Market attention was on bumper crop of UK and European company earnings early Thursday, after US central bank meeting minutes confirmed a hawkish bias among policy-makers.
Mixed corporate updates and ex-dividend stocks were causing large-cap indices to underperform mid-cap and small-cap measures in London. Engineering firm Rolls-Royce was up strongly, while paper maker Mondi was lower.
The FTSE 100 index opened down 13.51 points, or 0.2%, at 7,917.12. The FTSE 250 was up 172.45 points, 0.9%, at 19,852.74, and the AIM All-Share was up 3.13 points, 0.4%, at 855.41.
The Cboe UK 100 was down 0.2% at 792.14, the Cboe UK 250 was up 1.0% at 17,341.55, and the Cboe Small Companies was 0.1% lower at 13,929.97.
In European equities on Thursday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was up 0.2%.
Investors also were considering the latest policy-meeting minutes from the US Federal Reserve.
Although the 25 basis point rate hike was agreed upon, the minutes showed a ‘few’ members said they wanted a half-point, or 50-basis-point, hike that would show even greater resolve to get inflation down.
Since the February meeting, regional presidents James Bullard of St Louis and Loretta Mester of Cleveland have said they were among the group that wanted a more aggressive move at the January 31 to February 1 rate-setting meeting. This meant the somewhat hawkish minutes were less of a surprise.
There was a fairly muted response on Wall Street, with the Dow Jones Industrial Average ending down 0.3% and the S&P 500 down 0.2% but the Nasdaq Composite up 0.1%.
The dollar was stronger against major currencies.
Sterling was quoted at $1.2052 early Thursday, lower than $1.2066 at the London equities close on Wednesday. The euro traded at $1.0612, down from $1.0629. Against the yen, the dollar was quoted at JP¥134.86, firm on JP¥134.67.
In the FTSE 100, Rolls-Royce shares jumped 17% in early trade.
The jet engine maker’s annual revenue increased to £13.52 billion from £11.22 billion a year before, but its pretax loss widened to £1.50 billion from £294 million, due to £2.42 billion in net financing costs. Operating profit improved to £837 million from £513 million, however.
CEO Tufan Erginbilgic said Rolls-Royce will begin a strategic review as part of its restructuring programme, and will share the findings and its medium term goals in the second half of 2023. Looking to 2023, the company noted a ‘continued recovery’ in its end markets, and is confidence of higher profit and cash flow.
Commented Andy Chambers at research house Edison: ‘As civil markets continue to recover, aided by the return to international traffic operations from China, defence spending accelerates and power markets transition to lower emissions, Rolls-Royce looks well positioned to improve competitiveness, increase cash flows, strengthen the solid balance sheet and improve shareholder returns.’
WPP added 3.9% in early trading, boasting strong performance across all its major agencies in 2022.
Ad agency said revenue in 2022 rose 13% to £14.43 billion from £12.80 billion in 2021. Revenue less pass-through costs rose 14% to £11.80 billion.
Pretax profit jumped 22% to £1.16 billion from £951 million. WPP raised its dividend to 39.4p from 31.2p.
‘We enter 2023 in a strong financial position with good momentum from new business and the many opportunities ahead of us,’ said CEO Mark Read. WPP expects like-for-like revenue less pass-through costs growth of 3% to 5% in 2023.
Edison said WPP’s results were at the top end of market expectations.
At the other end of London’s blue-chips was Mondi, down 6.3%.
The packaging and paper company said revenue jumped 28% in 2022 to €8.90 billion from €6.97 billion a year before. Pretax profit more than doubled to €1.56 billion from €712 million. The figures are based on continuing operations, excluding its divested Russian operations.
Mondi recommended a dividend of 70 euro cents, up 7.7% from 65 cents a year before. However, investors seemed perturbed by the firm’s shaky outlook.
‘Whilst a number of input costs are starting to decline, we continue to see an environment of softer demand and pricing, with destocking expected to continue through the first quarter,’ Mondi warned.
Ex-dividend stocks also were holding back the FTSE 100. AstraZeneca was down 1.8%, Unilever 1.4%, and Barclays 0.6%.
In the FTSE 250, John Wood surged 31%.
Late Wednesday, the energy sector-focused engineering and consulting business said it has rebuffed three unsolicited proposals for a takeover by Apollo Global Management.
It said the most recent approach was received in late January, proposing a cash offer for all of its shares at a price of 230 pence each, around £1.59 billion in total.
John Wood said the board ‘carefully considered’ each of the proposals with its financial advisers and ‘engaged on a limited basis’ with Apollo, before unanimously rejecting each proposal.
Hikma Pharmaceuticals rose 5.3%, as it reported a dip in annual revenue while profit tumbled, but shared a more positive outlook for the current year.
Revenue edged down 1% to $2.52 billion from $2.55 billion, but pretax profit dropped to $233 million from $544 million.
This was due to an impairment in its Generics business. Hikma noted a strong performance from Injectables and Branded businesses, which helped to partially offset the Generics decline. The annual dividend was lifted by 4% to 56 cents.
‘Looking ahead, we are confident that we will deliver good growth across all three of our businesses in 2023,’ said Chair & CEO Said Darwazah.
On AIM, Quadrise Fuels added 10%.
The residual oil technology licensor updated on its Moroccan material transfer & cooperation agreement. The company confirmed the MSAR fuel for the forthcoming trial has been cleared at Moroccan customers, and is now on its way to the client’s facility.
It is now finalising the trial schedule with its client, and expects fuel trials to begin before the end of the current quarter.
In Asia on Thursday, financial markets in Tokyo were closed for the Emperor’s Birthday holiday. In China, the Shanghai Composite fell 0.1%, while the Hang Seng index in Hong Kong lost 0.4%. The S&P/ASX 200 in Sydney closed down 0.4%.
Gold was quoted at $1,827.78 an ounce early Thursday, down from $1,835.00 on Wednesday. Brent oil was trading at $80.96 a barrel, lower than $81.16
Still to come on Thursday’s economic calendar, there’s a eurozone inflation reading at 1000 GMT, before the latest US jobless claims data at 1330 GMT.
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