Strong results from lender Barclays and sanctions against Russia that were less severe than expected allowed the London market to remain positive on Wednesday.
The FTSE 100 index was up 24.51 points, or 0.4%, at 7,518.72 at midday. The mid-cap FTSE 250 index was up 81.02 points, or 0.4%, at 21,074.35. The AIM All-Share index was up 4.01 points, or 0.4%, at 1,035.71. The FTSE 100 had posted a small gain on Tuesday, but the smaller-cap indices had closed lower.
The Cboe UK 100 index was up 0.4% at 747.24 on Wednesday. The Cboe 250 was up 0.3% at 18,872.49, and the Cboe Small Companies up 0.7% at 15,221.48.
In mainland Europe, the CAC 40 in Paris climbed 1.0%, while the DAX 40 in Frankfurt was 0.8% higher.
US President Joe Biden unveiled a series of sanctions against Russia. The measures included moves against two Russian banks, cutting the country off from Western financing by targeting Moscow’s sovereign debt, and penalising oligarchs and their families who are part of Putin’s inner circle.
That came after a series of similar announcements in Europe, with Germany halting certification of the lucrative Nord Stream 2 gas pipeline from Russia, while Britain targeted five banks and three billionaires. Canada, Japan and Australia have since followed up with their own punishments.
The sanctions were not as bad as investors feared, crucially not aiming at Russia’s crude exports.
ActivTrades analyst Pierre Veyret described the sanctions as a ‘warning shot’ only, easing downward pressure on prices. ‘Despite today’s bullish market open on stocks, the overall appetite for riskier assets continues to drop everywhere as investors keep looking for safety,’ he said.
In the FTSE 100, Barclays was up 3% after the bank reported a surge in annual profit, aided by the reversal of credit impairments set aside in 2020 to deal with the fallout from the pandemic, and the bank said it plans £1 billion in share buybacks.
Barclays pre-tax profit improved sharply to £8.41 billion in 2021 from £3.07 billion in 2020 and came in ahead of market consensus of £8.11 billion.
The bank declared a total dividend of 6p, substantially higher than the 1p paid out in 2020. The bank additionally intends to launch a share buyback worth up to £1 billion, which is expected to commence in the first quarter of this year.
Barclays noted it has frozen millions of pounds in bonus share awards made to former boss Jess Staley, who resigned after the initial findings of an investigation into his role as private banker to disgraced financier and convicted sex offender Jeffrey Epstein.
‘The strategic revamp started by departed CEO Jes Stanley pre-pandemic is still the focus of new management, and with rates set to rise and no slowdown in M&A activity, the medium-term looks to be positive for the bank,’ commented Rob Murphy of research firm Edison.
At the other end of London large-caps, Russia-focused metals and mining stocks Evraz and Polymetal were the worst performers, down 6% and 3% respectively.
Rio Tinto was down 0.7%. The Anglo-Australian miner hiked its dividend to a record level for 2021, following a sharp rise in profit and revenue, driven by significant price rises for major commodities, more than offsetting a decline in output.
Rio reported a pre-tax profit of $30.83 billion in 2021, doubled from $15.39 billion in 2020, while underlying earnings before interest, tax, depreciation and amortisation rose 58% to $37.72 billion from $23.90 billion.
Consensus expectations had underlying EBITDA coming in at $38.29 billion.
This was on sales revenue that grew 42% year-on-year to $63.50 billion from $44.61 billion. This figure was short of consensus expectations, which stood at $65.12 billion.
In the FTSE 250, Unite Group was the top gainer, up 5.5%. The student accommodation provider swung to a profit in 2021 and raised its shareholder payout on a ‘strong’ recovery from the pandemic.
The Bristol-based firm swung to a pre-tax profit of £343.1 million from a loss of £120.1 million in 2020. This was on total revenue growth of 24% to £266.9 million from £215.6 million. Rental income rose to £209.0 million from £196.1 million.
