European markets had broadly shrugged off a hawkish set of minutes from the US Federal Reserve, but the FTSE 100 underperformed peers on Thursday as Shell shares slipped on a warning of hefty writedown following its exit from Russia.
The US central bank confirmed that it is looking to tighten its monetary policy, minutes from the last Federal Open Market Committee meeting showed late Wednesday, and strongly considered a 50 point rise in March.
At their March policy meeting, several Fed officials supported raising interest rates by half a percentage point in the future to combat inflation, the meeting minutes highlighted.
‘The minutes to the March FOMC meeting show an intensifying desire to regain control of the inflation narrative via a series of aggressive rate rises and a rapid shrinking of the Federal Reserve’s balance sheet. We expect the outcome to be a 3% Fed funds rate by early next year,’ said Dutch bank ING.
However, with the risk of a recession looming, ING added, these hikes may just be a precursor to rate cuts before 2023 is out.
The FTSE 100 index was down 4.27 points, or 0.1%, at 7,583.43. The mid-cap FTSE 250 index was up 38.81 points, or 0.2%, at 21,139.32. The AIM All-Share index was up 3.11 points, or 0.3%, at 1,050.88.
The Cboe UK 100 index was down 0.2% at 753.74. The Cboe 250 was down 0.2% at 18,517.29, and the Cboe Small Companies down 0.3% at 15,395.21.
In mainland Europe, the CAC 40 in Paris was up 0.6%, while the DAX 40 in Frankfurt was up 0.5%.
In the FTSE 100, Aviva and abrdn were the biggest fallers, down 3.7% and 2.3% respectively, after the stocks went ex-dividend meaning new buyers no longer qualify for the latest payout.
Shell was down 1.5% after the oil major said it will book an impairment of between $4 billion and $5 billion in the first quarter of 2022 after exiting its operations in Russia.
‘These charges are expected to be identified and therefore will not impact adjusted earnings. Details of the accounting treatment and impact of ongoing developments will be provided at the first quarter 2022 results announcement,’ the company said.
Shell last month said it would withdraw from involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas, following Russia’s attack on Ukraine.
In addition, Shell said operating cash flow is expected to be hurt by ‘very significant’ working capital outflows, as price increases impacting inventory have led to a cash outflow of around $7 billion.
Entain was down 0.7%. The gambling firm said it made a strong start year with a good performance across all areas of the business, and is confident in its financial performance for the year ahead.
For the three months to March 31, net gaming revenue was up 31% compared to the first quarter last year, supported by the easing of Covid-19 restrictions. Retail arm volumes were within 5% to 10% of pre-Covid levels. However, first-quarter online net gaming revenue was down 8% on an annual basis, though it said this was in line with expectations.
In the FTSE 250, 888 Holdings was the standout performer, up 21%, after the gambling firm unveiled plans for a bookbuild to help fund its acquisition of some William Hill assets, also adding the purchase price of the deal has been cut.
The Gibraltar-based firm said the enterprise value of the William Hill assets has been cut to between £2.0 billion and £2.1 billion from £2.2 billion previously. 888 and Caesars have amended their September purchase deal, with the cash consideration due at closing reduced to £584.9 million from £834.9 million before.
888 intends to conduct a placing of up to 70.8 million new shares, representing around 19% of its issued share capital. The placing will be conducted through an accelerated bookbuild process which will be launched immediately. The price at which the shares are to be placed will be determined following the close of the process, it explained.
At current market prices, the fundraise would be worth around £160 million. 888 said the placing replaces its previous intention to raise around £500 million in the issue of new equity.
At the other end of the mid-caps, Countryside Partnerships was the worst performer, down 15%, after the housebuilder issued a profit warning amid the results of an operational review which found ‘execution-related’ failures.
The UK housebuilder and urban regeneration firm said that adjusted revenue fell 13% to £658.6 million in the six months to March 31, from £755.0 million a year before. Adjusted operating profit dropped 42% in the period to £45.6 million from £78.6 million a year before, with Countryside blaming this on an ‘unusually strong’ comparative period with the first half of financial 2021.
As a result, adjusted operating profit for the year ending September 30 is expected to be roughly £150 million, down 10% from £167 million the year before.
TI Fluid Systems was down 12% after Jefferies downgraded the brake fluids and fuel tanks maker to ‘hold’ from ‘buy’.
The pound was quoted at $1.3080 at midday Thursday, up from $1.3073 at the London equities close Wednesday.
The euro was priced at $1.0891, lower against $1.0906. Against the yen, the dollar was trading at JP¥123.74 in London, soft from JP¥123.77.
On the continent, eurozone retail sales figures presented a mixed picture, with the monthly rise in February falling short of expectations but the annual hike topping market forecasts.
According to Eurostat, the single currency bloc’s retail sales rose 0.3% on a monthly basis in February, quickening from a 0.2% hike in January but falling short of FXStreet-cited consensus of a 0.6% growth.
Annually, retail sales rose 5.0% in the eurozone in February, slowing from January’s 8.4% rise but bettering market forecasts of a 4.8% hike.
Brent was quoted at $102.28 a barrel Thursday at midday, down from $104.01 Wednesday evening.
Rich countries will tap an additional 120 million barrels of oil from emergency reserves in a bid to calm crude prices that have soared following Russia’s invasion of Ukraine, the International Energy Agency said on Wednesday.
The move includes 60 million barrels to be released by the US, which has recently announced it would tap its strategic oil reserves.
The IEA ‘is moving ahead with a collective oil stock release of 120 million barrels (including 60 million barrels contributed by the US as part of its overall draw from its Strategic Petroleum Reserve)’, IEA Executive Director Fatih Birol said in a tweet.
Last week, US President Joe Biden announced a record release of US oil onto the market - one million barrels every day for six months, or a total of more than 180 million barrels.
Gold stood at $1,927.16 an ounce, flat against $1,927.10 late Wednesday.
New York was pointed to a higher open ahead of jobless claims data at 1330 BST. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 up 0.3%, and the Nasdaq Composite up 0.6%, based on futures trading.
On the corporate front, Berkshire Hathaway has boosted its stake in HP, according to a regulatory filing on Wednesday, sending shares in the technology firm surging.
HP shares were up 15% in pre-market trade in New York.
Berkshire Hathaway added to its HP stake by buying just shy of $400 million worth of shares, Wednesday’s regulatory filing said. The transactions occurred earlier this week.
Warren Buffet’s insurance and industrial conglomerate now owns just over an 11% stake in HP.
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