European stock markets were on the rise at the end of an eventful week, on a combination of positive earnings from big-name companies on both sides of the Atlantic and growing expectations that interest rates hikes may top out sooner than previously expected.
Strong numbers from Apple and Amazon in the US and from NatWest and Standard Chartered helped to lift investor sentiment.
Expectations for the peak of the US tightening cycle were being scaled back, after the US economy contracted for a second straight quarter between April and June, according to official data released on Thursday.
This fuelled predictions of recession and therefore less need for big additional rate hikes by the US Federal Reserve. It also has caused a fresh headache for President Joe Biden, who has seen his approval ratings plummet ahead of midterm elections in November.
The FTSE 100 was up 36.30 points, or 0.5%, at 7,381.55 at midday. The FTSE 250 index was up 275.78 points, or 1.4%, at 20,130.97. The AIM All-Share index was up 5.96 points, or 0.7%, at 919.08.
The Cboe UK 100 index was up 0.5% at 737.07. The Cboe 250 was up 1.7% at 17,561.12. The Cboe Small Companies was up 0.3% at 13,819.61.
In Paris, the CAC 40 stock index was up 1.0%. In Frankfurt, the DAX 40 was 1.2% higher.
‘With many of the big US names reporting this week and the Federal Reserve delivering its latest decision on rates, this always felt like a make or break week, and fragile markets have just about emerged intact,’ said AJ Bell investment director Russ Mould. ‘Also helping sentiment was good news from Amazon and Apple, with both managing to deliver better-than-expected sales despite rising prices and a weakening consumer outlook.’
New York was pointed to a higher open following well-received earnings from the two trillion-dollar tech names after the close on Thursday.
The Dow Jones Industrial Average was called up 0.3%, S&P 500 index up 0.7% and Nasdaq Composite up 1.1%. The indices ended up 1.0%, up 1.2% and up 1.1% respectively on Thursday.
Apple was up 2.2% in pre-market trade in New York after the technology hardware maker said it successfully navigated a ‘challenging operating environment’ during its third-quarter, posting record revenue on bumper iPhone sales.
Revenue in the third quarter ended June 25 climbed 1.9% year-on-year to $82.96 billion from $81.43 billion. Sales topped a CNN cited forecast of $82.8 billion. Profit declined, however, as operating expenses increased.
Pretax profit fell 5.3% to $23.07 billion from $24.37 billion a year earlier. iPhone sales alone rose 2.8% to $40.67 billion, offsetting some weakness in Mac, iPad and accessories sales.
Amazon.com was up 12% in the New York pre-market, after the Seattle, Washington-based e-tailer offered an optimistic outlook.
Amazon said net sales in the second quarter of 2022 climbed 7.2% to $121.23 billion from $113.08 billion a year earlier, beat CNN cited consensus of $119.0 billion. However, it swung to a pretax loss of $2.65 billion from a $8.63 billion profit a year earlier.
Looking ahead, Amazon expects third-quarter net sales of between $125.0 billion and $130.0 billion, so growth of 13% to 17% year-on-year. Profit could be wiped out, however.
The e-commerce company forecasts third-quarter operating income between breakeven and $3.5 billion, down from positive $4.9 billion a year prior.
Bucking the trend, Intel was down 10% pre-market after the computer chip maker, also late Thursday, posted quarterly results ‘below its standards’ and was forced to lower its annual outlook.
In the three months to June 30, the Santa Clara, California-based CPU and semiconductor manufacturer recorded a net loss of $454 million, swinging wildly from the $5.06 billion profit booked the year before. Net revenue dropped 22% to $15.32 billion from $19.63 billion.
For 2022, revenue is expected between $65 billion to $68 billion, with EPS at $2.57. The new outlook is below the $76 billion guided for in the first quarter.
In London, NatWest was the best performer in the FTSE 100, up 7.1%.
The state-backed lender reported a strong performance in the first half of 2022, against a beneficial backdrop of rising UK interest rates.
For the six months to June 30, total income was £6.22 billion, up from £5.14 billion last year. Operating pretax profit was £2.62 billion, up from £2.32 billion.
NatWest proposed an interim dividend of 3.5 pence per share, up 17% from last year and a special dividend with share consolidation of £1.75 billion, or 16.8 pence per share. Taken together these will deliver 20.3p of dividends per share, it said. It also noted it has completed the £750 million share buyback programme launched in February.
Looking ahead, NatWest upgraded its outlook for the year, saying it now expects income of £12.5 billion, up from £11 billion previously.
Barclays was up 3.0% after the bank provided further details on the £500 million share buyback that it announced with its interim results on Thursday.
The London-based firm said the new programme will begin either when the £1.00 billion buyback started in May completes or on October 3, whichever is earlier, and complete it by January 28 next year. Barclays has appointed Citigroup to run the new buyback.
Standard Chartered was up 0.1%, after the Asia-focused bank said it delivered a strong set of results for the first half of the year and also launched a substantial share buyback.
For the six months to June 30, operating income rose 8% to $8.22 billion from $7.63 billion last year, and pretax profit was $2.77 billion, up 8% from $2.56 billion.
