Hawkish words from US central bankers meant European equities struggled to press on in early dealings on Wednesday, and focus now turns to a speech from Federal Reserve Chair Jerome Powell which is on the docket in the afternoon.
The FTSE 100 index opened up 10.02 points, 0.1%, at 7,420.06. The FTSE 250 was down 25.10 points, 0.1%, at 17,736.61 and the AIM All-Share was down 0.26 of a point at 698.37.
The Cboe UK 100 was up 0.1% at 740.50, the Cboe UK 250 was flat at 15,419.09, and the Cboe Small Companies was unmoved at 12,932.60.
In European equities, the CAC 40 in Paris was flat, while the DAX 40 in Frankfurt fell 0.2%.
In the US on Tuesday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.2%, the S&P 500 up 0.3% and the Nasdaq Composite up 0.9%.
In Asia on Wednesday, the Nikkei 225 index in Tokyo closed down 0.3%. In China, the Shanghai Composite ended down 0.2%, while the Hang Seng index in Hong Kong was down 0.6%. The S&P/ASX 200 in Sydney closed up 0.3%.
Sterling was quoted at $1.2268 early Wednesday, lower than $1.2304 at the London equities close on Tuesday. The euro traded at $1.0677, down versus $1.0688. Against the yen, the dollar was quoted at JP¥150.65, up versus JP¥150.51.
‘The data calendar remains quiet across developed markets, but we are hearing more from central bankers. Fed speakers have delivered hawkish comments, emphasising the fight against inflation and keeping options open for December. Expect more pushback against dovish bets as Powell takes the stage today and tomorrow: the USD recovery may have more to run,’ analysts at ING commented.
Fed Chair Jerome Powell speaks at 1415 GMT.
On Tuesday, Fed Governor Michelle Bowman said in prepared remarks in Ohio on Tuesday: ‘I continue to expect that we will need to increase the federal funds rate further to bring inflation down to our 2% target in a timely way.’
There is also focus on the Bank of England on Wednesday, with Governor Andrew Bailey speaking at 0930 GMT. It is unclear whether Bailey will speak about monetary policy.
Ebury analyst Matthew Ryan commented: ‘Chief Economist Huw Pill said on Monday that the MPC could begin cutting interest rates in mid-2024, albeit that rates will probably not return back to their 2010s levels. This has been perceived as moderately bearish for the pound, as while swaps are eyeing the first rate cut in June 2024, this is far from fully priced in by markets. Clearly, the Bank of England remains stuck between a rock and a hard place, as elevated inflation and sky-high wages on the one hand are counteracted by a very fragile economy on the other.’
The dollar was in robust shape, though oil was not. A barrel of Brent crude fetched $81.65 early Wednesday, lower than $82.55 late Tuesday. Brent spiked in the wake of a Hamas attack on Israel on October 7, but the North Sea benchmark now sits below the $84.37 a barrel that it fetched prior to the event.
There has been a reluctance to send oil higher, despite the North Sea benchmark approaching the $94 a barrel mark in mid-October.
Swissquote analyst Ipek Ozkardeskaya commented: ‘Trend and momentum indicators remain comfortably negative, but the [relative strength index] warns that crude oil is about to step into the oversold market territory, and that it will soon be time for a correction. Buyers are expected to come in at the $75/77 range, and a correction to $80/82 range is possible, with limited upside potential above that level. The risk of a sudden jump due to supportive geopolitical news is live, but if the Gaza war, the Iranian warnings that the war could escalate and spill to the region, and Opec and Russia’s reminder that they will keep the production levels tight couldn’t prevent this month’s selloff, the slowing demand rhetoric will continue to outweigh the supply concerns and keep the market in the bearish waters.’
In London, M&S surged 9.5%, the best performer in an otherwise tepid open for large-caps.
It reported improved interim results and early signs suggest the clothing, home and food retailer will enjoy a decent Christmas.
Revenue in the half-year to September 30 increased 11% to £6.13 billion from £5.54 billion a year earlier. Pretax profit jumped 56% to £325.6 million from £208.5 million.
M&S said: ‘M&S’s first half results showed a good year on year improvement in almost all businesses. Favourable market conditions, surprisingly resilient consumer demand and the effect of competitor exits from the market provided a solid backdrop. In this environment, the strategy to reshape for growth has enabled M&S to increase customer numbers and market share in both businesses, with healthy volume growth and reduced promotions in Food, higher than expected full price sales in Clothing & Home and structural cost reduction supporting robust margins.’
Food sales rose 15%, while in Clothing & Home, they increased 5.7%.
Chief Executive Stuart Machin said: ‘Looking ahead, trading momentum has been maintained through October, with customers responding positively to our Christmas ranges. There will be challenges and headwinds in the year ahead and progress won’t be linear, but we are ambitious for future growth and are driving what is in our control.’
The company’s interim dividend amounted to 1.0 pence per share. It did not pay an interim dividend in the year prior.
ITV tumbled 6.4%, as a decline in advertising revenue has kept a lid on its top line so far in 2023.
Total revenue in the nine months to September 30 amounted to £2.98 billion, a rise of 0.9% from £2.95 billion a year earlier. In the ITV Studios production arm, revenue rose 9.3% on-year to £1.52 billion, though in Media & Entertainment, it fell 6.5% to £1.46 billion. M&E includes ITVX, as well as ITV’s television networks.
‘ITVX continued to perform strongly. Total digital revenues were up 23% and total streaming hours were up 27% to the end of September with monthly active users continuing to grow in line with our expectations,’ ITV said.
M&E’s outcome was hurt by a 7% decline in total advertising revenue.
ITV added: ‘The advertising market remains challenging and over the full year 2023 we expect ITV TAR to be down around 8% versus 2022 TAR, which was the second highest in ITV’s history and included the positive impact of the FIFA World Cup.’
Elsewhere in London, eEnergy soared 45% after the net-zero energy services received a ‘strategic investment’ from partner Luceco.
Lighting manufacturer and distributor Luceco will invest £1.8 million in eEnergy. It will subscribe for 35.1 million eEnergy shares at 5 pence each, a 25% premium to the firm’s closing price on Tuesday.
It will mean Luceco has a 9.1% stake in the AIM listing. Luceco shares were 0.2% higher.
Over in Frankfurt, Commerzbank was the best blue-chip performer, up 4.8%, after its profit surged in the third quarter along with a substantial revenue boost, and announced plans for a €600 million buyback.
The Frankfurt-based bank said net profit for the third quarter of 2023 swelled to €684 million from just €195 million the prior year. Commerzbank also said net interest income rose 34% to €2.17 billion in the quarter from €1.62 billion. Total revenue jumped 46% to €2.76 billion from €1.89 billion.
Commerzbank maintained its intention to distribute €3 billion among shareholders between 2022 and 2024. It has applied to launch a buyback of up to €600 million, subject to approval from the European Central Bank and German Finance Agency.
Gold was quoted at $1,968.01 an ounce early Wednesday, higher than $1,963.77 on Tuesday.
Still to come on Wednesday is a eurozone retail sales reading at 1000 GMT.
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