Stocks in London finished Thursday in the green, as corporate earnings came in full force, and the European Central Bank announced a surprisingly aggressive rate hike.
The FTSE 100 index closed up 6.20 points, or 0.1%, at 7,270.51. The FTSE 250 ended up 309.40 points, or 1.6%, at 19,709.24. The AIM All-Share closed up 5.55 points, or 0.6%, at 902.33.
The Cboe UK 100 ended down 0.2% at 723.60, the Cboe UK 250 closed up 1.2% at 17,126.80, and the Cboe Small Companies finished up 0.7% at 13,544.10.
In European equities, the CAC 40 in Paris ended up 0.3%, while the DAX 40 in Frankfurt finished 0.3% lower.
In the FTSE 100, Howden Joinery ended the best performer, up 4.2%, after the kitchen products supplier lifted its interim dividend as its interim profit surged ahead of pre-pandemic levels, due to good growth of its depots.
The London-based company reported pretax profit of £145.0 million in six months to June 11, reflecting a 22% rise from £119.2 million the same period a year before. Compared to pre-Covid 19 levels, Howden Joinery's pretax profit was up 86% from £78.1 million.
Revenue rose 16% to £913.1 million from £784.9 million. In comparison with pre-pandemic levels, revenue rose 40% from £652.6 million.
Howden Joinery declared an interim dividend of 4.7 pence, up 9.3% year-on-year from £4.3p.
Looking ahead, Howden Joinery said it has ‘good momentum’ going into the second half, which includes its peak trading period.
3i ended the second best performer, up 4.2%, after the private equity investor reported a rise in net asset value for the first quarter of its financial year.
As at June 30, the London-based company posted a net asset value of 1,406 pence per share, up 6.4% from 1,321p at the end of March. For the three month-period, 3i posted an NAV total return of 6.6%.
Within its Private Equity portfolio, 3i noted strong contributions from Action, AES, Dynatect and MAIT.
At the other end of the large-caps, Dechra Pharmaceuticals closed down 6.8% at 3,478.10p. The veterinary products firm said it has raised £180 million from a placing of 5.2 million shares at 3,430p each to fund its acquisition of Piedmont Animal Health for £175 million.
The placing price was an 8% discount to the closing share price on Wednesday in London of 3,730.00p.
In the FTSE 250, Mike Ashley's Frasers was the star performer, rising 27% as it said annual profit surged, despite the ‘well-chronicled challenges’ hitting the retail sector.
In the year that ended April 24, revenue rose 31% to £4.75 billion from £3.63 billion. Frasers said this was largely due to the reopening of its stores after Covid-19 restrictions were lifted in March last year. Pretax profit jumped to £366.1 million from £8.5 million.
‘Standout stocks included Frasers, which jumped after reporting a record-breaking year amid strong growth across its business. Although that must be viewed in the context of Covid recovery, with the comparative period negatively affected by lockdowns,’ said AJ Bell's Russ Mould.
Moneysupermarket was the next best FTSE 250 performer after Frasers, jumping 13%. The price comparison site said revenue in the first half of 2022 climbed 19% to £193.2 million. Pretax profit was 14% higher at £42.1 million.
At the other end of the midcaps, Carnival ended the worst performer, down 9.4%. Late on Wednesday, the Anglo-US cruise liner commenced underwritten public offering of $1.0 billion of shares of common stock. It will grant the underwriter a 30-day option to purchase up to $150.0 million additional shares and will use net proceeds for general corporate purposes ‘which could include addressing 2023 debt maturities’.
The pound was quoted at $1.1958 at the London equities close, down from $1.1988 at the close Wednesday.
The ECB defied its earlier guidance and raised its key interest rates by 50 basis points, deeming a ‘larger’ first-step towards policy normalisation appropriate in the face of soaring inflation.
Inflation in the eurozone hit 8.6% in June, the highest-ever level in the currency club and well above the central bank's target of 2.0%.
The euro stood at $1.0195 at the European equities close, down from $1.0202 late Wednesday.
The common currency for the euro area was trading at $1.0251 in the immediate aftermath of the ECB's rate hike, but has since retreated.
It is the Frankfurt-based central bank's first rate hike since 2011. It takes the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility to 0.50%, 0.75% and 0.00% respectively.
The ECB also unveiled the first details of a new crisis tool to fight bond market stress in parts of the eurozone.
The instrument is a response to recent increases in the borrowing costs for governments in more highly indebted, usually southern eurozone members, such as Italy.
Dubbed the ‘Transmission Protection Instrument’, the targeted bond-buying scheme ‘can be activated to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across the euro area,’ the ECB said.
With prices taking off, the euro hitting parity against the dollar and other central banks racing ahead with bigger hikes, the ECB was under pressure to think about making a bigger move at the meeting on Thursday.
Future rate hikes ‘will be appropriate’, the ECB said, as it looks to catch up with the US Federal Reserve and the Bank of England which both started raising rates earlier and more aggressively.
The ‘frontloading’ of the rate hikes meant the ECB could take a ‘meeting-by-meeting approach to interest rate decisions’, it said, stressing that future moves would be ‘data-dependent’.
The ECB had a fine line to tread between soaring inflation and the weakness of the eurozone economy, rattled by the war in Ukraine. The continent's dependence on Russian energy imports has eurozone members bracing for a difficult winter and planning to ration supplies if Moscow halts gas deliveries.
In addition, the fallout from Russia's war in Ukraine and soaring inflation have darkened the eurozone's economic outlook, President Christine Lagarde said at the subsequent press conference.
‘Russia's unjustified aggression towards Ukraine is an ongoing drag on growth. The impact of high inflation... and higher uncertainty are having a dampening effect on the economy,’ Lagarde told reporters, adding that those factors were ‘significantly clouding the outlook for the second half of 2022’.
However, political turmoil in Rome cast a shadow over the announcement, with the resignation of former ECB president Mario Draghi as Italian prime minister on Thursday sending renewed shivers through debt markets and the spread between Italian and German bonds widened.
Against the yen, the dollar was trading at JP¥137.93, down from JP¥138.05 late Wednesday.
Stocks in New York were mostly lower at the London equities close. The DJIA was down 0.5%, the S&P 500 index down 0.2% and the Nasdaq Composite was up 0.1%.
On Wall Street, Tesla was up 7.4% after the electric vehicle maker, late Wednesday, reported better-than-expected second quarter earnings, despite a hit from Covid-19 lockdowns in Shanghai that weighed on profit margins.
Amazon.com was up 0.4% after the e-commerce company made a move into the medical sector with the acquisition of US primary healthcare provider One Medical for $3.9 billion.
Brent oil was quoted at $103.48 a barrel at the equities close, down sharply from $107.06 at the close Wednesday.
Gold stood at $1,710.60 an ounce at the London equities close, firm against $1,707.88 late Wednesday.
The economic events calendar on Friday has UK retail sales numbers at 0700 BST. There are also a raft of PMI readings due from France, Germany, the eurozone, UK and US.
The UK corporate calendar on Friday has interim results from insurer Beazley and first-quarter results from currency manager Record.
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