Turning to returns, StanChart proposed an interim dividend of $119 million, equivalent to 4.0 US cents per share. StanChart announced a $500 million share buyback to start ‘imminently’ and plans to return more than $5 billion to shareholders over the next three years.
At the other end of the large-caps, Intertek was the worst performer, down 3.2%. The quality assurance provider issued a disappointing outlook alongside its interim results.
For the six months to June 30, pretax profit £203.5 million, up 9.2% from £186.3 million last year on revenue of £1.49 billion, up 13% from £1.32 billion. Interek declared an interim dividend of 34.2 pence per share, unchanged from last year.
Looking ahead, Intertek said it was targeting robust like-for-like revenue growth with a margin slightly below 2021, reflecting the lockdown restrictions in China in the first half, the expected divisional mix, and investments in growth.
Separately, Intertek said it has agreed to buy solar energy and energy storage sector services provider Clean Energy Associates for an undisclosed sum. The move forms part of an effort to expand its end-to-end sustainability offering.
AstraZeneca was down 2.5%. The drugmaker said it delivered a strong first-half boosted by demand for its cancer treatments.
For the six months to June 30, revenue jumped to $22.16 billion from $15.54 billion last year with growth coming from all disease areas, including Covid-19 medicines, and from the addition of Alexion Pharmaceuticals.
However, pretax profit sank to $800 million from $2.37 billion a year ago. This was largely due to selling, general & administrative expenses growing 58% to $9.52 billion from $6.03 billion - driven by the acquisition of Alexion and recent launches, including Evusheld.
AstraZeneca declared a $0.93 interim dividend, which it said reflects its intention to increase its payout to $2.90 per share for 2022. It had paid a total of $2.87 for 2021.
Looking ahead, the Cambridge, England-based company raised its full-year revenue guidance, saying it expects it to rise by a percentage in the low twenties rather than the high teens forecast previously.
International Consolidated Airlines Group was down 0.6%, reversing an earlier gain. IAG swung to profit in the second quarter of 2022, citing strong demand for premium leisure travel and a continued recovery of business travel from the Covid-19 pandemic.
The British Airways and Iberia owner climbed to a €73 million pretax profit in the three months to June 30 from a whopping €1.12 billion loss a year before. IAG remained in loss for the half-year, though this narrowed to €843 million from €2.34 billion.
IAG said it will fly 80% of 2019 - meaning pre-pandemic - passenger capacity in the third quarter and 85% in the fourth. It said this was down five percentage points from previous guidance and was due to ‘challenges at Heathrow’ airport in London.
Still, IAG said its full-year capacity will be 78% of 2019's and North America will be close to full 2019 capacity by year-end.
The UK competition regulator on Friday said it is investigating online fast-fashion retailers Asos and boohoo over their 'green' fashion claims.
The probe into alleged 'greenwashing' also includes the George brand of grocer Asda. 'Greenwashing' is an attempt by a business to market itself as environmentally conscious, even though its practices may not be.
The Competition & Markets Authority said the companies make ‘broad claims about the use of recycled materials in new clothing - with little to no information about the basis for those claims or exactly which products they related to’.
The CMA aims to ‘get to the bottom of whether the firms' green claims are misleading customers.’
In response, Asos and boohoo said they will cooperate with the investigation and are ‘committed’ to providing accurate information about their products. Both declined to comment further on the investigation. The stocks were up 3.6% and 2.5% respectively.
The pound was quoted at $1.2166 at midday on Friday, up from $1.2129 at the London equities close Thursday.
The euro was priced at $1.0231 at midday, up from $1.0133 late Thursday.
On the continent, eurozone inflation rose to another record high in July, according to flash estimates from Eurostat.
On an annual basis, the eurozone consumer price index rose by 8.9% in July, picking up pace from a 8.6% increase in June. The print was higher than the market forecast, cited by FXStreet, of 8.6%.
The inflation rate remains well above the European Central Bank's target of 2% inflation over the medium term.
What's more, economic growth in the 19-member EU bloc slowed in the second quarter, according to a preliminary flash estimate published by Eurostat.
On an annual basis, gross domestic product expanded by 4.0% in the second quarter, slowing from growth of 5.4% in the first quarter. The latest reading was higher than the 3.4% consensus estimate. Meanwhile, quarter-on-quarter growth improved to 0.7% from 0.5%.
The EU data comes as growth in its largest economy, Germany, stagnated in the second quarter of the year, official data showed, as analysts warned that a recession could be round the corner amid a looming energy crisis.
The German economy grew by zero percent due to ‘difficult’ global economic conditions, federal statistics agency Destatis said.
The continuing impact of the ‘Covid-19 pandemic, interruptions in supply chains and the war in Ukraine, are clearly reflected in the short-term economic development,’ Destatis said.
Growth in the first quarter was revised upwards to 0.8% from an initial estimate of 0.2%. Separate figures showed that the German unemployment jobless rate climbed by 0.1 of a percentage point to 5.4% in July, the second consecutive monthly increase.
Against the yen, the dollar was trading at JP¥133.15 in London at midday, down from JP¥134.45.
Brent oil was quoted at $109.24 a barrel on Friday at midday, up sharply from $107.47 late Thursday. Gold stood at $1,762.82 an ounce, higher against $1,755.39.
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