European equities were on the decline on Thursday afternoon, with equities unnerved by events in the Middle East, as well as some caution ahead of key US data and a eurozone interest rate decision.
The European Central Bank announces an interest rate decision in just under an hour at 1315 BST. It is expected to enact its first pause in over a year, halting a steep hiking cycle.
Among individual shares in London, Standard Chartered plunged after reporting a difficult third-quarter. Restaurant Group edged higher as the owner of Pizza Express mulls a takeover bid for the Wagamama owner. Safestyle plummeted, meanwhile, as it said a capital injection is unlikely.
The FTSE 100 index was down 43.21 points, 0.6%, at 7,371.13. The FTSE 250 was down 67.52 points, 0.4%, at 16,803.19, and the AIM All-Share was down 3.09 points, 0.5%, at 670.73.
The Cboe UK 100 fell 0.6% at 735.56, the Cboe UK 250 lost 0.3% at 14,555.02, and the Cboe Small Companies was down 0.3% at 12,627.59.
In European equities on Thursday, the CAC 40 in Paris was down 0.5%, while the DAX 40 in Frankfurt was shed 1.2%.
‘The market is on edge. Anxiety is running higher. It is partly geopolitics, and it is partly market stresses,’ Bannockburn Global Forex analyst Marc Chandler commented.
The European Central Bank announces its latest rate decision at 1315 BST. A press conference with President Christine Lagarde follows half an hour later. The central bank is expected to decide against a rate hike.
Analysts at Lloyds Bank commented: ‘ECB President Lagarde in her press conference will probably again drop strong hints that rates have peaked unless there is a sustained rise in oil prices but is likely to also repeat a warning that there is unlikely to be an imminent cut.’
US gross domestic product data for the third quarter will be released shortly after the ECB decision at 1330 BST.
According to FXStreet-cited market consensus, the US economy is expected to have grown 4.2% in the third-quarter, picking up from 2.1% in the second.
Stocks in New York were called lower ahead of the data. The Dow Jones Industrial Average was called down 0.3%, the S&P 500 index 0.6% lower, and the Nasdaq Composite down 1.0%.
The pound was quoted at $1.2084 at midday on Thursday in London, down compared to $1.2143 at the equities close on Wednesday. The euro stood at $1.0541, lower against $1.0590. Against the yen, the dollar was trading at JP¥150.25, higher compared to JP¥149.93.
In the FTSE 100 index, Standard Chartered was by far the worst performer, down 10%.
The Asia-focused lender said operating income rose 4.5% to $4.52 billion from $4.33 billion a year before. However, pretax profit dropped 54% to $633 million from $1.39 billion, well below the $1.41 billion pencilled in by analysts, according to company-compiled consensus.
The bottom-line hit came as credit impairments increased to $292 million from $227 million, which included further charges related to the Chinese commercial real estate sector.
The firm also booked an impairment of around $700 million related to the reduction in the carrying value of its holding in China Bohai Bank. This reflected ‘subdued earnings and a challenging macroeconomic outlook’ at Bohai, StanChart said.
Unilever shed 3.3%. It announced a series of changes to its division leadership, partly triggered by the internal promotion of a new finance chief, as it also reported a small decline in third-quarter revenue and revealed an ‘action plan’ to boost growth.
Fernando Fernandez will step up to chief financial officer from president of the Beauty & Wellbeing business group. Previously, he led Unilever’s business in Brazil and then all of Latin America.
Turning to recent trading, Unilever said turnover in the third quarter was €15.24 billion, down 3.8% from a year before, though underlying sales growth was positive 5.2%. For the first nine months of the year, turnover was €45.78 billion, up 0.4% on year, with 7.7% underlying sales growth.
The company also set out an ‘action plan’ to improve growth.
‘Our performance in recent years has not matched our potential,’ Chief Executive Hein Schumacher said. ‘The quality of our growth, productivity and returns have all under-delivered.
In the FTSE 250 index, Greencoat UK Wind was up 2.8%.
The company, which invests in UK wind farms, upped its 2024 dividend target to 10 pence per share. It is a 14% increase from the 2023 target of 8.76p.
Greencoat UK Wind also plans a share buyback reflecting the company’s prospects, ’strong balance sheet‘ and cash flow and the discount to net asset value at which its shares trade. The company will buyback up to £100 million worth of shares.
Amongst London’s small-caps, Restaurant Group rose 2.4% amid a possible twist in its takeover saga.
On Wednesday, Sky News reported that the Pizza Express owner is at the preliminary stages of evaluating whether to make a rival offer for Restaurant Group, which this month agreed to be bought by Apollo Global Management for just over £500 million.
On Thursday, Restaurant Group confirmed that it has received a diligence request from the PizzaExpress owner, Wheel Topco. The owner of Wagamama said that Wheel Topco is evaluating a possible offer for the company.
‘The idea of combining two of the UK’s most popular casual dining chains has logic to it and may prompt Pizza Express to push hard to rival private equity firm Apollo’s existing £500 million bid, particularly given former Wagamama chair Allan Leighton now occupies the same position at Pizza Express,’ said AJ Bell’s Danni Hewson.
Earlier in October, Restaurant Group agreed to be acquired by funds managed by private equity firm Apollo Global Management. The offer values the equity of Restaurant Group at £506 million and the company as a whole, including debt, at an enterprise value of £701 million.
On AIM, Safestyle UK plummeted 61%.
The retailer and manufacturer of PVCu replacement windows and doors said that it does not expect to receive a capital injection or new financing.
Earlier this month, Safestyle said it was considering a number of options, which could include the sale of some subsidiary businesses. At the time, the firm said it was in ‘active discussions’ regarding the sale of some or all of its assets, but noted there could be no certainty of a sale, nor of the level of return to shareholders.
Brent oil was quoted at $88.04 a barrel at midday in London on Thursday, up from $87.71 late Wednesday. Gold was quoted at $1,988.01 an ounce, up against $1,982.33.
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