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London open: Stocks fall on weak US cues; Persimmon bucks trend
London stocks fell in early trade on Wednesday, taking their cue from a downbeat session on Wall Street after First Republic’s results reignited concerns about the banking sector, despite well-received results from Microsoft and Alphabet.
At 0840 BST, the FTSE 100 was down 0.3% at 7,866.61.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Realisation is dawning that more ominous clouds are gathering over the US economy, causing fresh nervousness for investors. Despite some better-than-expected results from the first of the big tech crowd to report, the darkening picture of consumer confidence has increased concerns about lower spending ahead.
“The worry mill is continuing to grind about the banking crisis, with First Republic Bank looking fragile after its shares collapsed to a record low. The regulatory cavalry is likely to be on standby to step in unless more funding can be raised from the large white knight lenders. Concerns about the raft of problems piling up for the global economy is keeping pressure on oil prices. Brent crude is hovering around $81 a barrel, down 7% from its highs earlier in the month as lower demand for energy is forecast amid ever tightening financial conditions.”
In equity markets, Primark owner AB Foods was under pressure again after disappointing results a day earlier.
Consumer goods giant Reckitt Benckiser was also down as it announced the appointment of a new chief executive and posted a rise in first-quarter sales amid price hikes.
Bunzl fell despite saying it expects annual revenue and operating margin to be slightly ahead of forecasts as it reported a rise in first-quarter sales of 8.4%.
Building materials company CRH lost ground even as it reported a “positive” start to the year, with first-quarter sales and EBITDA ahead of the previous year amid good demand.
Watches of Switzerland was under the cosh, having surged on Tuesday after markets blog Betaville said it was at the centre of takeover speculation,
GSK was little changed as it said first quarter profits and revenue both beat expectations, driven by its shingles and meningitis treatments, among others.
On the upside, miners were among the top performers following heavy losses on Tuesday, with Rio Tinto, Glencore, Anglo America and Antofagasta all higher.
Persimmon rallied as the housebuilder posted a slump in first-quarter completions but said it expects full-year 2023 volumes to be towards the top end of guidance following an improvement in sales rates since the start of the year. Peers followed suit, with Taylor Wimpey and Barratt also trading up.
Standard Chartered nudged higher after it posted better-than-expected first-quarter profits, driven by higher interest rates and forecast annual earnings at the top end of guidance.
Susannah Streeter said: “Given the turmoil we’ve seen in the banking sector over recent weeks, even in the last 24 hours with First Republic’s woes so front of minds, it’s a breath of fresh air to see Standard Chartered surpass earnings expectations and post a pretty upbeat outlook.
“Higher interest rates continue to act as a headwind for profits, but arguably more important in the current climate was the robust customer deposit numbers and a credit impairment charge of just $26m, well below market expectations. This was a resilient set of results that should help to quell some of the fears that issues are systemic throughout the sector.”
Elsewhere, Smith & Nephew gained after the medical equipment manufacturer reiterated its full-year guidance after seeing revenues improve in the first quarter.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Persimmon Plc | +5.34% | +66.00 | 1,302.00 |
| 2 |  |
Taylor Wimpey Plc | +2.23% | +2.70 | 123.80 |
| 3 |  |
Barratt Developments Plc | +1.81% | +8.70 | 489.40 |
| 4 |  |
Rio Tinto Plc | +1.45% | +72.50 | 5,057.00 |
| 5 |  |
Berkeley Group Holdings (the) Plc | +0.90% | +39.00 | 4,391.00 |
| 6 |  |
British Land Company Plc | +0.86% | +3.30 | 386.70 |
| 7 |  |
Segro Plc | +0.82% | +6.60 | 811.40 |
| 8 |  |
Bp Plc | +0.81% | +4.30 | 533.60 |
| 9 |  |
British American Tobacco Plc | +0.71% | +21.00 | 2,993.00 |
| 10 |  |
Shell Plc | +0.70% | +17.00 | 2,442.50 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Associated British Foods Plc | -4.71% | -93.50 | 1,890.50 |
| 2 |  |
Spirax-sarco Engineering Plc | -4.21% | -485.00 | 11,045.00 |
| 3 |  |
Crh Plc | -3.70% | -149.00 | 3,873.00 |
| 4 |  |
Carnival Plc | -3.16% | -20.80 | 637.60 |
| 5 |  |
Tui Ag | -2.65% | -14.40 | 528.00 |
| 6 |  |
Easyjet Plc | -2.07% | -10.30 | 486.10 |
| 7 |  |
Bunzl Plc | -2.00% | -64.00 | 3,138.00 |
| 8 |  |
Burberry Group Plc | -1.89% | -50.00 | 2,591.00 |
| 9 |  |
Melrose Industries Plc | -1.82% | -7.40 | 399.20 |
| 10 |  |
International Consolidated Airlines Group S.a. | -1.77% | -2.60 | 144.10 |
US close: Stocks firmly lower as earnings remain in focus
Major indices were firmly in the red at the close of trading on Tuesday as market participants digested a number of earnings reports.
