Stocks in Europe traded higher on Wednesday morning amid a slew of corporate earnings and a rise in oil prices, after the Bank of Japan raised its main interest rate and before the Federal Reserve’s decision later.
The FTSE 100 index shot up 93.67 points, or 1.1%, at 8,368.08 on Wednesday morning. But the FTSE 250 rose 194.53 points, 0.9%, at 21,627.04, while the AIM All-Share added 3.72 points, 0.5%, at 781.88.
The Cboe UK 100 was up 1.0% at 835.69, the Cboe UK 250 added 0.8% to 18,947.68, but the Cboe Small Companies slipped 0.1% to 17,286.42.
The CAC 40 in Paris rose 1.0%, while Frankfurt’s DAX 40 traded 0.7% higher.
Stocks in New York ended mixed on Tuesday. The Dow Jones Industrial Average rose 0.5%, but the S&P 500 lost 0.5% and the Nasdaq Composite lost 1.3%.
Equities in Asia powered higher on Wednesday, however. In China, the Shanghai Composite ended up 2.1%, while the Hang Seng in Hong Kong traded up 2.3%. In Tokyo, the Nikkei 225 added 1.5%, while the S&P/ASX 200 in Sydney rose 1.8%.
Before the Fed, was the Bank of Japan, which lifted its benchmark rate.
The central bank said in a statement it had set an interest rate of 0.25% – up from around 0% to 0.1% – having ditched its maverick negative rate policy aimed at boosting economic growth in March.
‘Moves to raise wages have been spreading’ in Japan while ‘economic activity and prices have been developing generally in line with the bank’s outlook’, the BoJ said.
Pepperstone analyst Chris Weston commented: ‘The BoJ has pulled off another mini masterstroke in its approach to changes in monetary policy, and again its ability to communicate important changes to the market, and not cause any tightening in financial conditions, shows that while they have an incredible challenge ahead of them, the BoJ are managing the situation admirably.
‘As the BoJ has detailed, Japan’s real policy and real market rates are still negative, and until that dynamic changes we can say that policy is still accommodative and stimulatory, and with the current inflation dynamics in play, a move away from this setting is prudent and the market sees them in control and credible.’
The pound was quoted at $1.2842 early Wednesday, up from $1.2829 at the time of the London equities close on Tuesday. The euro stood at $1.0821, up from $1.0808. Against the yen, the dollar was trading at JP¥151.12, down markedly from JP¥153.88.
The Fed is expected to stand pat. It announces its latest decision at 1900 BST.
Ebury analyst Matthew Ryan commented: ‘We do, however, expect the [Federal Open Market Committee] to convey to markets that it is on the cusp of lowering rates for the first time in the current cycle.’
The Bank of England announces its latest interest rate decision on Thursday.
In London, HSBC shares rose 3.1%. It announced a share buyback programme of up to $3 billion as it reported a slightly lower pretax profit after a fall in net interest income.
It posted a pretax profit of $21.56 billion for the first half of 2024, down 0.5% from $21.66 billion a year prior. The lender’s net interest income fell 7.4% to $16.91 billion from $18.26 billion. Profit beat consensus of around $20.5 billion, however.
Miners traded higher, with Anglo American up 4.1%, Antofagasta climbing 3.5% and Rio Tinto shares rising 1.2%.
Rio Tinto maintained its first-half payout after a ‘stable financial performance’. Sales revenue during the first six months of the year edged up 0.5% to $26.80 billion from $26.67 billion a year prior. Pretax profit rose 17% to $8.12 billion from $6.93 billion.
‘Rio Tinto is both consistently very profitable and growing. This is being driven by the disciplined investments we are making to strengthen our operations and progress major projects for profitable organic growth,’ CEO Jakob Stausholm said. ‘Our overall copper equivalent production is on track to grow by around 2% this year, and our ambition is to deliver around 3% of compound annual growth from 2024 to 2028 from existing operations and projects.’
The CEO the firm is at an ‘inflection point’, as it looks ahead to the future of its aluminium portfolio with confidence, and hails ‘consistent production at our Pilbara iron ore operations’.
Rio Tinto maintained its interim dividend at 177.0 cents per share.
GSK struggled despite a guidance hike, as sales of one offering fell short. The stock traded down 2.8%.
The drugmaker now expects revenue will rise between 7% and 9% at constant currency for 2024, its view increased from its previous 5% to 7% range.
GSK had expected growth ‘towards the upper part’ of that range.
Constant currency core operating profit growth of 11% to 13% is expected, as GSK raised its outlook from 9% and 11%.
Its guidance does not factor in its Covid-19 Solutions offering as it does not anticipate further ‘pandemic-related sales or operating profit’ this year.
For the second-quarter of 2024, revenue rose 9.8% to £7.88 billion from £7.18 billion a year prior. Pretax profit, however, fell by a quarter year-on-year to £1.50 billion from £1.99 billion.
Core operating profit, which excludes items such as legal, restructuring and impairment costs from the equation, increased 16% to £2.51 billion from £2.17 billion.
‘GSK’s momentum this year continues with excellent second quarter performance, reflecting strong operational execution and the strengthening breadth of our portfolio to both prevent and treat disease. Q2 sales grew in all areas, with Specialty Medicines in particular benefitting from new product launches in oncology and HIV. In R&D, so far this year, we have secured approvals or filings for 10 major opportunities and reported positive data from 7 phase III trials,’ CEO Emma Walmsley said.
Shore Capital Markets noted sales of GSK’s Shingrix ‘missed materially’, falling short of consensus by 20%. Shingrix is a shingles vaccine.
Brent oil was quoted at $79.38 a barrel early Wednesday, rising from $78.51 at the time of the closing bell in London on Tuesday. Shell and BP rose 2.3% and 1.8%, tracking Brent higher.
Geopolitical tensions supported oil. Hamas political leader Ismail Haniyeh was killed in a strike in Tehran, Iran. China condemned the incident and warned it could lead to more instability in the Middle East.
Hamas said Haniyeh had been killed by an Israeli strike.
Back in London, Just Eat Takeaway jumped 10%. The food delivery firm announced a new share buyback of up to €150 million and backed yearly guidance.
Revenue in the first half of the year slipped 0.7% to €2.57 billion from €2.59 billion a year earlier. Its pretax loss stretched to €363 million from €317 million. However, adjusted earnings before interest, tax, depreciation and amortisation surged 42% to €203 million from €143 million a year prior.
Orders declined 4.9% to 446 million from 469 million and gross transaction value declined 1.5% to €13.2 million from €13.4 million.
For the full-year, JET still expects to achieve an adjusted Ebitda of €450 million.
It expects the €150 million buyback to conclude at the end of March.
Gold was quoted at $2,419.30 an ounce early Wednesday in London, rising from $2,384.97 at the time of the equities close on Tuesday.
Before the Fed decision, there is still a eurozone inflation reading to come at 1000 BST.
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