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London open: Stocks edge down as investors eye Fed, BoE announcements
London stocks edged lower in early trade on Wednesday as caution set in ahead of rate announcements from the US Federal Reserve and the Bank of England, while results from Microsoft and Alphabet failed to impress.
At 0830 GMT, the FTSE 100 was down 0.2% at 7,650.35.
Jim Reid, head of global economics and thematic research at Deutsche Bank, said: “The main event over the last 24 hours occurred after the US closing bell as results from Microsoft and Alphabet last night soured risk sentiment.
“Both of the tech giants narrowly beat revenue and earnings estimates, but saw an underwhelming reaction in after-hours trading. Alphabet slid more than 5% amid lower-than-anticipated advertising revenues for Google. Microsoft declined by as much as 3% initially, arguably signalling some overextension of the recent strong rally, but largely reversed this decline after its outlook call later in the evening.”
Investors were looking ahead to the Fed’s latest policy announcement, due after the close of European markets, with the BoE set to announce its decision on Thursday.
They were also mulling figures from Nationwide released earlier, which showed that UK house prices rose more than expected in January as mortgage rates trended lower.
House prices were up 0.7% on the month, having been flat in December and versus expectations for a 0.1% jump. The average price of a home now stands at £257,656.
On the year, prices were down just 0.2% in January following a 1.8% decline the month before. This marked the strongest outturn since January 2023.
Nationwide chief economist Robert Gardner said: “There have been some encouraging signs for potential buyers recently with mortgage rates continuing to trend down. This follows a shift in view amongst investors around the future path of Bank Rate, with investors becoming more optimistic that the Bank of England will lower rates in the years ahead.
“These shifts are important as this led to a decline in the longer-term interest rates (swap rates) that underpin mortgage pricing around the turn of the year. However, the partial reversal in recent weeks in response to stronger than expected inflation and activity data cautions that the interest rate outlook remains highly uncertain.
“While a rapid rebound in activity or house prices in 2024 appears unlikely, the outlook is looking a little more positive. The most recent RICS survey suggests the decline in new buyer enquiries has halted, while there are tentative signs of a pickup in the number of properties coming onto the market.”
Andrew Wishart, senior economist at Capital Economics, said the larger-than-expected monthly gain in house prices reflected improving public sentiment about the economy and the housing market, and supports CE’s above-consensus forecast that house prices will rise by 3% this year.
“While the cost of the mortgage needed to buy the average home remains high by historical standards, the rise in house prices at the start of the year shows that declines in mortgage rates have been sufficient for house prices to eke out further gains,” he said. “Alongside improving public sentiment about the outlook for house prices according to YouGov, we are content with our above-consensus forecast that they will rise by 3% this year, reversing the 2.4% fall in 2023.”
In equity markets, Vodafone fell after French telecoms firm Iliad said it had rejected a revised offer to merge the two companies’ Italian businesses. The revised offer would have given Vodafone €6.6bn in cash and a €2bn shareholder loan. Meanwhile, Iliad would have received €400m in cash and a €2bn loan.
GSK nudged lower despite lifting its sales outlook for the next seven years.
Professional IT services provider FDM Group was also in the red after saying it expects annual revenues to be flat, confirming the warning it issued in November about the hit from geopolitical uncertainties and clients deferring project decisions.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Croda International Plc | +4.03% | +185.00 | 4,771.00 |
| 2 |  |
Antofagasta Plc | +1.38% | +23.50 | 1,729.50 |
| 3 |  |
Flutter Entertainment Plc | +1.34% | +215.00 | 16,285.00 |
| 4 |  |
Hiscox Ltd | +1.28% | +13.00 | 1,028.00 |
| 5 |  |
Taylor Wimpey Plc | +1.08% | +1.60 | 149.10 |
| 6 |  |
Rightmove Plc | +1.07% | +6.00 | 566.80 |
| 7 |  |
Smiths Group Plc | +1.07% | +17.50 | 1,659.50 |
| 8 |  |
Aviva Plc | +0.88% | +3.80 | 436.00 |
| 9 |  |
Pearson Plc | +0.85% | +8.20 | 972.00 |
| 10 |  |
St. James’s Place Plc | +0.84% | +5.40 | 651.40 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Vodafone Group Plc | -3.80% | -2.61 | 66.14 |
| 2 |  |
Smurfit Kappa Group Plc | -1.93% | -58.00 | 2,950.00 |
| 3 |  |
Smith & Nephew Plc | -1.36% | -15.00 | 1,084.00 |
| 4 |  |
Marks And Spencer Group Plc | -1.33% | -3.40 | 251.30 |
| 5 |  |
Scottish Mortgage Investment Trust Plc | -1.30% | -10.20 | 773.80 |
| 6 |  |
Tui Ag | -1.27% | -7.00 | 546.00 |
| 7 |  |
Wpp Plc | -1.18% | -9.40 | 786.20 |
| 8 |  |
Carnival Plc | -1.18% | -14.00 | 1,177.00 |
| 9 |  |
Fresnillo Plc | -1.15% | -6.20 | 533.00 |
| 10 |  |
Gsk Plc | -0.96% | -14.80 | 1,523.00 |
US close: Markets mixed ahead of earnings, but Dow hits new peak
US stock markets finished mixed on Tuesday as investors braced themselves for a deluge of corporate earnings from tech heavyweights, a central bank policy decision and some vital economic data.
