Global equities were largely on the up at the end of the week, negotiating a trio of major central bank decisions, with one more to come on Thursday, as the corporate earnings season continues.
It was a bullish open in New York, while the FTSE 100 squeezed out the most minor of gains, comfortably outperformed by its European peers.
It was a decent day for London listing banking shares. A Standard Chartered buyback lifted the stock, while NatWest’s shares rose on decent results, as the Nigel Farage-Coutts scandal hangs over it.
The FTSE 100 index rose just 1.51 points to 7,694.27. The FTSE 250 closed down 149.23 points, 0.8%, at 19,124.14, and the AIM All-Share gave back 3.06 points, 0.3%, at 766.23.
For the week, the FTSE 100 rose 0.4%, though the FTSE 250 lost 0.4%. The AIM All-Share was largely unmoved.
The Cboe UK 100 ended down 0.1% at 767.75, the Cboe UK 250 lost 0.9% at 16,788.89, and the Cboe Small Companies fell 0.3% to 13,768.89.
In European equities on Friday, the CAC 40 in Paris added 0.2%, while the DAX 40 in Frankfurt rose 0.4%, hitting a record level.
In New York, the Dow Jones Industrial Average rose 0.8%, the S&P 500 surged 1.1% and the Nasdaq Composite jumped 2.0%.
‘Another week, another round of interest rate hikes. Under the circumstances, markets have held up remarkably well,’ AJ Bell analyst Russ Mould commented.
Sterling was quoted at $1.2861 late Friday, down slightly from $1.2865 at the London equities close on Thursday. The euro traded at $1.1030, up from $1.0996. Against the yen, the dollar was quoted at JP¥140.53, down versus JP¥141.07.
The Federal Reserve and European Central Bank both lifted rates by 25 basis points this week. The Bank of Japan, meanwhile, kept its benchmark rate unchanged at 0.10%, though it was its yield curve control tool that was in focus.
The Bank of Japan said it will allow ‘greater flexibility’ in controlling bond yields, as it raised its full-year inflation forecast to 2.5% from its previous estimate of 1.8%.
It said it would continue to allow 10-year Japanese government bond yields to ‘fluctuate in the range of around plus and minus 0.5 percentage points from the target level, while it will conduct yield curve control with greater flexibility regarding the upper and lower bounds of the range as references, not as rigid limits,’ the central bank said in a statement.
In London, IAG shares shot up 5.8%. The British Airways parent swung to a pretax profit of €1.04 billion in the six months that ended June 30 from a loss of €843 million a year before, on €13.58 billion in revenue, up 45% from €9.35 billion.
Looking ahead, IAG said 80% of third-quarter revenue and 30% of fourth-quarter revenue has been booked.
Standard Chartered added 4.0% after the Asia-focused bank launched a new $1 billion share buyback programme.
Pretax profit in the six months that ended June 30 was $3.32 billion, up 20% from $2.77 billion a year before. Operating income increased by 11% to $9.13 billion from $8.23 billion, and StanChart also benefitted from a reduced credit impairment of $161 million, down from $263 million a year before.
NatWest, meanwhile, reported under a cloud of controversy which saw Alison Rose step down as chief executive. Rose admitted to being the source of an inaccurate news story about the finances of pro-Brexit politician Nigel Farage. The boss of NatWest unit Coutts also stepped down.
NatWest’s earnings numbers did the talking on Friday, however. It reported total income of £7.73 billion in the six months ended June 30, up 24% from £6.22 billion a year earlier.
Operating pretax profit rose to £3.59 billion, up 37% from £2.62 billion.
It also plans to begin an on-market buyback programme of up to £500 million in the second half of 2023.
The one tinge of disappointment is that NatWest cut net interest margin guidance to ‘less than 3.20%, with a current view of around 3.15%’. It had previously predicted an NIM of ‘around 3.20%’.
Shares rose 2.8% on Friday.
In the FTSE 250, Vanquis Banking Group plunged 29%.
Vanquis reported that in the six months ended June 30 it swung to a pretax loss of £14.5 million from a profit of £37.3 million a year earlier.
Vanquis said that this reflects primarily the IFRS 9 impact of strong loan book growth, together with unplanned inflation driving higher costs. Meanwhile, impairment charges more than doubled to £85.6 million from £38.5 million.
Analysts at Shore Capital Markets commented: ‘We believe the group’s transition to being a mid-cost credit provider under the stewardship of outgoing CEO Malcolm Le May has opened-up a much larger growth opportunity in a still under-served part of the market. However, Vanquis is still in a transitional phase which, combined with the impact of higher inflation and interest rates, is causing some short term earnings volatility. Nevertheless, we believe that strong execution by incoming CEO Ian McLaughlin could drive a significant improvement in financial performance and a re-rating of the shares in due course.’
YouGov slipped 11%. The research and data analytics expects its full-year revenue to be at the lower end of the market consensus range, which it cites at £257 million to £274 million, compared to £221.1 million a year earlier.
‘As previously communicated, the group experienced longer sales cycles and protracted client decision-making at the start of this calendar year. The group continues to focus on selling high-margin products and services and remains disciplined to ensure delivery of sustainable, profitable growth,’ it explained.
In addition, it said a series of personnel changes would become effective from August 1, including Steve Hatch joining the company as its new CEO.
Hatch was until recently Meta Platforms Inc’s vice president for Northern Europe, managing all business operations and strategy for the region, taking on the role in 2016. This was after being appointed Facebook’s first regional director in the UK in 2014. He is also a non-executive director at Reach, but will step down from this role upon joining YouGov.
Hatch will succeed Stephan Shakespeare, who will move to non-executive chair. Current Chair Roger Parry will leave the company after 16 years. Also on the board, Senior Independent Director Rosemary Leith will also step down after serving nearly nine years, replaced by Nick Prettejohn.
Brent oil was quoted at $83.67 a barrel late Friday in London, up from $83.59 late Thursday. Gold was quoted at $1,962.33 an ounce, higher against $1,944.93.
Monday’s economic calendar has inflation and gross domestic product readings from the eurozone at 1000 BST. The week picks up speed with manufacturing data from across the globe on Tuesday, before a Bank of England interest rate decision on Thursday and the latest US nonfarms payrolls data on Friday.
Monday’s local corporate calendar has half-year results from Bank of Ireland Group and education publisher Pearson.
Copyright 2023 Alliance News Ltd. All Rights Reserved.
