Stocks in London opened lower on Wednesday, despite a strong showing from markets in New York and Asia, after largely strong US corporate earnings and a big stimulus package from the Chinese government.
The FTSE 100 index opened down 10.39 points, 0.1%, at 7,379.31. The FTSE 250 was down 129.55 points, 0.8%, at 16,864.55, and the AIM All-Share was down 3.30 points, 0.5%, at 675.15.
The Cboe UK 100 was down slightly at 737.05, the Cboe UK 250 was down 1.0% at 14,593.63, and the Cboe Small Companies was down 0.1% at 12,675.86.
In European equities on Wednesday, the CAC 40 in Paris was down 0.5%, while the DAX 40 in Frankfurt was down 0.3%.
Asian equity markets were up on Wednesday morning, thanks to Chinese government fiscal stimulus plans.
The Nikkei 225 index in Tokyo closed up 0.7%. In China, the Shanghai Composite closed up 0.4%, while the Hang Seng index in Hong Kong was up 0.3% in late dealings.
China unveiled plans for $137 billion in extra debt to boost infrastructure spending.
The country approved a plan to issue ¥1 trillion in sovereign bonds to be distributed to local governments to support national disaster prevention and recovery.
The move will lift the fiscal deficit ratio for 2023 to about 3.8% of gross domestic product, the official Xinhua news agency said Tuesday, well above the three percent usually considered Beijing’s limit.
Leaders rarely alter the budget mid-year, but it did happen in 2008 after the Sichuan earthquake and during the Asian financial crisis in the late 1990s.
The S&P/ASX 200 in Sydney closed down marginally, as inflation numbers came in slightly hotter than expected.
According to the Australian Bureau of Statistics, consumer prices in the third quarter rose 5.4% annually, compared to 6.0% in the second quarter. This was slightly faster than the 5.3% market consensus estimate, as cited by FXStreet. This marks the third consecutive quarter of lower annual inflation and is down significantly from the peak of 7.8% in the December 2022 quarter.
The pound was quoted at $1.2148 early on Wednesday in London, down compared to $1.2163 at the equities close on Tuesday. The euro stood at $1.0585, lower against $1.0588. Against the yen, the dollar was trading at JP¥149.90, unchanged from a day earlier.
In the FTSE 100, Lloyds lost 0.6%.
In the third quarter of 2023, the lender’s net income rose 0.7% on-year to £4.51 billion from £4.48 billion. This was below company-compiled consensus of £4.56 billion, however.
Net interest income alone was 1.5% higher at £3.44 billion, though this also fell short of consensus of £3.45 billion.
Pretax profit more than trebled to £1.86 billion from £576 million a year earlier, beating consensus of £1.82 billion.
‘Notable was the relatively upbeat forecast for impairments – Lloyds, for now, managing to keep bad debts under some kind of control. The key question for investors is how long the company can continue to enjoy some sort of benefit from the higher cost of borrowing and if or when the strain on household finances becomes so acute the level of loans gone bad starts to balloon,’ said AJ Bell head of financial analysis, Danni Hewson.
Lloyds Banking’s ‘reassuring’ numbers followed a mixed set of results from Barclays on Tuesday. Barclays had cut its UK net interest margin guidance, leading to investors fretting over the possibility of a similar disappointment at Lloyds and NatWest, which reports on Friday.
Barclays and NatWest were down 0.9% and 1.0% respectively in early dealings.
Consumer goods firm Reckitt Benckiser shed 2.2%.
Reckitt Benckiser reported that life-for-like revenue in the third quarter of 2023 rose 3.4% to £3.60 billion. This was driven by growth in its Hygiene and Health arms, and was offset by a 12% fall in its Nutrition division.
It also announced a strategic update. As part of this, Chief Executive Officer Kris Licht said: ‘We do, however, have room to sharpen and improve. We will continue to invest in the superiority of our products, work to improve the consistency of our in-market execution and optimise our cost base. At the same time, we will constantly sharpen our portfolio in line with our clear principles for portfolio value creation.’
As part of this, Reckitt said it is beginning its £1 billion share buyback programme, which will commence imminently and last over the next 12 months.
In the FTSE 250, Essentra was by far the worst performer, down 10%.
The Oxford-based components company said it has continued to deliver a ‘resilient’ performance in the third quarter of 2023.
On a like-for-like and trading day adjusted basis, revenue declined by 7.1% in the third quarter, compared to the same period in the prior year.
Reflecting the softer trading environment, Essentra expects to deliver adjusted operating profit within its expectations for financial 2023, but towards the lower end.
Ibstock lost 3.1%, despite leaving its own guidance unchanged.
The Leicestershire, England-based maker of clay and concrete building products said it has delivered a ‘resilient’ performance in the third quarter of 2023. However, it noted that market demand in the period was more subdued than expected.
As a result, and in line with the wider UK brick industry, sales volumes in the third quarter were below those achieved during the second quarter of the year.
In the US on Tuesday, Wall Street ended higher, following some strong earnings from US companies. The Dow Jones Industrial Average closed up 0.6%, the S&P 500 up 0.7% and the Nasdaq Composite up 0.9%.
There will be quarterly results from Facebook-owner Meta Platforms after the New York market close on Wednesday.
Brent oil was quoted at $86.94 a barrel early in London on Wednesday, up from $86.37 late Tuesday. Gold was quoted at $1,970.22 an ounce, higher against $1,963.03.
Investors are also anticipating Canada’s latest interest rate decision to come later in the day.
Markets are expecting the bank to keep rates steady at 5%, while keeping the options open for further rate hikes.
‘Recent evidence that inflationary pressures are easing have dampened expectations of further rate rises and the sell-off in global bonds has further strengthened the case for interest rates to remain on hold. However, the BoC is unlikely to provide any support for hopes of an early cut in interest rates,’ said Lloyds Bank.
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