate buydowns.”
However, they said that home sales are expected to weaken in the fourth quarter and fall below the 600,000 level by early next year. “Homebuilders are seeing prospective buyers retreat to the sidelines. We also expect a weaker economy and softer labor market conditions to weigh on housing demand.”
Thursday newspaper round-up: Shell, Boohoo, Sam Bankman-Fried
The former NatWest chief executive breached data protection laws when she spoke to a BBC journalist about the planned closure of Nigel Farage’s bank accounts, the UK’s information watchdog has ruled. An Information Commissioner’s Office (ICO) report seen by the Guardian said that Alison Rose broke rules on two counts: first by revealing that Farage had a banking relationship with its private bank, Coutts; and secondly by providing “misleading information” that led the BBC to believe the bank was closing his accounts for purely commercial reasons, linked to his wealth. – Guardian
Shell’s new chief executive is poised to cut hundreds of jobs from the oil giant’s low-carbon division as part a plan to boost the company’s profits. Wael Sawan plans to shrink the number of staff working on low-carbon solutions by around 200 next year, after vowing to shift Shell’s focus towards high-profit oil projects and expanding its gas business when he became chief executive in January. – Guardian
Sovereign wealth funds and local councils are among a group of investors plotting a £100m lawsuit against Boohoo after allegations of modern slavery wiped more than £1bn from the company’s value. The fast fashion retailer is being targeted by City lawyers seeking compensation for shareholders who suffered losses after allegations of forced labour in Boohoo’s factories came to light in 2020. – Telegraph
Qatar has backed a £400m refinancing of struggling Canary Wharf in its first significant UK deal since the terror attacks on Israel sparked criticism of its links to Hamas. Canary Wharf Group (CWG) secured hundreds of millions of pounds in extra financing from Qatar’s sovereign wealth fund and its Canadian co-owner on Wednesday as the landlord struggles with high vacancy rates. – Telegraph
Sam Bankman-Fried plans to testify at his criminal fraud trial after his closest associates blamed the former billionaire for the collapse last November of his FTX cryptocurrency exchange. In a telephone conference on Wednesday with Lewis Kaplan, the judge who is overseeing the case in a federal court in Manhattan, Mark Cohen, Bankman-Fried’s lawyer, said the defence planned to call three other witnesses to testify briefly after prosecutors finished presenting their case. “Our client is also going to be testifying,” he said. – The Times
