The boost for stock markets from the US Federal Reserve policy announcement and commentary on Wednesday was wearing off by Thursday midday in London, as attention shifted back to second-quarter earnings and a US GDP reading.
The Fed lifted the US federal funds rate by 75 basis points to a 2.25% and 2.50% range, as widely expected. It had raised rates by the same increment in June - the first hike of that magnitude since November 1994.
The US central bank also will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.
All monetary policy board members voted in favour of Wednesday's three-quarter percentage point hike.
Fed Chair Jerome Powell on Wednesday said a period of slower growth may be needed for a US economy characterised by a tight labour market, though he played down recessionary fears.
In addition, he cautioned that a period of detailed forward guidance could come to an end, as the central bank now eyes a ‘meeting-by-meeting’ approach to monetary policy decisions. Powell said Wednesday's rate hike was of the correct magnitude, though the Fed would not hesitate to implement a stronger increase if needed.
However, Powell also said that, going forward, the pace of rate hikes could slow. ‘As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation,’ he said.
‘Chair Powell left the door open for another large hike at the next meeting in September,’ noted Bannockburn Global Forex. ‘Yet, the market took away a dovish message and the dollar suffered, rates slipped, and equities rallied.’
The FTSE 100 was down 12.90 points, or 0.2%, at 7,335.33 midday Thursday. The FTSE 250 index was up 89.32 points, or 0.5%, at 19,728.41. The AIM All-Share index was up 6.44 points, or 0.7%, at 909.32.
The FTSE 100 was being held back by a weaker dollar and stronger pound in the wake of the Fed policy announcement.
The Cboe UK 100 index was down 0.1% at 732.00. The Cboe 250 was up 0.4% at 17,169.12. The Cboe Small Companies was up 0.5% at 13,732.71.
In Paris, the CAC 40 stock index was down 0.2%, while in Frankfurt, the DAX 40 was 0.1% lower.
In the FTSE 100, Ashtead was the among the best performers, up 4.0%, after the equipment rental firm's US rival United Rentals reported record second-quarter results after the New York close on Wednesday.
United Rentals rose 5.1% in after-hours trade in New York.
The world's largest equipment rentals firm posted second-quarter net income of $493 million, or $6.90 per diluted share, up from $293 million, or $4.02 per share, last year.
The Stanford, Connecticut-based firm also raised its annual revenue outlook to $11.4 billion to $11.7 billion from $11.1 billion to $11.5 billion.
Ashtead generates a bulk of its revenue in the US via its Sunbelt unit.
Schroders was up 3.8% after the fund manager reported interim results that ‘weathered difficult market conditions’.
For the six months to June 30, revenue inched up to £1.43 billion from £1.42 billion, but pretax profit fell 16% to £312.8 million from €373.9 million.
Assets under management ended the period at £773.4 billion, up from £766.7 billion on December 31, despite sharp falls in equity and bond markets.
The London-based firm maintained its interim dividend at 37 pence per share.
Shell was up 1.5% after the oil major's earnings surged on the back of higher oil prices following Russia's invasion of Ukraine.
For the six months to June 30, adjusted earnings before interest, tax, depreciation and amortisation was $42.18 billion, up 67% from $25.20 billion last year. Income attributable to shareholders almost tripled to $25.15 billion from $9.09 billion.
Shell declared an interim dividend of $0.50, up 21% from $0.41 last year. In addition, Shell launched a share buyback programme of $6 billion, which is expected to be completed by the third quarter of this year.
At the other end of the large-caps, Smith & Nephew was the worst performer, down 11%. The medical devices maker reported a drop in first-half profit and lowered annual guidance.
For the six months to June 30, revenue was flat at $2.60 billion from the same time last year and pretax profit fell to $204 million from $223 million.
Looking ahead, Smith & Nephew kept its 2022 underlying revenue growth guidance of 4.0% to 5.0% unchanged. However, its trading profit margin is now expected to be around 17.5%, down from 18.5% previously guided. Its trading profit margin in 2021 was 18.0%.
The London-based firm said the downgrade reflects the ‘prolonged impact of the inflationary environment and continued external supply challenges’.
BT was down 4.9%. The telecommunications provider reported quarterly revenue and earnings growth.
