Blue-chip shares in Europe ended largely lower after an earnings deluge on Tuesday, which saw consumer goods stocks impress, but banking firms struggle.
New York-listed First Republic Bank was among the worst of the lot. Santander suffered a less dramatic fall in Madrid.
In the consumer facing sector, Pepsi and Nestle managed to pull off price hikes in the first-quarter. Hotelier Whitbread is emerging as a post-Covid winner, while cautious Primark guidance hurt AB Foods shares.
‘Prices have been hiked for another quarter and for the most part consumers have been willing to keep on paying for the stuff they really want to buy. Both Pepsi and Nestle have made share price gains after updating investors that sales have remained robust despite double-digit increases in the cost of some of the world’s most popular brands,’ AJ Bell analyst Danni Hewson commented.
‘But overall updates have been pretty mixed and markets have remained subdued today, not least because of First Republic’s reminder of the crisis that struck the banking sector just a few short weeks ago.’
The FTSE 100 index lost 21.07 points, or 0.4%, at 7,891.13 on Tuesday. The FTSE 250 slipped 11.55 points, or 0.1%, at 19,215.39, and the AIM All-Share ended down 4.59 points, or 0.6%, at 824.26.
The Cboe UK 100 ended down 0.3% at 789.74, the Cboe UK 250 lost 0.4% at 16,816.77, and the Cboe Small Companies down 0.1% at 13,323.45.
In European equities on Tuesday, the CAC 40 index in Paris lost 0.6%, though the DAX 40 in Frankfurt edged up 0.1%.
Major equity benchmarks in New York were lower. The Dow Jones Industrial Average was down 0.4%, the S&P 500 lost 0.8% and the Nasdaq Composite shed 1.0%.
The pound was quoted at $1.2404 late Tuesday afternoon in London, lower compared to $1.2457 at the close on Monday. The euro stood at $1.0983 down against $1.1026 late Wednesday. Against the yen, the dollar was trading at JP¥133.98, lower compared to JP¥134.38.
The yen was on the up amid risk-off trade on Tuesday, while the greenback was supported by President Joe Biden announcing a US re-election bid.
Biden announced Tuesday he is running for re-election in 2024, plunging at the record age of 80 into a ferocious new White House campaign ‘to finish the job’.
‘Every generation has a moment where they have had to stand up for democracy. To stand up for their fundamental freedoms,’ Biden wrote on Twitter, along with a video.
A big week for banking sector earnings kicked off with a whimper. Shares for European banking stocks were largely weaker as investors picked apart earnings from Santander and UBS.
Santander fell 6.0% in Madrid. It posted a profit hike though windfall taxes in Spain kept a lid on growth.
Weaker profit in its Brazil division also spooked investors.
UBS lost 2.2%. In its first quarterly report since the hastily-arranged takeover of stricken compatriot Credit Suisse, UBS reported a profit miss.
The Swiss bank reported a net profit of $1.03 billion in the first quarter of 2023, down 47% from $1.94 billion in the previous year, and falling short of consensus of $1.7 billion.
Over in New York, a sharp share price fall for First Republic was one of the major stories. The stock plunged 30%.
First Republic - which announced a major employee downsizing to cut costs - reported deposits of $104.5 billion at the end of March, a drop of nearly $72 billion from the level at end-2022.
It is the bank’s first batch of earnings since Silicon Valley Bank’s dramatic collapse in March raised alarm bells about the vulnerabilities of regional lenders.
Also spooking investors, management took no questions during a subsequent earnings call.
Among large-cap London-listed banks, Standard Chartered is the first to report, announcing quarterly results on Wednesday.
While banking earnings underwhelmed, makers of consumer goods impressed. Nestle rose 0.8% in Zurich and PepsiCo was up 2.2% in New York on well-received quarterly figures.
On the up in London, Whitbread shot up 4.6%.
In the financial year that ended March 2, the Premier Inn-owner posted pretax profit of £374.9 million, multiplied from £58.2 million the year before. Whitbread said this was above pre-pandemic levels, driven primarily by its Premier Inn UK division. Revenue surged to £2.63 billion from £1.70 billion.
In addition, Whitbread announced a £300 million share buyback programme.
Associated British Foods fell 5.1% after setting out a cautious outlook in its Primark retail arm.
The FTSE 100 constituent said it is ‘cautious about the resilience of consumer spending’, as shoppers face rampant inflationary pressure.
‘We expect like-for-like sales growth in the second half, although we expect that growth to moderate from that in the first half,’ Chair Michael McLintock said.
Elsewhere in London, Hyve rose 4.2% to 119.80 pence after the events organiser backed a new and improved takeover bid from funds advised by Providence Equity Partners.
The new bid of 121p per share is up from 108p previously. The bid values Hyve at £363 million on a fully diluted basis and values it at around £524 million on an enterprise basis.
Unbound fell 14% after clothing company WoolOvers Group ruled out making a takeover bid. Unbound in March had said it was in discussions with WoolOvers for a potential bid.
Brent oil was quoted at $80.52 a barrel at late Tuesday afternoon in London, flat from $82.10 late Monday. Gold was quoted at $1,987.63 an ounce, up slightly against $1,982.78.
Still to come on Tuesday are earnings from Google owner Alphabet and computing firm Microsoft.
Wednesday’s local corporate calendar has first-quarter results from pharmaceutical firm GSK and trading statements from consumer goods company Reckitt Benckiser and housebuilder Persimmon.
The economic diary has a consumer confidence reading from Germany at 0700 BST.
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