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London open: Stocks edge up as BT, Shell gain after results; BoE eyed
London stocks rose in early trade on Thursday, underpinned by well-received results from Shell and BT, after the Federal Reserve poured cold water on the prospect of a rate cut in March and as investors eyed a policy announcement from the Bank of England.
At 0900 GMT, the FTSE 100 was up 0.2% at 7,647.93.
Steve Clayton, head of equity funds at Hargreaves Lansdown, said: “The Fed met and held interest rates steady. This was widely expected but Fed Chair, Jay Powell, then produced a bucket of cold water and poured it, saying that the degree of confidence that the Fed would require before cutting was unlikely to be achieved before their next meeting in March.
“Interest rate bulls, many of whom have been calling for early and sustained rate cuts, effectively had their legs cut away from beneath them after that message. The market has had to push back expectations for the scale and pace of rate cutting through the rest of 2024. It’s very much a case of train delayed, not cancelled, at this point. But investors are likely to be less forgiving if we see any data emerging suggesting that the economy still has scope to keep inflation bubbling away.”
The BoE announcement is due at midday, with no change expected to interest rates.
Clayton said: “The Fed’s move has very likely set the stage for a similar ‘rates on hold, don’t get excited’ message from the Bank of England when they make their next rates announcement at lunchtime today. Chairing a central bank on either side of the Atlantic is likely to be a thankless task this year. Upcoming elections put the bankers in the spotlight. If they cut, opposition parties will accuse them of paving the way for the incumbent to win. Hold tight, and the shouting will come from the other direction, arguing that the bank is needlessly restricting the economy. In the worst case, from the central banks’ perspective, the economy will be obviously in need of changed rates, in either direction, just as electorates are heading to the polls.”
In equity markets, Africa-focused telecoms group Airtel Africa rallied as it said it plans to launch a share buyback worth up to $100m after a strong underlying performance in the third quarter, though currency movements weighed heavily on growth.
BT Group was also on the front foot as it reiterated annual guidance and reported flat adjusted earnings for the third quarter and a rise in revenues driven by higher prices.
Shell gushed higher as the oil giant posted a drop in annual profits but lifted its dividend and announced another $3.5bn share buyback.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Shell Plc | +2.57% | +63.00 | 2,510.00 |
| 2 |  |
Bt Group Plc | +2.01% | +2.25 | 114.45 |
| 3 |  |
Easyjet Plc | +1.83% | +10.20 | 566.40 |
| 4 |  |
Phoenix Group Holdings Plc | +1.54% | +7.80 | 513.20 |
| 5 |  |
Bp Plc | +1.51% | +7.00 | 469.45 |
| 6 |  |
Glencore Plc | +1.44% | +6.05 | 426.50 |
| 7 |  |
Vodafone Group Plc | +1.43% | +0.96 | 68.28 |
| 8 |  |
Flutter Entertainment Plc | +1.32% | +215.00 | 16,500.00 |
| 9 |  |
Ferguson Plc | +0.98% | +145.00 | 14,995.00 |
| 10 |  |
Dcc Plc | +0.97% | +56.00 | 5,812.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Fresnillo Plc | -3.69% | -19.60 | 512.00 |
| 2 |  |
3i Group Plc | -2.90% | -72.00 | 2,407.00 |
| 3 |  |
Ocado Group Plc | -2.20% | -12.00 | 534.60 |
| 4 |  |
Next Plc | -2.17% | -184.00 | 8,284.00 |
| 5 |  |
Tui Ag | -1.46% | -8.00 | 541.00 |
| 6 |  |
Land Securities Group Plc | -1.31% | -8.80 | 660.80 |
| 7 |  |
Associated British Foods Plc | -1.15% | -27.00 | 2,314.00 |
| 8 |  |
British Land Company Plc | -1.13% | -4.30 | 377.70 |
| 9 |  |
Melrose Industries Plc | -1.05% | -6.20 | 584.60 |
| 10 |  |
Segro Plc | -0.75% | -6.60 | 875.20 |
US close: Stocks drop sharply on Fed rate-cut uncertainty
US stock markets suffered heavy losses on Wednesday on the back of poorly received results from tech heavyweights and comments from the Federal Reserve which said that interest-rate cuts are not yet imminent.
After trading more or less flat for most of the session, the Dow – which notched another record closing high on Tuesday – dropped 0.8% by the close with only four index constituents in positive territory. The S&P 500 sank 1.6% and the Nasdaq plunged 2.2%, with the latter weighed down by heavy falls from Microsoft and Alphabet.
The Fed said it was now closer to achieving its goals for both full employment and inflation stability, but policymakers were still not confident enough that inflation was shifting back down to the 2% target on a sustainable basis. Until they are, the Federal Open Market Committee would not cut rates, according to the policy statement released at 1400 ET.
