A full plate of earnings from London blue-chips was giving investors plenty to sink their teeth into early Wednesday, ahead of a key US interest rate decision after the close.
Among reporting companies, Smurfit Kappa, Lloyds Banking and Reckitt Benckiser led the FTSE 100 index, while Unite Group and Rio Tinto were the biggest fallers.
The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1900 BST. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 BST.
The US central bank is widely expected to announce a second successive 75 basis points increase to borrowing costs.
‘Also of interest will be any signals that the Fed sends about its future policy intentions,’ commented analysts at Lloyds Bank. ‘Markets continue to price in further rate rises of just over 100bp by early 2023. However, rising concerns about downside risks to growth are reflected in just over 50bp of rate cuts now priced in for later in 2023.’
London stock indices were outperforming European counterparts early Wednesday.
The FTSE 100 was up 29.20 points, or 0.4%, at 7,335.48. The FTSE 250 index was up 16.11 points, or 0.1%, at 19,584.90. The AIM All-Share index was up 0.64 of a point, or 0.1%, at 899.16.
The Cboe UK 100 index was up 0.3% at 731.47. The Cboe 250 was up 0.1% at 17,060.12. The Cboe Small Companies was up 0.1% at 13,569.61.
In Paris, the CAC 40 stock index was down 0.4%, while in Frankfurt, the DAX 40 was 0.9% lower.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.2%. In China, the Shanghai Composite closed down 0.1%, while the Hang Seng index in Hong Kong was down 1.5%. The S&P/ASX 200 in Sydney ended up 0.2%.
In the FTSE 100, Reckitt Benckiser was a top performer, up 3.9%, after the hygiene and household goods maker raised its annual guidance following a positive first-half performance.
For the six months to June 30, the Slough, England-based firm swung to a pretax profit of £1.69 billion from loss of £1.94 billion last year, on revenue of £6.89 billion, up 4.4% from £6.60 billion.
Looking ahead, Reckitt said annual sales growth will be in a range of 5% to 8%, up from previous guidance of 1% to 4%. It also expects growth in its adjusted operating margins.
‘We are already delivering sustainable mid-single digit net revenue growth and remain firmly on track to deliver our medium-term goal of mid-20s adjusted operating margins by the mid-2020s,’ Reckitt added.
Lloyds Banking was up 4.5% after the high street lender raised its annual guidance against a beneficial backdrop of rising UK interest rates.
For the six months to June 30, net income was £8.45 billion, up sharply from £7.56 last year, but pretax profit was £3.66 billion, down from £3.91 billion.
Lloyds said it set aside £377 million to cover a possible increase in loan defaults as UK interest rates rise to combat rampant inflation.
Underlying profit before the impairment was up 34% to £4.1 billion in the first half, driven by strong net income growth.
Lloyds's CET1 ratio - a key measure of a bank's financial strength - stood at 14.7% on June 30, down from 16.7% at the same time last year.
Turning to returns, Lloyds declared a 0.80p interim dividend, up 20% from last year and worth £550 million in total.
Looking ahead to 2022, Lloyds said its banking net interest margin is now expected to be greater than 280 basis points. It was 2.77% in the first half, up from 2.50% a year before.
Lloyds said its return on tangible equity is now seen at 13% in 2022. It was 13.2% in the first half, down from 19.2% a year ago.
The bank's six-month results were ahead of expectations, commented John Moore at wealth manager Brewin Dolphin, with rising interest rates boosting net interest margin and little sign of deterioration in credit quality.
‘Lloyds is in reasonable shape to weather a tougher macro-economic environment, with its restructuring programme keeping costs in check and new services in the offing,’ Moor said. ‘But, there are still loose ends to tie up - for instance, its ownership of Scottish Widows - and investors will be looking for updates on these fronts in the next set of statements.’
Domestic rivals NatWest and Barclays were up 3.2% and 1.0% respectively in a positive read-across.
Legal & General was up 1.5% after Berenberg raised the insurer to 'buy' from 'hold'.
Smurfit Kappa was up 6.5%, after reporting a jump in half-year pretax profit on a 36% rise in revenue. The Irish packaging firm declared an interim dividend 31.6 euro cents, up from 29.3 cents a year ago.
At the other end of the large-caps, Rio Tinto was the worst performer, down 3.5%. The Anglo-Australian miner slashed its first-half dividend, as earnings were dented by weaker iron ore prices.
Rio said it saw ‘significant movement’ in the pricing for commodities in the half amid growing recession fears and a decline in consumer confidence.
For the six months to June 30, revenue fell to $29.78 billion from $33.08 billion last year, and pretax profit slumped to $12.32 billion from $18.05 billion.
Rio Tinto declared an interim dividend of 267.0 US cents, down 29% from 376.0 cents last year.
During the period, Rio said $10.5 billion in net cash generated from operating activities, 23% lower than the 2021 first half - primarily driven by downward price movements for major commodities.
In June, Rio aid it made a $1.1 billion final payment to the Australian Taxation Office in respect of 2021 profit. It also experienced a rise in working capital, mainly due to elevated prices for raw materials in aluminium inventory.
The miner said operations and growth projects continue to be hurt by the ‘high unplanned absences’, tight labour markets, rising input costs and supply chain disruptions.
Unite Group was down 5.1%. The provider of student accommodation reported a rise in net asset value and profit, lifting its dividend by 69% in response, but also warned on inflationary pressures.
New York ended lower on Tuesday, with the Dow Jones Industrial Average down 0.7%, S&P 500 down 1.2%, and Nasdaq Composite down 1.9%.
Google-owner Alphabet on Tuesday recorded a second quarter profit fall, as it missed top- and bottom-line consensus.
In the second quarter to June 30, revenue improved 13% year-on-year to $69.69 billion from $61.88 billion. The revenue figure came in below a CNN-cited market forecast of $69.9 billion. In addition, growth slowed markedly from a 62% surge in the second quarter of 2021.
Pretax profit declined 14% to $19.01 billion from $21.99 billion a year earlier. Basic earnings per share fell 12% to $1.22 each, lagging a CNN-cited consensus of $1.27.
Alphabet class A shares rose 4.9% in after-hours trade in New York.
Microsoft reported a strong rise in revenue in the final quarter of its financial year, thanks to continued strong Cloud services demand.
In the three months to June 30, revenue rose 12% to $51.87 billion from $46.15 billion a year before. Net income increased slightly to $16.74 billion from $16.46 billion. Diluted earnings per share improved to $2.23 from $2.17.
The stock rose 4.0% after-hours.
The pound was quoted at $1.2050 early Wednesday, up from $1.2021 at the London equities close Tuesday.
The euro was priced at $1.0144, up from $1.0120. Against the yen, the dollar was trading at JP¥136.93, higher against JP¥136.63.
Brent oil was quoted at $104.67 a barrel Wednesday morning, down from $105.24 late Tuesday. Gold stood at $1,720.55 an ounce, firm against $1,717.77.
Copyright 2022 Alliance News Limited. All Rights Reserved.
