Another reassuring earnings report from a major UK bank helped shares in London to start positively on Wednesday, despite continued banking sector concern in the US.
The FTSE 100 index opened up 40.58 points, 0.5%, at 7,813.61. The FTSE 250 was up 47.61 points, 0.3%, at 19,361.84, and the AIM All-Share was up 1.01 points, 0.1%, at 829.21.
The Cboe UK 100 was up 0.5% at 781.15 the Cboe UK 250 was up 0.1% at 17,012.68, and the Cboe Small Companies was flat at 13.460.87.
In European equities, the CAC 40 index in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.4%.
Market focus for Wednesday is squarely on the US Federal Reserve, which is set to announce its latest interest rate decision at 1900 BST.
The market is expecting another 25 basis point hike, bring the target rate to 5.00% to 5.25%. The US central bank is then expected to halt its rate hiking cycle.
New York closed in the the red on Tuesday, amid further worries about the US regional banking sector. The Dow Jones Industrial Average ended down 1.1%, the S&P 500 fell 1.2% and the Nasdaq Composite lost 1.1%.
The dollar was weaker in early exchanges in Europe before the rate announcement.
Sterling was quoted at $1.2504 early Wednesday, higher than $1.2463 at the London equities close on Tuesday. The euro traded at $1.1027, higher than $1.0986.
Against the yen, the dollar was quoted at JP¥135.80, down from JP¥136.55.
In the FTSE 100, RS Group fell 2.7%, as it announced the resignation of its chief financial officer. David Egan has left the role at the industrial and electronics products distributor with immediate effect, with Jane Titchener taking over on an interim basis.
‘Very recently I notified the board of a personal relationship with a colleague. Following a detailed review by the board, I recognise that there have been some shortcomings of judgment on my part and my actions have fallen short of the high standards expected of RS leadership,’ Egan explained.
Shares GSK consumer healthcare spin-off Haleon fell 3.3%.
Haleon said operating profit in the first quarter was up 35% to £627 million, mostly thanks to separation and admission costs a year before. Haleon was listed in London in July of last year.
On an adjusted basis, operating profit rose 9.5% to £691 million. However, Haleon noted a lower adjusted operating profit margin, which fell 90 basis points to 23.1%, as a result of higher costs and foreign exchange headwinds.
Lloyds Banking was up 0.1%.
The lender said net interest income rose 18% to £3.43 billion in the first quarter from £2.90 billion a year before. It swung to positive total income of £9.31 billion from a £2.11 billion loss in the previous year. On an underlying basis, net income rose 15% to £4.65 billion from £4.03 billion.
Pretax profit jumped 46% to £2.26 billion from £1.54 billion.
Customer deposits fell by £2.2 billion to £473.1 billion. This was ‘including a reduction in Retail current account balances of £3.5 billion, partly driven by seasonal customer outflows, including tax payments, higher spend and a more competitive market,’ Lloyds said, noting it was partially offset by deposit increases in Commercial Banking.
Looking ahead, Lloyds backed annual guidance of a banking net interest margin of more than 305 basis points, and return on tangible equity of around 13%.
‘While an increase to costs takes a little shine off the bank’s performance, there is still a lot to be positive about,’ commented John Moore, senior investment manager at RBC Brewin Dolphin.
‘First Republic’s collapse has hit US banks’ shares, but looking longer term Lloyds could be among the beneficiaries in that some challenger banks don’t have the strength and depth to navigate through the current environment.’
HSBC added 1.0%, as Berenberg raised the stock to ’buy’ from ’hold’, following its strong first-quarter showing on Tuesday.
Housebuilder Barratt Developments edged 0.2% lower, as it updated on the period from January 1 to April 31, ahead of its year end on June 30.
The company on Wednesday said it is now fully forward sold for financial 2023, thanks to an improved sales rates.
Net private reservations per active outlet per average week was 0.65, compared to 0.93 a year before. Barratt expects to deliver adjusted pretax profit in line with current market expectations of £876.8 million. Trading for the full year is in line with the board’s expectations, and it remains on track to complete between 16,500 and 17,000 homes, including around 750 joint venture completions.
Flutter Entertainment was trading flat, despite a solid first-quarter update.
The gambling operator reported a strong start to 2023, with revenue in the first quarter up 54% year-on-year to £2.41 billion. Average monthly players rose 30% to 12.3 million, with strong recreational customer growth seen across all divisions.
The firm’s US division saw 92% growth in revenue. ‘We added over 1.5 million customers [in the US] in the quarter, and we remain the clear market leader. Our US sports betting handle of $10.9 billion represented almost 60% of the group’s total sportsbook stakes,’ said Chief Executive Peter Jackson.
Following shareholder approval at its recent annual general meeting, Dublin-based Flutter expects its additional listing in the US to happen late in the fourth quarter.
Flutter is just one of several firms to pursue a US listing in recent months.
In a bid to encourage more firms to list in the UK, the UK Financial Conduct Authority announced late Tuesday that it will simplify the rules for UK listings.
The FCA said it is proposing ‘significant’ changes to the listing rulebook, including replacing its existing standard and premium listing segments with a single category for equity shares in commercial companies.
The financial watchdog said a single equity category would remove eligibility requirements that can deter early-stage companies, be more permissive on dual class share structures, and remove mandatory shareholder votes on transactions such as acquisitions to reduce frictions to companies.
In the FTSE 250 index early Wednesday, TI Fluid Systems jumped 10%.
The maker of storage, carrying and delivery systems for fluids backed its annual outlook, as first-quarter revenue rose 15% year-on-year to €869.8 million.
‘The group’s performance through Q1 2023 has been encouraging and our outlook for the year remains unchanged, with constant currency revenue growth outperformance compared to [light vehicle production] growth, adjusted [earnings before interest & tax] margins to expand above 6%,’ TI Fluid Systems explained.
On AIM, Mirriad Advertising surged 65%, as the in-content advertising company announced a collaboration with Microsoft.
Mirriad said it has worked with Microsoft to build a new application programming interface. This is part of establishing a roadmap for ‘adopting Microsoft Azure and its AI capabilities for various use-cases’.
‘The wide-ranging agreement with Microsoft can unlock significant benefits and opportunities for both parties as we continue to develop our technical capabilities and scale the creation and delivery of contextually relevant ad experiences in content,’ said CEO Stephan Beringer.
In Asia on Wednesday, the stock market in Japan was shut for Constitution Memorial Day. In Shanghai, the market remained closed as Labour Day continued in China. Hong Kong was open, and the Hang Seng index was down 1.7%. The S&P/ASX 200 in Sydney closed down 1.0%.
Gold was quoted at $2,017.63 an ounce early Wednesday, higher than $2,011.85 on Tuesday. Brent oil was trading at $75.45 a barrel early Wednesday, weakening further from $76.17 late Tuesday.
Still to come in the economic calendar, in addition to the US interest rate announcement, the EU will publish its unemployment data at 1000 BST. There will also be two services PMI prints for the US from 1445 BST.
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