Importantly however, the reference to the possible need for further rate hikes – which has been a mainstay of policy statements since the Fed first paused monetary tightening last June – was removed. Furthermore, during his press conference, Fed chair Jerome Powell said that everyone on the committee believed that rates would be cut in 2024, but the timing was yet to be determined.
Bonds gained on the news, with the 10-year US Treasury yield falling 11.5 basis points to 3.919%, but equity prices plunged further into the red.
“The FOMC didn’t fully embrace financial markets’ view that rate cuts could come as early as March,” said economist Ryan Sweet from Oxford Economics. “That said, if the Fed finds itself falling behind the curve, it has plenty of room to cut aggressively and this could be factoring into their communication. There was nothing in the post-meeting statement that warrants a change to our forecast for the first rate cut to occur in May.”
In other macro news, the ADP Employment report showed that private sector employment in the US increased by 107,000 from December, versus expectations for a 145,000 jump. Meanwhile, December’s gain was revised down to 158,000 from 164,000.
The Department of Labor’s Employment Cost Index increased by 0.9% during the fourth quarter (consensus: 1.0%). Covid distortions aside, that was the smallest increase since December 2019 and down from the 1.1% rise seen during the prior quarter.
The Chicago purchasing managers’ index, which tracks business conditions across Illinois, Indiana and Michigan, dropped to 46.0 this month, from a revised 47.2 in December, missing the 48.0 forecast.
Microsoft and Alphabet disappoint
Microsoft, the second-largest company by market cap which crossed the $3trn mark last week, fell nearly 3% after underwhelming with its statement for its fiscal second quarter. The company delivered a record quarter, beating analysts’ forecasts with both revenues and profits, driven by a 30% jump in sales for its Azure division, the market was firmly focusing on guidance for the third quarter. The tech giant pointed to revenues of $60-61bn, or $60.5bn at the mid-point, slightly under the current consensus estimate of $60.93bn.
Google owner Alphabet also overshot market estimates with its fiscal fourth quarter but shares dropped by over 7% with market chatter pointing to disappointing search revenues.
Apple, the largest company by market cap which reports earnings after the close of trading on Thursday, also fell 2%.
Shares in Paramount Global soared over 20% after it emerged Allen Media Group had submitted a multi-billion dollar bid for the US giant. In a statement sent to Reuters, the business – controlled by entrepreneur Bryon Allen – said it had submitted a $30bn debt and equity bid.
Troubled aerospace giant Boeing topped market expectations with fourth-quarter results, but declined to offer guidance for 2024 as it grappled with safety issues with its 737 MAX-9 narrowbody. Shares rose 5% after the company reported a quarterly loss per share of 47 cents, much better than the expected 78 cents loss. Revenue also exceeded estimates, totalling $22.02bn, compared to the expected $21.1bn.
Thursday newspaper round-up: National Lottery, Mike Lynch, Morrisons
The Czech billionaire whose company takes over running the UK national lottery from Thursday is still in business with the Kremlin-owned gas company Gazprom, nearly two years after promising regulators he would sever ties with Russia. The Gambling Commission awarded Allwyn the lucrative 10-year licence to run the lottery, estimated to be worth up to £100bn in sales, in March 2022. – Guardian
Mike Lynch, the technology tycoon once lauded as the UK’s answer to Bill Gates and now facing criminal fraud charges in the US, is suing the Serious Fraud Office. Lynch, who was extradited to the US last year to face trial over allegations he duped Hewlett-Packard into overpaying when it struck an $11bn (£8.6bn) deal to buy his software firm Autonomy in 2011, has filed a data protection claim against the SFO in the high court in London. – Guardian
A senior member of the Barclay family faces a petition from a leading private bank to declare him personally bankrupt, in the latest legal drama for the owners of The Telegraph. According to High Court documents, Alistair Barclay, 34, is alleged to be in default on £946,754 of borrowing from Investec, which only offers bank accounts to individuals with net wealth of more than £3m. – Telegraph
The new boss of Morrisons has started to invite shoppers to board meetings and has been holding customer “round tables” in stores as part of a plan to “re-energise and reshape” the troubled supermarkets chain. Rami Baitiéh, who joined as chief executive in November, admitted that Morrisons had “not been on peak form” since the pandemic and said he would reveal his new strategy for the business in March. – The Times
The competition regulator has started an investigation into a drugs company formerly run by the brother of Nasser Hussain, the ex-England cricket captain, over its supply of iron deficiency treatments to NHS patients. The Competition & Markets Authority said it was investigating suspected anti-competitive conduct by Vifor Pharma. – The Times
