Stock prices were mostly lower and the dollar was higher early Thursday, after a high-powered panel of the world’s top central bankers made it clear that interest rates need to rise still further to contain price inflation.
Central bankers on Wednesday took part in the annual European Central Bank Forum in Sintra, Portugal. The theme of the 2023 forum was ‘macroeconomic stabilisation in a volatile inflation environment’.
‘The central message coming from this week’s Sintra conference is that economies are holding up better than expected, the decline in inflation has been frustratingly slow, and more tightening needs to be done,’ summarised analysts at ING.
The FTSE 100 index opened down 11.91 points, or 0.2%, at 7,488.58. The FTSE 250 was down 33.81 points, or 0.2%, at 18,379.00, and the AIM All-Share was down 2.97 points, or 0.4%, at 753.63.
The Cboe UK 100 was down 0.2% at 747.18, the Cboe UK 250 was flat at 16,059.52, and the Cboe Small Companies was down 0.2% at 13,058.82.
Ipek Ozkardeskaya at Swissquote Bank said that the major central bankers’ speeches were the ‘same background music’, with US Federal Reserve Chair Jerome Powell, Bank of England Governor Andrew Bailey and ECB President Christine Lagarde all agreeing that their fight against inflation wasn’t over.
Powell told the event in Sintra that the US central bank is leaving open the possibility of consecutive interest rate hikes in the months ahead.
The Fed recently paused its cycle of rate increases after 10 consecutive hikes, to give policymakers more time to weigh the effects of past moves on inflation.
However, Powell told ECB’s central banking conference that the Fed believes there’s ‘more restriction coming’.
‘Policy hasn’t been restrictive enough for long enough,’ he added.
Powell’s hawkishness helped lift the dollar on Thursday morning in London.
The pound was quoted at $1.2642, down from $1.2741 at the London equities close on Wednesday. Against the yen, the dollar was trading at JP¥144.62, higher compared to JP¥144.22. Meanwhile, the euro stood at $1.0916, unchanged from late Wednesday.
New York ended narrowly mixed on Wednesday. The Dow Jones Industrial Average closed down 0.2%, the S&P 500 index flat, and the Nasdaq Composite up 0.3%.
All major banks in the US have passed the Fed’s annual stress test, designed to assess how well they would fare in a major financial crisis.
The Fed said on Wednesday that all 23 banks tested ‘are well positioned to weather a severe recession and continue to lend to households and businesses even during a severe recession’.
The latest test results follow widespread banking turbulence in the US and Europe earlier this year, sparked by the rapid collapse of Californian regional lender Silicon Valley Bank.
In London early Friday, B&M European Value Retail was among the worst-performing stocks in the FTSE 100 index, down 5.2% in early morning trade.
The retailer reported strong and profitable trading across all three divisions in the thirteen weeks to June 24. Revenue in the first quarter grew 14% to £1.32 billion from £1.16 billion a year prior.
‘Our strong trading momentum demonstrates the strength of our unchanged strategy to relentlessly focus on price, product and excellence in retail standards. The business is well positioned as we start to transition to our autumn winter season,’ said Chief Executive Alex Russo.
Ocado was the best blue-chip performer, up 2.3%. The online grocer announced price cuts on milk and other items as grocers compete to pass on falls in wholesale costs to customers.
It follows Ocado’s ’price promise’ launched earlier this year, which compares prices against more than 10,000 like-for-like products on Tesco.com.
In contrast, shares in supermarket rivals Tesco and Sainsbury’s were down 0.6% and 0.7%, respectively.
In the FTSE 250, Serco jumped 7.5% after the outsourcer reported a strong start to 2023, with robust demand for immigration services, and growth in defence services.
Serco reported revenue of £2.5 billion in the first half of the year, up 13% from £2.2 billion a year prior. As a result, Serco increased its full-year revenue guidance by 4% to at least £4.8 billion. This would be around 6% higher than the £4.5 billion reported in 2022.
Serco expects underlying trading profit in the half-year to increase 8% to at least £140 million. For the full-year, Serco increased its underlying trading profit guidance by 4% to £245 million. This would be 3% higher than the £237 million achieved in 2022.
Elsewhere in London, De La Rue surged 12% after it said it is seeing ‘encouraging signs of recovery’ following a significant downturn in currency demand over the past 18 months.
The security printed products maker swung to a pretax loss of £29.6 million in the year ended March 25 from a profit of £24.2 million the year prior. This largely reflected lower revenue from its Currency division, adverse product mix, and an increase in operating expenses, it said.
Back in April, De La Rue said it expected full-year adjusted operating profit in financial 2024 to be in the low £20 million range. On Thursday, it said trading in the first two months of the year has been in line with this and thus the low £20 million range remains its expectation for the full-year.
In financial 2023, adjusted operating profit totalled £27.8 million, down from £36.4 million the year before.
Moonpig shares added 4.9% despite the online greeting cards and gifting company reporting a double-digit percentage drop in profit in the year ended April 30 amid a ‘challenging’ economic context from October onwards.
The company reported pretax profit of £34.9 million, down 13% from £40.0 million the year prior. More positively, revenue climbed 5.2% to £320.1 million from £304.3 million.
Moonpig said, given the context of the current macroeconomic environment, it expects revenue to grow at a low-single-digit percentage rate in the first half. For the full-year, it expects revenue growth at a mid- to high-single-digit percentage rate.
‘Moonpig is facing a double whammy as the cost-of-living crisis bites into sales and demand levels normalise post-pandemic,’ remarked Zainab Atiyyah, an analyst at research house Third Bridge.
‘Our [industry] experts say while customers are still buying cards and gifts for their loved ones, they are now spending considerably less. Moonpig will need to widen its range of price points to protect order frequency over the next 12-18 months.’
In European equities on Thursday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both 0.1% higher.
In Tokyo on Thursday, the Nikkei 225 index closed up 0.1%. In China, the Shanghai Composite and the Hang Seng index in Hong Kong both closed down 0.2%. The S&P/ASX 200 in Sydney closed flat.
Brent oil was quoted at $73.88 a barrel at early in London on Thursday, down from $74.05 late Wednesday. Gold was quoted at $1,905.45 an ounce, lower against $1,910.97.
Still to come in Thursday’s economic calendar, there is a German inflation reading at 1300 BST, as well as a US gross domestic product reading and the latest US jobless claims report at 1330 BST.
Copyright 2023 Alliance News Ltd. All Rights Reserved.
