With less than a week to go before the next US interest rate decision, stock market participants were holding off on any big bets on Thursday ahead of two key economic indicators, leaving London shares flat at midday.
The FTSE 100 index was down 3.81 points at 7,848.83. The FTSE 250 was up 27.47 points, or 0.1%, at 19,235.44, and the AIM All-Share was down 0.17 of a point at 821.67.
The Cboe UK 100 was flat at 784.97, the Cboe UK 250 was up 0.1% at 16,866.74, and the Cboe Small Companies was flat at 13,714.87.
‘Traders are keeping an eye on crucial US GDP and initial jobless claims data, looming in the afternoon, to see how the [US] Federal Reserve may adjust the pace of its monetary tightening,’ said Pierre Veyret, technical analyst at ActivTrades.
A US gross domestic product estimate for the first quarter and the weekly jobless claims figures both will be released at 1330 BST.
Markets are expecting annual economic growth to slow to 2.0% in the first quarter of 2023 from 2.6% a quarter earlier.
‘A negative surprise in US GDP could further boost the Fed doves and pull the rate hike expectations lower,’ said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The Fed will announce its next interest rate decision on Wednesday next week. According to the CME FedWatch tool, there is a 75% chance the central bank will lift rates by 25 basis points, and a 25% chance rates will be kept in their current range of 4.75% to 5.00%
In London, Barclays was the top blue-chip performer at midday, up 3.9%. The bank said said all three of its businesses performed well in the first quarter of 2023, with high-quality income growth and double-digit returns.
Barclays reported pretax profit of £2.60 billion, up 16% from £2.23 billion a year prior. Total income amounted to £7.24 billion, up 11% from £6.50 billion.
Barclays’ return on tangible equity was 15.0%, compared with 11.5% in the same quarter a year prior. Its CET1 ratio was 13.6% at the end of March, down from 13.9% at the end of December.
RS Group rose 3.1% after it announced it acquired Dutch industrial products distributor Distrelec for €365 million.
The industrial and electronics products distributor said the ‘complementary’ acquisition ‘significantly’ expands its continental European presence, particularly in Germany, Switzerland and Sweden.
The purchase is expected to increase RS revenue by about 40% in Germany, Austria and Switzerland, 80% in Scandinavia, and add scale in Italy, Belgium, Luxembourg, the Netherlands and Eastern Europe.
St James’s Place slid 3.8% as the wealth manager reported a year-on-year slowdown in net inflows during the first three months of 2023.
Funds under management as of March 31 amounted to £153.62 billion, up 1.6% year-on-year from £151.25 billion. However, net inflows were £2.00 billion, slowing from £2.91 billion a year earlier.
St James’s Place does expect a ‘more supportive environment for new business’ as the rest of the year unfolds, should economic worries show more signs of abating.
Among London mid-caps, Inchcape rose 3.3% as it said it made an ‘excellent start’ to 2023, with full-year results expected to be in-line with market consensus.
The automotive distributor said it expects adjusted pretax profit at £487 million for 2023. In 2022, adjusted pretax profit was £373 million.
Chief Executive Duncan Tait said: ‘Our first quarter results show a continuation of the trends we experienced at the end of last year, with organic growth underpinned by the improvement in vehicle supply. Growth in the Distribution segment was further accelerated by the significant contribution from new businesses in the Americas - with Derco, Simpson Motors and Ditec all contributing positively.’
Lancashire Holdings rose 4.0%, the FTSE 250’s top performer, as it reported a record first quarter and said it only saw a negligible hit from natural catastrophe events so far in 2023.
The Bermuda-based insurance company said gross written premiums rose 23% to $586.2 million in the first three months of 2023 from $477.9 million a year before. It was Lancashire’s best-ever first-quarter for gross written premiums.
Elsewhere in London, International Personal Finance climbed 2.1%.
The financial services firm says all its divisions have started the year well, with the company trading ahead of its internal plans at the end of the first quarter.
Chief Executive Gerard Ryan says: ‘We have delivered strong year-on-year lending and receivables growth and, despite the macroeconomic landscape, we have not seen any discernible impact of the cost-of-living crisis on customer repayment performance across the group.’
In European equities on Thursday, the CAC 40 index in Paris was up 0.3%, while the DAX 40 in Frankfurt was flat.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.3%, the S&P 500 index up 0.5%, and the Nasdaq Composite up 0.8%.
Wall Street ended largely lower on Wednesday, despite a positive performance for technology stocks, following well-received earnings from Microsoft and Alphabet, as bank shares slid further, weighed down by fears of turmoil in the sector.
Facebook-owner Meta Platforms, which reported after the closing bell on Wednesday, posted better-than-expected revenue in the first quarter and issued positive guidance for the next three months.
Shares in the firm were up 12% in pre-market trade on Thursday, helping lift Wall Street’s mood ahead of the open.
‘The owner of Facebook, Instagram and WhatsApp saw signs of recovery in its advertising business, helping to dispel concerns about the continued relevance of these platforms,’ commented AJ Bell investment director Russ Mould.
‘This, plus the greater efficiency pursued by the business in recent months, is clearly helping to win the market over, although CEO Mark Zuckerburg’s continued insistence on pursuing his metaverse vision will ring in the ears of some investors like tinnitus.’
On Thursday, Amazon, Mastercard and Eli Lilly will report first-quarter results.
The dollar regained some ground midday Thursday after softening over the past few days due to the renewed worry around the US banking sector.
Sterling was quoted at $1.2450 at midday on Thursday in London, lower compared to $1.2472 at the close on Wednesday. The euro stood at $1.1042, slightly lower against $1.1046. Against the yen, the dollar was trading at JP¥133.71, higher compared to JP¥133.54.
‘The markets are reacting to the return of concerns over the stability of the US banking sector, as well as signs of slowing down in the wider economy. A growing number of investors believe the Federal Reserve will be forced to cut rates before the end of the year, in order to avoid a sharper economic contraction, and the more this view gains traction the less support there will be for the US dollar,’ said Ricardo Evangelista, senior analyst at ActivTrades.
Brent oil was quoted at $77.88 a barrel at midday in London on Thursday, down from $80.29 late Wednesday. Gold was quoted at $2,000.58 an ounce, higher against $1,995.53.
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