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London open: FTSE edges up ahead of rate decisions
London stocks edged higher in early trade on Wednesday, taking their cue from a positive finish on Wall Street, as investors eyed policy announcements from the Federal Reserve, Bank of England and European Central Bank.
At 0825 GMT, the FTSE 100 was up 0.3% at 7,794.87.
The Fed’s rate announcement is due after the close of London markets, at 1900 GMT, while the BoE and ECB will make their announcements on Thursday.
Danske Bank said: “The main event today will be the FOMC meeting. Anything but a 25bp hike would be a major surprise, and the focus will be on guidance about the terminal rate level.
“We expect the communication to be on the hawkish side, markets price in cumulative 58bp worth of hikes by next June while we look for three consecutive 25bp hikes, which would take the Fed Funds rate to 5.00-5.25% by May.”
On home shores, data out earlier showed that shop price inflation hit fresh highs last month as the cost of food soared.
According to the latest BRC-NielsenIQ Shop Price Index, annual shop price inflation was 8% in January, up from 7.3% in December, above the three-month average of 7.5% and a record high. Within that, non-food jumped 5.1% year-on-year from 4.4% a month earlier, while food surged 13.8%, compared to 13.3% in December. It is the highest inflation rate in the food category on record.
Helen Dickinson, chief executive of the British Retail Consortium, said retailers had reduced discounting in January while input costs had continued to rise.
“Ambient food inflation accelerated the most, as wholesale and bulk prices grew, particularly for sugar and alcohol. Fresh food prices also remained high due to increased food production costs as well as elevated wholesale fruit and vegetable prices,” she said.
“With global food costs coming down from their 2022 high and the cost of oil falling, we expect to see some inflationary pressures easing. However, as retailers still face ongoing headwinds from rising energy bills and labour shortages, prices are yet to peak – and will likely remain high in the near term.”
Investors were also mulling the latest figures from Nationwide, which showed that house prices fell for the fifth month in a row, with annual price growth slowing to 1.1% in January as surging interest rates and inflation continued to hammer mortgage holders.
The average sale price fell 0.6% to £258,297 in January compared with £262,068 in December.
In equity markets, Standard Chartered was a high riser after the Financial Times suggested that First Abu Dhabi Bank could look at the company again after backing away from a bid last month.
Halma rallied after the safety technology company announced the acquisition of Thermocable for its safety sector fire detection unit, Apollo Fire Detectors, for £22m.
Ladbrokes owner Entain gained after it lifted full-year earnings expectations as it reported a record fourth quarter for both net gaming revenues and active customers.
GSK ticked higher after the drug giant said fourth-quarter profits came in ahead of expectations, boosted by strong demand for its blockbuster shingles vaccine.
Following two days of weakness on the back of a short seller attack, Darktrace traded up as the cyber security firm announced a buyback of up to 35m shares.
On the downside, telecoms giant Vodafone slumped after it said revenues fell in the third quarter as the economic slowdown hit trading in Continental Europe and offset a good performance in the UK.
Housebuilder Persimmon was hit by a downgrade to ‘sell’ at Citi.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Tui Ag | +3.58% | +6.05 | 174.95 |
| 2 |  |
Itv Plc | +2.99% | +2.42 | 83.30 |
| 3 |  |
Ocado Group Plc | +2.76% | +17.80 | 663.80 |
| 4 |  |
Halma Plc | +2.42% | +52.00 | 2,200.00 |
| 5 |  |
Marks And Spencer Group Plc | +1.92% | +2.80 | 148.60 |
| 6 |  |
Smiths Group Plc | +1.91% | +33.00 | 1,760.00 |
| 7 |  |
Flutter Entertainment Plc | +1.87% | +235.00 | 12,785.00 |
| 8 |  |
Ferguson Plc | +1.85% | +210.00 | 11,570.00 |
| 9 |  |
Carnival Plc | +1.75% | +13.40 | 781.00 |
| 10 |  |
Smurfit Kappa Group Plc | +1.71% | +58.00 | 3,450.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
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| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Vodafone Group Plc | -2.22% | -2.07 | 91.05 |
| 2 |  |
Fresnillo Plc | -2.12% | -17.40 | 804.00 |
| 3 |  |
Anglo American Plc | -1.98% | -68.50 | 3,398.00 |
| 4 |  |
Rio Tinto Plc | -1.27% | -80.00 | 6,239.00 |
| 5 |  |
Aviva Plc | -0.92% | -4.20 | 451.50 |
| 6 |  |
Antofagasta Plc | -0.78% | -13.50 | 1,719.00 |
| 7 |  |
Bt Group Plc | -0.76% | -0.95 | 123.70 |
| 8 |  |
Compass Group Plc | -0.67% | -13.00 | 1,918.00 |
| 9 |  |
Bae Systems Plc | -0.58% | -5.00 | 851.80 |
| 10 |  |
Hikma Pharmaceuticals Plc | -0.47% | -8.00 | 1,700.50 |
US close: Major indices wrap up January with solid gains
Wall Street stocks closed higher on Tuesday as market participants awaited the outcome of the Federal Reserve’s two-day policy meeting and digested a number of earnings reports.
