The FTSE 100 was the laggard in Europe, though trade in New York was more confident, after bullish earnings from Facebook’s parent and as a tame US economic reading lifted hope of a rate hike pause from the Federal Reserve.
In London, grocer Sainsbury’s and Paddy Power owner Flutter lost out. Though earnings from Barclays impressed. After the New York close, Amazon reports.
The FTSE 100 index closed down 21.06 points, 0.3%, at 7,831.58. The FTSE 250 ended up 40.04 points, or 0.2%, at 19,248.01, and the AIM All-Share added 0.79 of a point, 0.1%, at 822.63.
The Cboe UK 100 ended down 0.3% at 783.07, the Cboe UK 250 rose 0.3% at 16,886.84, and the Cboe Small Companies dropped 0.3% to 13,256.96.
In European equities on Thursday, the CAC 40 index in Paris closed up 0.3%, while the DAX 40 in Frankfurt ended flat.
‘Slowing growth was always going to be the price for finally pulling up runaway inflation but today’s US GDP figures have still surprised on the downside,’ AJ Bell analyst Danni Hewson commented.
US economic growth slowed markedly and came in below market expectations in the first quarter, numbers from the Bureau of Economic Analysis showed.
US gross domestic product grew by 1.1% on an annualised basis in the first three months of 2023, compared to the last three months of 2022, slowing from a 2.6% rise on the same basis in the fourth quarter of 2022.
Economic growth fell short of FXStreet-cited consensus of a 1.9% annualised climb.
The figure comes just days before the US Federal Reserve next meets. According to the CME FedWatch tool, there is an 81% chance that the central bank lifts US interest rates by 25 basis points to a range of 5.00% to 5.25% on Wednesday next week.
The Fed is largely expected to pause hikes thereafter, a notion that was supported by the tepid US GDP reading.
The data puts fears of a recession back under the spotlight. The dollar was mixed on Thursday.
Sterling was quoted at $1.2492 at late Thursday in London, lower compared to $1.2472 at the close on Wednesday. The euro stood at $1.1024, lower against $1.1046.
Equities in the US shone. Hope the Fed will pause hikes soon, as well as Meta’s strong results, lifted the mood.
Stocks in New York were higher. The Dow Jones Industrial Average was up 0.7%, the S&P 500 index jumped 1.1%, and the Nasdaq Composite surged 1.7%.
Facebook-owner Meta Platforms, which reported after the closing bell on Wednesday, posted better-than-expected revenue in the first quarter and issued positive guidance for the next three months.
The stock was up 14% in New York.
While US tech jumped, European technology companies struggled. STMicroelectronics was among the worst of the lot, sliding 8.2% in Paris, despite the chipmaker beating expectations.
The Swiss-headquartered company reported on Thursday that its first quarter net income increased 40% to $1.04 billion or $1.10 per share from $747 million or $0.79 per share in the same quarter a year before.
Net revenue totalled $4.25 billion, representing a year-over-year increase of 20% from $3.55 billion. Analysts expected revenue of $4.13 billion for the quarter.
Earlier in the week, fears for the US banking sector re-emerged, after poor results from First Republic.
In contrast, European banks were on the up.
Deutsche Bank rose 2.5% as it reported an increase in its first-quarter profit and announced new measures to reduce its costs.
The lender booked a net profit of €1.32 billion over the first three months of 2023, it said in a statement, an 7.7% increase on €1.23 billion in the same period last year.
In London, Barclays shot up 5.2%. It said all three of its businesses performed well in the first quarter of 2023, with high-quality income growth and double-digit returns.
Barclays reported pretax profit of £2.60 billion, up 16% from £2.23 billion a year prior. Total income amounted to £7.24 billion, up 11% from £6.50 billion.
Among the worst FTSE 100 performers, however, was grocer Sainsbury’s. The stock slid 2.7%.
It reported a drop in annual profit, saying it has spent £560 million on keeping prices low for customers amid the cost of living crisis.
Sainsbury’s reported that revenue in its financial year ended March 4 rose by 5.3% to £31.49 billion from £29.90 billion a year earlier. However, pretax profit plummeted by 62% to £327 million from £854 million.
Looking ahead, the company expects to report underlying pretax profit between £640 million and £700 million in financial 2024. In financial 2023, underlying pretax profit came in at £690 million, down from £730 million a year earlier.
Gambling stocks on the FTSE 100 also struggled. Flutter fell 1.5%.
Flutter said a long-awaited gambling act review in the UK is ‘important and necessary’ for the industry, which has come under greater regulatory scrutiny.
The Paddy Power owner said it wants to take a ‘leadership role in responsible betting and gaming’. It said it has already made pre-emptive changes that have removed £150 million worth of revenue from its UK business.
Proposed measures announced in the UK government’s white paper could present an incremental revenue hit between £50 million and £100 million.
‘This would result in the total cumulative revenue impact of changes already introduced and those announced today of between £200 million to £250 million of annual UK revenue. We estimate that there will be no incremental impact in 2023, with changes occurring from some point in 2024,’ Flutter said.
Elsewhere in London, Lancashire Holdings added 5.1%. It reported a record first quarter and said it only saw a negligible hit from natural catastrophe events so far in 2023.
The Bermuda-based insurance company said gross written premiums rose 23% to $586.2 million in the first three months of 2023 from $477.9 million a year before.
It is Lancashire’s best-ever first-quarter for gross written premiums.
Lancashire noted natural catastrophe loss events during the quarter included storms in the US, an earthquake in Turkey, and flooding in New Zealand.
‘These losses, both individually and in aggregate, were not sufficiently material to exceed our normal disclosure threshold,’ Lancashire explained.
Brent oil was quoted at $78.08 a barrel late London on Thursday, down from $80.29 late Wednesday. Gold was quoted at $1,984.30 an ounce, down against $1,995.53.
On the eve of the Bank of Japan’s first decision under its new policy chief, the dollar was trading at JP¥133.95, higher compared to JP¥133.54.
The BoJ announces its latest interest rate decision on Friday. Friday will be the first decision by new BoJ Governor Kazuo Ueda. The BoJ is expected to maintain its benchmark rate at negative 0.10%.
Elsewhere on Friday, there are GDP numbers from France and Italy, before a eurozone reading at 1000 BST. There is inflation data from Germany at 1300 BST.
The local corporate calendar has first-quarter results from lender NatWest and a trading statement from education publisher Pearson.
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