The company proposed a final dividend of 15.6p per share, reflecting a 22% increase from the final payout of 12.75p the year prior. Its total dividends for 2021 amounted to 22.1p, up 73% from 12.75p.
Looking ahead, Unite said its outlook remains ‘strong’, saying it is confident in its ability to deliver ‘significant’ growth in earnings and attractive total accounting returns for shareholders.
At the other end of the midcaps, Aston Martin Lagonda was the worst performer, down 5.5%. The luxury carmaker said its annual performance was boosted by significant growth in Americas and record sales in China, on strong demand for its sports utility vehicle, the DBX.
For 2021, Aston Martin generated revenue of £1.10 billion, up 79% from £611.8 million in 2020, and its pre-tax loss narrowed to £213.8 million from a loss of £466 million.
Credit Suisse said fourth quarter revenue of £358.9 million was ahead of expectations of £356.3 million, but adjusted earnings before interest, tax, depreciation and amortisation of £65.6 million was short of expectations of £81 million.
Looking ahead, the Warwickshire, England-based firm said it was ‘well on its way’ to achieving medium-term targets of 10,000 wholesale deliveries, £2 billion revenue. and £500 million adjusted earnings before interest, tax, depreciation, and amortisation by 2024-25.
Supply chains globally continue to experience disruption, Aston Martin said, and it is focused on mitigating any hindrances this may have on production.
On AIM, Eve Sleep shares shot up 95% after the mattress retailer said it has entered into a partnership with sofa retailer DFS Furniture.
The partnership will initially cover the dfs.co.uk website, which brings in 2.7 million visitors every month, from March 3. Later in the year, Eve Sleep products including mattresses and bed frames will be available in the DFS showroom estate. The range will be expanded ‘at a later date.’
DFS shares were off 1.6%.
Peel Hunt was down 16%. The corporate broker and investment bank issued a profit warning, saying concerns pertaining to inflation and interest rates, as well as global geopolitical tensions, dented market conditions and investor sentiment.
As such, Peel Hunt said it has seen a number of deals delayed and capital markets activity early in 2022 has been ‘particularly challenging’. Peel Hunt expects annual revenue to be marginally below bottom of previous guided range and earnings will be ‘commensurately lower than current market expectations.’
The pound was quoted at $1.3597 at midday on Wednesday, little changed from $1.3595 at the London equities close Tuesday.
Bank of England Governor Andrew Bailey has called on banks to use restraint in paying bonuses to help keep inflation down as he warned the ‘least well off’ will be hit hardest by the cost-of-living crisis.
The governor told members of Parliament on the Treasury Select Committee that banks should ‘reflect on the economic situation we’re in’ when setting bonuses and pay rises.
It came as Barclays revealed it handed out £1.9 billion in bonuses for 2021, up from £1.6 billion in 2020, following similar payouts from rivals such as HSBC.
Bailey sought to defend controversial comments he made earlier this month urging workers not to ask for big pay rises to counter soaring inflation, saying that companies also need to think twice about raising prices significantly to help cool inflation pressures.
Bailey faced criticisms from trade unions, given his £575,538 pay package, as they said many workers deserved pay rises.
When questioned over the apparent insensitivity of his recent comments on worker wage restraint, Bailey said: ‘I’m not saying people should not take pay rises. It was in the context of large pay rises.’
The euro was priced at $1.1343, unmoved from $1.1344. Against the Japanese yen, the dollar was trading at ¥115.08 in London, up from ¥114.94.
Brent oil was quoted at $96.32 a barrel Wednesday at midday, firm from $96.70 late Tuesday. Gold stood at $1,894.50 an ounce, soft from $1,900.36.
New York was called higher following a lower close on Monday, which saw the S&P 500 enter into correction territory.
The Dow Jones Industrial Average was called up 0.5%, the S&P 500 up 0.6%, and the Nasdaq Composite up 0.9%, based on futures trading. The indices closed down 1.4%, 1.0% and 1.2% respectively on Monday.
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