At the close, the Dow Jones Industrial Average was up 1.09% at 34,086.04, while the S&P 500 advanced 1.46% to 4,076.60 and the Nasdaq Composite saw out the session 1.67% firmer at 11,584.55.
The Dow closed 368.95 points higher on Tuesday, reversing losses recorded in the previous session.
All three major indices registered monthly gains in January, with the Nasdaq Composite delivering its best monthly performance since July 2022. However, with several major earnings updates and the Federal Reserve’s interest rate decision all set to be revealed before the end of the week, Wall Street’s recent rally could still be at risk.
On the macro front, compensation cost growth for US workers slowed at the end of 2020 as, according to the Department of Labor, in seasonally adjusted terms, the quarter-on-quarter rate of increase in total compensation costs slowed from 1.2% in the third quarter to 1.0% in the fourth. Wage and salary growth, meanwhile, slipped from 1.3% to 1.0% and benefits growth dipped from 1.0% to 0.8%.
Elsewhere, the Federal Housing Finance Agency revealed house prices fell 0.1% month-on-month in November, a marked difference from November 2021’s 8.2% rise, as higher mortgage rates suppressed demand but low inventories helped maintain relatively flat prices throughout the month.
On another note, the Chicago purchasing managers index fell back to 44.3 points in January from 44.9 in December, according to the Institute for Supply Management, a fifth consecutive month of contraction and short of expectations for a reading of 45.
Finally, the Conference Board‘s consumer confidence index fell from an upwardly revised 109.0 in December to 107.1 in January, while the expectations index slipped from 83.4 to 77.8.
In the corporate space, drug maker Pfizer reported record-breaking full-year revenues but cautioned that 2023 sales could fall as much as a third, while fast food giant McDonald’s revealed US customer numbers had grown in the fourth quarter, leading to earnings and revenues that topped Wall Street estimates.
Spotify fell deeper into the red in the fourth quarter as costs mounted, with quarterly net losses widening to €270.0m from €39.0m a year earlier, while Exxon Mobil posted a mixed set of quarterly results albeit accompanied by hefty cash flows.
Still to earnings, Electronic Arts issued cautious guidance after missing revenue expectations, AMD beat revenue targets with its latest quarterly numbers, Amgen Q4 earnings per share came in line with expectations, Western Digital said quarterly earnings were at the high end of guidance, and Snap posted weak revenues amid continued struggles within its digital advertising unit.
Wednesday newspaper round-up: Stealth taxes, Lotus, PayPal
Almost 13,000 offshore companies holding UK property have failed to declare their ultimate owners and may now face fines and a ban on selling their land, the government has said. Martin Callanan, a business minister, praised the introduction of the new register of overseas owners of UK properties, saying it had been “invaluable for tax and revenue services, bringing transparency to opaque offshore trusts often used to obscure assets for tax purposes”. – Guardian
Stealth taxes are hitting higher earners more than expected, with rising wages helping the Treasury to rake in an extra £12bn alone last year, according to the Government’s spending watchdog. The Office for Budget Responsibility (OBR) said a stronger jobs market meant more people were dragged into paying the 40p rate of income tax rate than previously thought, pushing up employee tax and national insurance revenues sharply. – Telegraph
Lotus is to list its electric car business in the US in a $5.4bn deal backed by the world’s richest man, Bernard Arnault. Lotus Technology, the EV division of the British car marquee, is to merge with a special acquisition company (SPAC) listed in New York. The SPAC is backed by L Catterton, a private equity business part-owned by the Arnault family. – Telegraph
British boardrooms have been warned to brace for a further wave of investor activism after a record number of new campaigns at European companies propelled global activity by corporate raiders to its highest level since 2018. A report released yesterday by Lazard, the boutique investment bank, showed there were 235 new initiatives started by activist shareholders around the world last year, a 36 per cent increase on 2021 and a resurgence after three years of falling interventions. – The Times
PayPal announced plans to lay off about 2,000 employees, reducing its global workforce by 7 per cent, as it became the latest technology group to cut costs ahead of an expected slowdown. The payments group said it needed to take further action to address “the challenging macroeconomic environment” amid fears of a recession. Shares in PayPal rose 2.3 per cent, or $1.85, to close at $81.49 in New York last night. – The Times
