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London open: FTSE edges higher ahead of Fed; Nationwide data in focus
London stocks edged up in early trade on Wednesday as investors eyed the latest UK manufacturing data and a policy announcement from the US Federal Reserve.
At 0840 BST, the FTSE 100 was up 0.2% at 8,156.00.
Danske Bank said: “Today’s main event will be the FOMC meeting, where we and the markets expect no changes to the Fed’s policy rate.
“With no new economic projections, focus will be on Powell’s verbal guidance as well as on any hints on the Fed’s plans to taper the pace of QT.”
On home shores, figures released by Nationwide earlier showed that house prices unexpectedly fell in April for the second month in a row, as borrowing rates went up.
House prices fell 0.4% on the month following a 0.2% decline in March. Economists were expecting a 0.2% increase.
On the year, house price growth slowed to 0.6% in April from 1.6% the month before.
The average house price stood at £261,962 last month, versus £261,142 in March.
Nationwide chief economist Robert Gardner said: “The slowdown likely reflects ongoing affordability pressures, with longer term interest rates rising in recent months, reversing the steep fall seen around the turn of the year.
“House prices are now around 4% below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects.”
Imogen Pattison, assistant economist at Capital Economics, said the second consecutive decline in the Nationwide house price index in April confirms that the rise in mortgage rates since the start of the year will prevent further near-term price gains.
“But as we expect Bank Rate to fall more than most expect this year, the drop in mortgage rates further ahead will mean house prices are likely to start rising again,” she added.
Pattison said the 0.4% monthly fall reflects the likely tick up in the average quoted mortgage rate from 4.7% in March to 4.8% in April, as higher financial market interest rates maintained upward pressure on mortgage rates.
“In the coming months, we suspect mortgage rates will hover around their April level, keeping demand subdued. We expect that will prevent renewed gains in house prices in the near term. But if we are right to think that Bank Rate will be cut further than most expect this year, mortgage rates should fall to just over 4% by end-2024, leaving house prices up 3% y/y,” she said.
Still to come, the S&P Global/CIPS manufacturing PMI for April is due at 0930 BST.
In equity markets, Smith & Nephew shot higher as it reported a 2.9% year-on-year rise in first-quarter sales to $1.39bn, as its orthopaedics business continued to recover.
GSK rose as the pharmaceutical giant lifted annual profits guidance, pinning its hopes on demand for its respiratory virus and shingles treatments.
On the downside, Haleon slumped as the healthcare company’s first-quarter revenue missed expectations.
Fashion retailer Next was in the red as it said first-quarter sales came in ahead of forecasts and held guidance for the full year but warned that the next three months would be weaker due to wet spring weather.
Computacenter lost ground as it warned on first-half profits, citing strong prior-year comparatives and challenging UK markets.
Luxury carmaker Aston Martin Lagonda fell after saying it saw a double-digit drop in revenues and adjusted profits in the first quarter, but that the launch of four new models should drive “significant growth” in the second half and beyond.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Smith & Nephew Plc | +2.60% | +25.50 | 1,004.50 |
| 2 |  |
Prudential Plc | +2.34% | +16.40 | 717.40 |
| 3 |  |
Severn Trent Plc | +2.11% | +52.00 | 2,519.00 |
| 4 |  |
Gsk Plc | +1.49% | +25.00 | 1,698.00 |
| 5 |  |
Lloyds Banking Group Plc | +1.43% | +0.74 | 52.64 |
| 6 |  |
Fresnillo Plc | +1.34% | +7.50 | 565.50 |
| 7 |  |
Coca-cola Hbc Ag | +1.24% | +32.00 | 2,622.00 |
| 8 |  |
United Utilities Group Plc | +1.20% | +12.50 | 1,057.00 |
| 9 |  |
Johnson Matthey Plc | +1.14% | +20.00 | 1,776.00 |
| 10 |  |
Standard Chartered Plc | +1.10% | +7.60 | 697.40 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ashtead Group Plc | -2.60% | -152.00 | 5,690.00 |
| 2 |  |
Carnival Plc | -1.98% | -21.50 | 1,063.50 |
| 3 |  |
Scottish Mortgage Investment Trust Plc | -1.54% | -13.00 | 829.60 |
| 4 |  |
Ferguson Plc | -1.36% | -230.00 | 16,730.00 |
| 5 |  |
International Consolidated Airlines Group S.a. | -1.17% | -2.05 | 173.05 |
| 6 |  |
Associated British Foods Plc | -1.17% | -31.00 | 2,625.00 |
| 7 |  |
Ocado Group Plc | -1.02% | -3.60 | 349.50 |
| 8 |  |
Smiths Group Plc | -0.87% | -14.00 | 1,602.00 |
| 9 |  |
Flutter Entertainment Plc | -0.84% | -125.00 | 14,800.00 |
| 10 |  |
Sage Group Plc | -0.81% | -9.50 | 1,156.50 |
US close: Dow registers heavy losses ahead of FOMC decision
Wall Street stocks registered heavy losses on Tuesday as market participants awaited the outcome of the Federal Reserve’s two-day policy meeting and digested more mega-cap earnings.