Revenue for the three months to June 30 inched up 1% to £5.13 billion from £5.07 billion year-on-year. This was ‘due to improved pricing and trading in Consumer and Openreach,’ BT said, offset to some extent by ‘challenging market conditions’ hitting large corporate customers in Enterprise and Global.
Meanwhile, the former state monopoly said it has plans to place to minimise disruption when members of the Communication Workers Union strike on Friday and Monday.
BT and Openreach workers are to stage two 24-hour strikes in a dispute over pay. It will be the first strike action at BT since 1987 and the first national call centre workers' strike, said the union earlier this month, adding that 40,000 workers were involved in the dispute.
Electricity utility SSE was down 4.5% after the stock went ex-dividend, meaning new buyers no longer qualify for the latest payout.
Barclays was down 2.8% after the lender reported a drop in first-half profit, as it took a credit impairment charge. It also launched a share buyback.
For the six months to June 30, total income was £13.2 billion, up 17% from £11.3 billion last year, but pretax profit was £3.73 billion, down 24% from £4.90 billion.
Barclays took litigation and conduct charges of £1.9 billion for the first half of the year, including a previously disclosed £1.3 billion cost related to the ‘over-issuance of securities’ in the US.
Turning to shareholder returns, Barclays declared a half-year dividend of 2.25p per share and said it intends to initiate a further share buyback worth up to £500 million.
In the FTSE 250 index, discoverIE was the best performer, up 10%.
The customised electronics maker said that sales growth in its last financial year has continued into its first quarter. discoverIE reported that in the quarter to June 30, revenue jumped by 27%, measured at constant exchange rates. It added that this boost has enabled underlying earnings to climb ahead of the board's expectations.
CMC Markets was the worst performer, down 17%, after the contract-for-difference provider said operating costs were set to be higher than initially expected.
The London-based firm now expects operating costs to be 5% above guidance provided at the 2022 results last month.
CMC attributed the rise in operating costs to a combination of higher personnel and non-personnel costs, including higher professional fees and software costs associated with expansion projects.
Rival online trading platforms IG and Plus500 were off 2.5% and 2.0% respectively in a negative read-across.
New York was pointed to a lower open, following a strong close on Wednesday, as tech earnings season rolls on.
The Dow Jones Industrial Average was called down 0.1%, S&P 500 down 0.4% and Nasdaq Composite down 0.7%. The indices closed up 1.4%, up 2.6% and up 4.1% respectively on Wednesday.
After the New York close Wednesday, Meta Platforms cautioned on weak ‘advertising demand’ driven by economic uncertainty, as its second quarter revenue and profit fell short of market expectations. Revenue of $28.82 billion in the three months to June 30 was 0.9% lower than $29.08 billion a year earlier. Pretax profit tumbled 35% to $8.19 billion from $12.51 billion a year prior.
The stock was down 5.2% in pre-market trade. Meta is down 55% in the past 12 months causing the Facebook and Instagram parent to lose its status as a trillion-dollar market value company. Its current market value sits just under $460 billion.
Continued trillion-dollar club members Apple and Amazon report after the market close in New York.
Investors will be looking for any outlook commentary from Apple's Tim Cook, after Bloomberg reported last week that the iPhone maker plans to slow hiring and spending growth next year in some divisions to cope with a potential economic downturn.
Apple was down 0.4% in the premarket.
‘There are growing concerns about rising costs and dwindling consumer appetite, but it is believed that Apple's customers are above average earners, and therefore they are in a better position to shake off the slightly less rosy economic climate,’ said Equiti Capital analyst David Madden.
Amazon shares were down 0.5% in the pre-market.
The pound was quoted at $1.2110 at midday Thursday, up from $1.2045 at the London equities close Wednesday.
The euro was priced at $1.0128, soft from $1.0133. Against the yen, the dollar was trading at JP¥135.57, well down from JP¥137.17.
Brent oil was quoted at $108.20 a barrel Thursday at midday, up from $106.68 a barrel late Wednesday. Gold stood at $1,739.48 an ounce, higher against $1,718.59.
Thursday's economic calendar has US gross domestic product data at 1330 BST, after an inflation reading from Germany at 1300 BST.
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