The Dow rose 0.4% to set another record close of 38,467.31, while the S&P 500 pulled back 0.1% from Monday’s all-time high and the Nasdaq dropped 0.8%.
Microsoft is first up, due to publish its figures after the closing bell, and will have a lot to prove following a 65% surge in the stock over the past 12 months. “Today represents the biggest day of fourth-quarter earnings thus far, with Microsoft hoping to maintain its new crown as a $3 trillion business,” said analyst Joshua Mahony from Scope Markets.
Results from Alphabet were due out after markets closed, along with earnings from Advanced Micro Devices, Starbucks, Electronic Arts and Juniper Networks. Then on Thursday, Apple, Amazon and Meta Platform will publish their results.
Big week for macro events
Investors were also looking ahead to the Federal Reserve’s two-day policy meeting which culminates on Wednesday but is widely expected to see the central bank stand pat on interest rates. The market will be on the lookout for more clarity on the outlook for rates since market expectations of a cut in March have been recently pushed back following resilient economic data.
Finally, the week will be capped off by the all-important US jobs report on Friday, which is currently expected to show that non-farm payrolls came in at 180,000 in January, down from 216,000 in December, while hourly earnings growth eased to 0.3% from 0.4%.
In macro news on Tuesday, the number of US job openings unexpectedly jumped by 3.1% to reach 9.026m in December, the highest in three months and ahead of the consensus estimate of 8.75m. Hiring meanwhile, picked up by 1.2% on the month to hit 5.621m.
Meanwhile, the closely watched Conference Board Consumer Confidence Index rose to 114.8 this month, up from a revised 108.0 in December. That was the highest reading since December 2021 and more or less in line with the consensus forecast of 115.
UPS sinks, GM jumps
UPS shares dropped 8% after the transport and logistics giant missed forecasts with its fourth-quarter results and underwhelmed with guidance for 2024, as well as announcing the removal of 12,000 jobs. The world’s largest package delivery firm, which employs over 500,000 people worldwide, revealed the job cuts after a disappointing end to 2023, in which revenues fell 7.8% to $24.9bn, undershooting market forecasts of $25.4bn.
In contrast, General Motors gained 8% after beating market forecasts in its fourth quarter, with adjusted earnings per share of $1.24, compared to an estimated $1.16, and the revenue of $43bn surpassing the estimated $38.67bn.
PayPal finished flat after plans to slash 9% of its headcount were revealed – following a reduction of 7% of employees last year – as the digital payments group embarks on a restructuring programme. “We are doing this to right-size our business, allowing us to move with the speed needed to deliver for our customers and drive profitable growth,” said chief executive Alex Chriss in an internal memo to staff.
Wednesday newspaper round-up: Sky, Tesla, Starbucks
Thousands of delicatessens and other specialist food shops have said new border rules that come in from Wednesday are likely to mean reduced choice of products for consumers. The Guild of Fine Food (GFF), which represents 12,000 businesses, has raised fears that European suppliers of specialist foods such as cheeses and meats will stop supplying the UK as a result of the additional red tape for imported goods. – Guardian
Sky is to cut about 1,000 jobs as customers move away from traditional satellite pay-TV to streaming-based services, in the latest round of redundancies to hit the UK media industry. The company, which employs about 26,000 staff in the UK, is seeking to reduce its workforce by about 4% this year. – Guardian
A US judge has ruled that billionaire Elon Musk’s $56bn (£44bn) Tesla pay package can be cancelled, calling the compensation “an unfathomable sum” that was not fair to shareholders, according to a court filing. The court’s opinion directed a Tesla shareholder who challenged the pay plan to work with Elon Musk’s legal team on an order implementing the judge’s decision. – Telegraph
HMRC has underestimated the true cost of government tax breaks by billions of pounds because it has been doing its sums wrong, the audit watchdog has claimed. Official forecasts massively underestimated the true cost of a range of tax reliefs because HMRC’s modelling did not account for the fact that the policies boosted growth, the National Audit Office (NAO) said in a report. – Telegraph
The world’s biggest coffee chain missed Wall Street estimates for quarterly sales in a sign that demand for its pricey coffees in the United States might be struggling, while its international markets also faced a slowdown. Shares in Starbucks, which opened its first outlet in 1971 in Seattle and has more than 32,000 stores in 80 countries, rose 4.2 per cent, or $3.95, to $98.03 in extended trading as its China business showed signs of recovery. – The Times
