European share prices were firm at midday on Thursday, but more potential gains from a comforting set of US Fed meeting minutes were scuppered by a warning from China about the state of its economy.
The FTSE 100 index was up just 6.37 points, 0.1%, at 7,529.12 midday Thursday. The mid-cap FTSE 250 index was up 115.34 points, or 0.6%, at 20,049.38. The AIM All-Share index was up 1.16 points, 0.1%, at 954.09.
The Cboe UK 100 index was a touch lower at 750.47. The Cboe 250 was up 0.6% at 17,787.19, and the Cboe Small Companies was up marginally at 14,570.56.
In mainland Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt both rose 0.5% midday Thursday, outperforming London's FTSE 100.
Equities in New York had climbed overnight after the US Federal Reserve's latest meeting minutes offered little in the way of surprises.
‘Investors welcomed the minutes of the last [Federal Open Market Committee] meeting yesterday, especially after it indicated the Fed could be less aggressive than initially expected, by changing the pace of its current hawkish approach if improvements were to be witnessed regarding inflation. While this provided investors with a temporary relief, today's mixed price action on stocks mostly shows that major bearish leverages linger,’ ActivTrades analyst Pierre Veyret commented.
‘The war in Eastern Europe and concerns about the Chinese economy still add stress to market sentiment, while investors will want to see evidence of improvements regarding the pressure coming from rising prices, rather than just rumour.’
China's premier sounded an unusually stark warning about the world's second-largest economy, saying it must return to normal as the country's zero-Covid strategy bites into growth.
In some ways, the challenges now are ‘greater than when the pandemic hit hard in 2020’, Premier Li Keqiang told a State Council meeting on Wednesday, according to a readout by the official Xinhua news agency.
New York stock market futures were largely higher on Thursday. The Dow Jones Industrial Average was called 0.3% higher, the S&P 500 up 0.2%, but the Nasdaq Composite down 0.1%.
Fed officials highlighted that interest rates need to rise quickly to rein in inflation and that hikes similar to the 50-basis-point one agreed at the May meeting may be necessary in the imminent future, minutes from the meeting showed.
‘Given that the Fed pivot is the most clearly communicated rate hike cycle in modern history and will continue to be so, stocks moved higher as the market now seems convinced there will be few double-paced rate hike twists in the future. That should lift some worries for equity investors about impending policy mistakes,’ SPI Asset Management analyst Stephen Innes commented.
The dollar was weaker on Thursday.
The pound hit a roughly two-week high of $1.2619 on Thursday. At midday in London, sterling fetched $1.2602, up from $1.2547 at the London equities close on Wednesday.
The euro climbed to $1.0711 from $1.0678. Against the yen, the dollar was trading at JP¥126.65, down on JP¥127.31.
In London, Intermediate Capital Group topped the large-cap index, up 8.1%.
The London-based asset manager hailed a ‘defining year’. Net asset value per share climbed 23% to 696 pence at its March 31 year-end from 566p 12 months earlier.
Total assets under management surged 26% to $72.06 billion from $59.59 billion a year earlier. It posted $23.38 billion of additions, but also $8.69 billion in realisations and a $2.38 billion hit from foreign exchange and other moves.
ICG lifted its payout by 36% to 76.0 pence from 56.0p.
BT shares gave back 3.9%. BT said the UK government is probing a recent investment in the telecommunications operator on national security grounds.
In December, billionaire telecom tycoon Patrick Drahi's Altice lifted its stake in BT to 18% from 12% previously. The transaction has been referred to the UK's National Security & Investment Act 2021.
‘BT Group will fully cooperate with this review,’ the company said.
United Utilities also lost 3.9%. It said increased finance expenses have eaten into annual profit, despite growth in revenue, with costs expected to rise further this coming year.
In the year ended March 31, the Warrington, England-based water and wastewater company said revenue edged up 3.0% to £1.86 billion from £1.81 billion a year prior. However, pretax profit dropped 20% to £439.9 million from £551.0 million.
Among mid-caps, Serco rose 9.0%. The outsourcer lifted its financial guidance in an impromptu trading update.
In the first four months of 2022, Serco has seen ‘stronger than expected trading’ and favourable foreign exchange movements.
It now expects underlying trading profit at actual currency rates of £225 million, up about £30 million from prior guidance and with favourable currency movement contributing £10 million of that. This result would represent a 1.7% reduction from £229 million in 2021.
Revenue is expected to land between £4.3 billion and £4.4 billion, up from previous guidance between £4.1 billion and £4.2 billion. It now expects an organic sales fall of 5%, better than previous guidance of a 10% decline. Revenue in 2021 amounted to £4.4 billion and organic sales then surged 10%.
Transport provider FirstGroup said it has received a ‘series of unsolicited, conditional proposals’ to be acquired by I Squared Capital Advisors.
The stock rose 6.8% to 127.50p.
It said it is considering the latest approach, received Wednesday evening, for 118 pence per share in cash, plus 45.6p more contingent on the proceeds of FirstGroup's recent disposals of First Transit and Greyhound.
At 163.60p, the total offer is a 38% premium to Wednesday's closing price. All previous I Squared offers were rejected.
At the other end of London's midcaps, IntegraFin tumbled 15%.
It shared a gloomy outlook for the rest of its financial year, despite posting revenue growth in the first half.
In its half-year ended March 31, the London-based investment platform reported revenue growth of 13% year-on-year to £67.0 million from £59.4 million.
Pretax profit dropped 52% to £23.5 million from £49.0 million, though pretax profit attributable to shareholders grew 2% to £31.7 million from £31.2 million.
‘The general economic outlook has deteriorated from that prevailing this time last year...We are faced with major global uncertainty arising from Russia's invasion of Ukraine and the significant, resultant effects. When added to the existing inflationary pressures, these are negative drivers for Transact revenue, and for all round expenses,’ Chief Executive Officer Alex Scott cautioned, looking ahead.
Hospitality group Hostmore, which owns the Fridays American food chain, warned its margin will fall short of medium-term guidance. Shares slumped 14%.
Hostmore expects an adjusted earnings before interest, tax, depreciation and amortisation margin in the low double-digits range for 2022, compared with its medium-term aim which targets a level in the mid-teens.
This is due to cost increases and lower volumes.
Like-for-like revenue in the 20 weeks to May 22 was 6% lower than years earlier.
‘We believe this is primarily a result of consumer confidence weakening significantly since Russia's invasion of Ukraine on 24 February 2022 which is contributing to the current cost of living crisis,’ Hostmore explained.
Brent oil was quoted at $114.88 a barrel midday Thursday, up from $113.93 late Wednesday. Gold stood at $1,846.09 an ounce, down from $1,850.30.
Still to come on economic events calendar on Thursday are US economic growth figures and the latest jobless claims numbers at 1330 BST.
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