Investors returned from the long Easter weekend in a subdued mood, amid concerns about slowing economic growth and tightening monetary policy, while the focus for the week ahead will continue to be on the US first-quarter earnings season.
A group of 143 countries representing 86% of the global economy is expected to hear from the International Monetary Fund on Tuesday that economic growth is likely to slow down in their countries in the near future.
The IMF is due to release its latest world economic outlook at 1300 GMT on Tuesday, and director Kristalina Georgieva had already warned that the news is likely to be downbeat.
The Russian invasion of Ukraine, which has resulted in disruption of exports from both commodity-rich countries, coupled with the Western sanctions piled on Russia in response, both play a role in the expected slowdown.
The FTSE 100 index was down 7.12 points, or 0.1%, at 7,609.26 early Tuesday. The mid-cap FTSE 250 index was down 131.88 points, or 0.6%, at 20,989.73. The AIM All-Share index was down 2.79 points, or 0.3%, at 1,057.37.
The Cboe UK 100 index was flat at 757.91. The Cboe 250 was down 0.6% at 18,452.91, and the Cboe Small Companies flat at 15,432.88.
The Easter holiday-shortened week began with caution as investors await the latest tranche of US earnings.
Due in the coming days in the US are earnings from electric car maker Tesla, telecommunications firm AT&T, and air carrier United Airlines.
This follows a mixed start to earnings season from US banks, though shares in Bank of America rose 3.4% on Monday after posting an increase in net interest income.
Total revenue for the first quarter of 2022 rose 1.8% to $23.23 billion from $22.82 billion a year before. Driving the result was a 13% jump in net interest income to $11.57 billion from $10.20 billion year-on-year, more than offsetting a 7.6% decline in non-interest income to $11.66 billion from $12.62 billion. Despite this increase in revenue, net income declined 12% to $7.07 billion from $8.05 billion.
‘We achieved solid first-quarter results earning $7.1 billion, continuing the momentum from record net income in 2021. Across our businesses, ongoing organic growth combined with good expense management drove operating leverage for the third consecutive quarter,’ said Chair & Chief Executive Brian Moynihan.
Wall Street posted modest losses on Monday with the UK and most of Europe closed. The Dow Jones Industrial Average slipped 0.1%, the broad-based S&P 500 lost 0.90 of a point, and the tech-rich Nasdaq Composite Index declined 0.1%.
‘US equities were directionless on Monday and the sector performance quite even, but with a slight preference for growth cyclicals,’ commented Danske Bank. ‘Reflation winners, as materials and energy, continued to outperform.’
In Asia on Tuesday, the Japanese Nikkei 225 index closed up 0.7%. In China, the Shanghai Composite was down 0.5%, while the Hang Seng index in Hong Kong was down 2.4%. The S&P/ASX 200 in Sydney ended up 0.6%.
Shares in Pearson fell 3.3%, the stock sitting at the bottom of London's FTSE 100 in opening trade. The educational materials publisher said its Online Program Management partnership with Arizona State University will end in June 2023.
‘The profit impact of the contract termination will be modest in 2022 and 2023 and will be offset thereafter through eliminating related costs and re-directing investment across our strategic growth opportunities,’ the FTSE 100-listed company said.
Pearson stressed its financial guidance for the current financial year remains unchanged, as does its medium-term outlook.
ITV shares were down 2.6% after Berenberg cut the stock to Sell from Hold.
Gathered at the top of the blue-chip index were miners, with Antofagasta up 2.4%, Glencore up 2.2%, and Anglo American up 2.1% after some better-than-expected Chinese growth data.
The world's second-biggest economy had lost steam in the latter half of last year with a property slump and regulatory crackdowns, pulling down growth. But it exceeded expectations in the first three months of 2022, growing 4.8% on-year, the National Bureau of Statistics said, with Lunar New Year spending and factory production cajoling growth.
The weeks ahead, however, appear treacherous for the economy with Beijing's unrelenting zero-Covid approach to outbreaks clogging supply chains and locking down tens of millions of people - including in the economic dynamos of Shanghai and Shenzhen as well as the northeastern grain basket of Jilin.
In the FTSE 250, Spectris rose 3.2%. The supplier of precision instrumentation and controls said it has sold Omega Engineering to Arcline Investment Management for $525 million, strengthening its balance sheet and paving the way for a share buyback.
Specialist sensors provider Omega generated sales of £129.0 million in 2021 and adjusted Ebitda of £19.7 million.
‘With new management and a revised strategy launched in 2020, Omega ended 2021 with a strong order book and well positioned for future growth; expecting to return to pre-Covid levels of revenue this year. We have been clear that scale is essential to deliver acceptable levels of profitability at Omega. As such, we believe that Omega's next stage of development can be better fulfilled with the scale provided as part of a larger group,’ the company said.
Spectris said its ‘enhanced’ balance sheet following the sale leaves it well placed to take part in further investment activity. In addition, the firm unveiled a £300 million share buyback programme, with an initial tranche of £150 million to start shortly.
In mainland Europe, the CAC 40 in Paris was down 0.8%, while the DAX 40 in Frankfurt was down 0.7% early Tuesday.
The pound was quoted at $1.3005, falling from $1.3060 Thursday and slipping below $1.30 earlier Tuesday. The euro was priced at $1.0784 on Tuesday, down from $1.0797 late Thursday. Against the yen, the dollar was trading at JP¥128.04, up from JP¥125.91.
‘The yen is once again emerging as the worst-performing currency in the G10, and with USD/JPY now at JP¥128.00, the perceived probability of FX intervention in Japan is set to rise...We expect USD/JPY to test JP¥130.00 in the coming days,’ said Dutch bank ING.
Gold stood at $1,977.50 an ounce, up from $1,964.54 late Thursday. Brent was quoted at $112.50 a barrel, up from $107.52.
The economic calendar gets off to a quiet start on Tuesday, with only residential construction figures and the Johnson Redbook retail sales index in the US. Later in the week, producer price figures from Germany are due on Wednesday, eurozone inflation data on Thursday, and then UK retail sales and a host of PMIs on Friday.
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