At the close, the Dow Jones Industrial Average was down 1.49% at 37,815.92, while the S&P 500 lost 1.57% to 5,035.69 and the Nasdaq Composite saw out the session 2.04% weaker at 15,657.82.
The Dow closed 570.17 points lower on Tuesday, easily wiping out yesterday’s gains and wrapping up the blue chip’s worst month since September 2022.
Central bank policymakers will meet for their two-day policy meeting on Tuesday, with their latest interest rate decision set to be revealed on Wednesday, with the Fed broadly anticipated to keep interest rates steady. However, investors have grown worried that chairman Jerome Powell’s post-meeting comments may be more hawkish than originally thought as a result of a run of hotter-than-expected inflation reports.
Corporate earnings were again in focus on Tuesday, with fast food giant McDonald’s delivering mixed first-quarter results on Tuesday as restructuring costs weighed on profits, Coca-Cola lifting annual sales forecasts after first-quarter numbers at the US giant topped expectations, Restaurant Brands topping estimates following a revival in demand at its Burger King sites, and Eli Lilly hiking its full-year forecasts by $2.0bn on the back of a strong performance from its weight-loss drug.
After the close, Amazon said profits had more than tripled in the first quarter of its current trading year, principally driven by its cloud computing unit, but still delivered quarterly revenues that fell short of estimates on the Street..
On the macro front for Tuesday, S&P Case-Shiller‘s February housing price index showed that home prices jumped 6.4% year-on-year in February, another increase after the prior month’s annual gain of 6% and the fastest rate of price growth since November 2022. The ten-city composite rose 8%, up from a 7.4% increase in January, while the 20-city composite posted an annual gain of 7.3%, up from a 6.6% advance reading in January.
Elsewhere, the Conference Board‘s consumer confidence index retreated to 97.0 in April from a downwardly revised 103.1 reading for March, the present situation index declined from 146.8 to 142.9, while the expectations index fell from a slightly upwardly revised reading of 74.0 last month to 66.4 in April.
Finally, the cost of employing workers picked up modestly at the start of 2024 amid a jump in benefits, according to the Department of Labor, which said the country’s employment cost index had advanced by 1.2% quarter-on-quarter, following a 0.9% rise over the prior three months and compared to a 1.0% increase forecast by economists. Wage and salary growth was steady at 1.1% in the quarter, despite gains in both the private and public sectors, while benefits sped up from 0.7% to 1.1%.
Wednesday newspaper round-up: Amazon, dividends, Weardale Lithium
Amazon profits soared once again in the first quarter of 2024, the company announced on Tuesday – the latest in a series of robust earnings reports for the retail giant. The company attributed the boost to artificial intelligence and advertising sales. Amazon reported overall revenue of $143.3bn in the first three months of the year – up 13% from the same period in 2023 and surpassing Wall Street expectations of $142.65bn. The e-commerce giant reported an increase of more than 200% to $15bn, with net income more than tripling to $10.4bn from $3.17bn at the same time in 2023. – Guardian
Shareholders have proved to be more successful at securing bumper payouts than workers have at winning higher pay, according to two studies that show dividends outstripping wages by a considerable margin in recent years. Oxfam said analysis of global data showed that dividend payments to shareholders over the last three years grew an average of 14 times faster than worker pay across 31 major economies. – Guardian
A mining company has announced plans to extract 10,000 tonnes of lithium a year from rocks beneath a County Durham beauty spot after drilling found vast volumes of hot brines laden with the precious mineral. Lithium is an essential component of the rechargeable batteries that power everything from mobile phones to electric vehicles – but the UK is currently entirely dependent on imports. – Telegraph
The Duke of Westminster’s property empire was lossmaking last year, although the King’s godson and his family still received more than £50 million in dividends. Grosvenor Group, which runs a multibillion-pound portfolio of assets including its 300-acre estate in the West End of London, suffered a loss of £28.6 million in 2023, having made a profit of £110.4 million in the previous year. – The Times