At the close, the Dow Jones Industrial Average was down 1.02% at 33,530.83, while the S&P 500 slipped 1.58% to 4,071.63 and the Nasdaq Composite saw out the session 1.98% weaker at 11,799.16.
The Dow closed 344.57 points lower on Tuesday, easily reversing modest gains recorded in the previous session.
Earnings remained in focus yet again on Tuesday, with UPS trading lower after its quarterly numbers fell short of expectations, while PepsiCo raised its full-year earnings forecast after posting quarterly figures that beat expectations.
General Motors also reported strong Q1 revenue and profits, leading it to hike its annual guidance, and McDonald’s delivered earnings that came in ahead of estimates by $0.30 amid strong diner demand and price hikes.
On the macro front, building permits tumbled 8.8% to a seasonally adjusted annual rate of 1.41m in March, taking a huge bite out of February’s 15.8% jump, according to a preliminary estimate from the Census Bureau. The reading missed market expectations of 1.45m and remained close to December’s 31-month low of 1.33m.
Elsewhere, US house price growth continued to ebb, although at a more moderate pace, according to S&P/Case-Shiller, which said its national home price index rose at an annual pace of 2.0% in February. That was down from the 3.7% clip observed during the previous month.
On another note, manufacturing sector activity in states bordering the mid-southeastern US Atlantic coast deteriorated a bit more in April, with the Federal Reserve Bank of Richmond‘s factory sector index slipping from a reading of -5 for March to -10 in April. Two of its largest components, the subindices for shipments and new orders, fell from 2 to -7 and from -11 to -20, respectively, while the gauge for employment improved from -5 to 0.
Moving on, sales of new single-family houses unexpectedly jumped 9.3% month-on-month in March to a seasonally adjusted annualised rate of 683,000, according to the Census Bureau, both the highest number in a year and beating forecasts of 630,000.
Finally, the Conference Board‘s US consumer confidence showed the headline figure had declined from 104 in March to 101.3 in April, compared to consensus estimates for a flat month-on-month reading.
Wednesday newspaper round-up: Energy suppliers, Google, SVB UK]
Energy suppliers are hoarding nearly £7bn of customers’ money despite a cost of living crisis that has left some households forced to choose between heating and eating. More than 16m UK households are collectively in credit by £6.7bn to their suppliers, with half of those holding balances of more than £200, research from comparison site Uswitch.com has shown. – Guardian
Allowing Silicon Valley Bank UK to fail would have caused a domino effect across the City, putting a number of regulated firms at risk of collapse, the boss of the Financial Conduct Authority has said. The FCA’s chief executive, Nikhil Rathi, outlined the watchdog’s assessments in a letter to MPs on the Treasury committee, as he detailed the hectic weekend of 10 March that started with a bank run on SVB UK’s deposits and ended with authorities facilitating HSBC’s takeover of the bank for just £1. – Guardian
Google managed to beat a downturn in the wider tech sector thanks to an increase in demand for its cloud services, as rival Microsoft enjoyed a 7pc boost to revenues. Alphabet, the search giant’s parent company, reported revenues grew to $69.8bn (£56.2bn) in the first three months of 2023, beating analyst expectations, but only improving by 3pc compared to the previous year. – Telegraph
The business department has “lost” billions of pounds of taxpayers’ funds by failing to pursue fraud and error in pandemic finance schemes, MPs have said. In a highly critical report, the public accounts committee found the Department for Business, Energy & Industrial Strategy was showing “no real signs of making the improvements that would prevent the big mistakes it has made over many years, especially during the pandemic, happening all over again”. – The Times
Inflation has struck at Pret A Manger. The sandwich chain has increased the price of its coffee subscription from £25 to £30 and changed the name of the loyalty scheme to Club Pret. Customers who use the scheme only for the five barista-prepared drinks a day they are entitled to will be annoyed at having to pay an extra £5, but if you also buy food then Club Pret membership gives 10 per cent off. – The Times
