Insurer Aviva shone, but Endeavour Mining, Spirax-Sarco and Entain all underwhelmed in a largely disappointing day of large-cap earnings in London on Thursday, compounding equity market misery.
Equities have struggled after hawkish comments from Federal Reserve Chair Jerome Powell to US lawmakers in recent days. Bets that the Fed will keep rates higher for longer have supported the dollar, though the greenback returned some gains on Thursday.
The FTSE 100 index was down 42.01 points, or 0.5%, at 7,887.91. The FTSE 250 was down 217.69 points, or 1.1% at 19,634.28, and the AIM All-Share was down 5.98 points, or 0.7%, at 848.75.
The Cboe UK 100 was down 0.6% at 789.60, the Cboe UK 250 was down 1.1% at 17,214.53, and the Cboe Small Companies was down 0.6% at 13,820.20.
On Tuesday, Fed Chair Jerome Powell warned that US interest rates will likely peak at a higher level than was previously anticipated due to January data that came in stronger than recent trends expected.
During his second day of testimony on Wednesday, Powell reiterated that the Fed would be prepared to increase the pace of rate hikes if needed but clarified that ‘no decision has been made’.
It has given stock market investors food for though, AJ Bell analyst Russ Mould commented.
It shattered a ‘comfortable illusion’ that had supported stocks at the start of the year. Traders believed rate hikes would slow and soon come to a halt, with a ‘soft-landing’ for the US economy also likely.
According to the CME FedWatch tool, markets think there is a 76% chance that the US central bank will lift rates by 50 basis points at its March meeting, with just a 24% chance of a smaller 25 basis point hike again.
A week ago, so before Powell’s testimony, there was a 68% chance of a 25 basis point lift.
Focus now turns to the latest batch of jobs market data. At 1330 GMT on Thursday, the latest US jobless claims data is released. A day later is the nonfarm payrolls.
Stocks in New York were called largely lower. The Dow Jones Industrial Average is seen opening flat, while the S&P 500 index is seen opening down 0.2%, and the Nasdaq Composite is called 0.5% lower.
The pound was quoted at $1.1894 at midday on Thursday in London, higher compared to $1.1859 at the close on Wednesday.
In London, Endeavour Mining was one of the worst blue-chip performer at midday, dropping 3.7%.
The gold miner reported a steep fall in annual profit for 2022, amid lower gold sales and higher operating costs.
In 2022, Endeavour’s pretax profit fell to $145 million from $448 million the previous year. This sharply missed UBS analyst forecasts of a rise to $610 million.
Also putting pressure on the FTSE 100, miners Rio Tinto, Antofagasta and Glencore lost 4.1%, 2.7% and 2.3%, respectively.
Spirax-Sarco fell 3.8%.
The thermal energy management and pumping company reported revenue of £1.61 billion, up 20% from £1.34 billion in 2021, driven by volume growth and price increases to protect margins.
However, the company said pretax profit was £308.1 million, down 2.0% from £314.5 million a year ago.
Chief Executive Officer Nicholas Anderson said: ‘We remain confident in our ability to self-generate growth and protect margins, while navigating the uncertainties ahead. In 2023, we anticipate mid-single-digit growth over 2022 group pro-forma sales, with mid-to-high single digit growth in Steam Specialties and Electric Thermal Solutions, as well as Watson-Marlow sales slightly below 2022.’
Ladbrokes owner Entain lost 3.4% after it announced a lower profit in 2022, despite revenue growth.
The gambling firm reported a pretax profit of £102.9 million, down sharply from £393.2 million in 2021. Revenue rose 12% to £4.30 billion from £3.83 billion.
Entain noted that share based payment charges were £6.9 million higher than last year, while underlying depreciation and amortisation was 6.9% higher, at £238.1 million from £222.8 million a year ago. The firm’s operating costs stretched by 18% to £1.12 billion from £952.7 million.
In addition, Entain booked a joint venture loss of £194.1 million, including a £193.9 million loss relating to BetMGM, in-line with expectations.
At the other end of the FTSE 100, Aviva climbed 3.0% to become the best performer at midday. The insurer announced a £300 million share buyback.
In 2022, Aviva swung to an IFRS loss of £1.14 billion from a profit of £2.04 billion the year prior. Meanwhile, its adjusted operating profit from continuing operations rose to £2.21 billion from £1.63 billion.
The company’s solvency II return on equity was 16.4%, up from 10.7% last year, while its solvency II shareholder cover ratio was 212%, down from 244%.
Looking forward, Aviva said the ‘positive momentum’ seen in 2022 has continued, reinforcing its confidence in its financial targets in 2023.
In the FTSE 250, Domino’s Pizza Group fell 6.2% as it reported a drop in annual profit.
In the financial year that ended December 25, the company’s pretax profit dropped to £98.9 million from £109.7 million the previous year.
Elsewhere in London, Alpha Financial Markets Consulting jumped 7.5%, after it said it was ‘delighted’ with its continuing strong performance and now expects to report full-year results ‘significantly’ ahead of current market expectations, which it did not specify.
On AIM, WANdisco requested its shares be suspended from trading on AIM while it conducts an investigation into its true financial position.
The company explained that, following investigations by its chief financial officer and chief executive officer, it has discovered ‘significant, sophisticated and potentially fraudulent irregularities’ with regard to received purchase orders and related revenue and bookings, as represented by one senior sales employee.
Consequently, WANdisco said the irregularities will ‘significantly impact’ its cash position and lead to ‘material uncertainty’ regarding its overall financial position.
The firm now expects that financial 2022 revenue could be as low as $9 million, and not $24 million as previously expected. In addition, the company said it has ‘no confidence’ in its announced financial 2022 bookings expectations.
Only on Monday, WANdisco had said it was in the early stages of exploring an additional listing in the US, but said it remains committed to its listing on London’s AIM.
In European equities on Thursday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both down 0.3%.
The euro stood at $1.0575 midday on Thursday, higher against $1.0553 at the London equities close on Wednesday. Against the yen, the dollar was trading at JP¥136.22, lower compared to JP¥137.14.
Brent oil was quoted at $82.71 a barrel at midday in London on Thursday, up from $82.60 late Wednesday. Gold was quoted at $1,819.52 an ounce, up slightly from $1,818.62.
Copyright 2022 Alliance News Ltd. All Rights Reserved.
