- FTSE 100 closes 47 points lower
- US stocks oscillate around opening levels ahead of Fed minutes
- Lloyds Bank up on £2bn buyback, annual profits flat
4.45pm: FTSE in the red
The UK's blue chip index finished 47 points lower at 7,931 points for a 0.6% loss on the day as commodity price weakness dragged the FTSE 100 lower.
Meanwhile, investor eyes are turning to the US Federal Reserve meeting minutes, due to be released later today.
"Expectations of ‘higher for longer’ in US interest rates mean that commodity prices have continued to tumble, and this has seen the FTSE 100 reverse some of its stratospheric performance," said IG's Chris Beauchamp.
"If, as seems likely, stocks struggle for the time being, then the FTSE seems set to trim more of its gains, with commodity weakness remaining a key driver. But the index still has plenty of ground to make up, and if the global economy does avoid a hard landing then the FTSE’s makeup puts it in a good place for more gains.”
4.00pm: Fruit and Veg-gate
Tesco has become the latest supermarket to introduce limits on sales of certain fruit and vegetables due to shortages of fresh produce, according to the BBC News website.
The move by Britain's biggest retailer follows similar moves by supermarket rivals Aldi, Asda and Morrisons, with other food retailers also said to be facing problems after extreme weather hit harvests abroad.
The shortages are largely the result of extreme weather in Spain and north Africa which have affected harvests.
However, Sainsbury's, Waitrose, M&S and Lidl have not announced any limits- yet.
Tesco, which is putting limits of three per customer on sales of tomatoes, peppers and cucumbers, said it was introducing the limits as a precautionary measure to ensure customers could still get the produce they needed, the BBC reported.
3.45pm: It pays to advertise
WPP PLC shares edged lower even as analysts at Credit Suisse upgraded its rating for the FTSE100-listed advertising giant to 'outperform' from 'neutral' and lifted their price target to 1,260p
The Swiss bank’s analysts made the change as their research suggests the structural headwinds which caused the de-rating of advertising agency stocks have significantly abated.
They said the drag on organic growth from fast-moving consumer goods (FMCG) companies has all but disappeared and those companies are now investing more in marketing, as shown by Unilever's increase in brand spend in its results for full-year 2022.
The analysts also said the concern over consultancies expanding into media and creative has proved exaggerated and pointed out that Facebook and Google have not disintermediated agencies in media as the digital market has grown in complexity.
In late afternoon trading, WPP shares were 0.4% lower at 1,007.50p
3.30pm: Another brick in the wall
Brick stocks are returning to normal levels after deliveries have started to fall because of slowing housing starts, according to a report on the Construction Enquirer website.
According to the Construction Leadership Council’s Product Availability working group, the housing slowdown has allowed brick manufacturers to rebuild stocks to their highest levels since May 2021.
While there are some exceptions, manufacturers are reporting up to 8 weeks supply for most brick types at current demand levels.
The past month has seen yet more improvements in the balance of product demand and supply, according to builders merchants and materials producers with good availability for most construction products and prices no longer as volatile, the website noted.
3.10pm: What's the picture
Cineworld shares dropped 13% on Wednesday amid reports the company has yet to receive any firm offers for its business. The final deadline for a bid has been set for 10 April.
According to the reports, Cineworld's bankruptcy attorney Joshua Sussberg said in a hearing on Tuesday that the company's outreach to 40 potential buyers had led to "many" offers for the rest-of-world assets but only "some strategic interest" in the entire company.
Sussberg said the group - which owns the Regal cinema chain in the US and Cineworld and Picturehouse in the UK and Ireland - did not receive any all-cash bids, and no bid came anywhere near the $6bn of secured indebtedness on the company's balance sheet.
In mid-afternoon trading, Cineworld shares were down 13% at 3.90p.
2.50pm: New York awaits Fed
The FTSE 100 index remained weaker but still well off the day's lows as US stocks edged modestly higher at the open ahead of the highly-anticipated release of minutes from the Federal Reserve’s latest rate-setting meeting, which investors hope will provide additional clues as to the path of future interest rate hikes.
FOREX.com market analyst Fiona Cincotta said investors would be scrutinizing the Fed minutes for clues as to how much support there was for a 50 basis point rate hike at the February meeting.
“This comes after two hawkish policymakers have recently said they would prefer a return to outsized hikes,” she said. “Any sense of a more hawkish stance at the Fed could pull stocks and gold lower while lifting the USD.”
Cincotta also highlighted that it was worth keeping in mind that the stronger economic data was released after the February Fed meeting took place. “As a result, the market may consider that the meeting minutes are already outdated,” she explained.
Around 20 minutes after the US market open, the Dow Jones Industrial Average had added 57 points or 0.2% at 33,219, the S&P 500 was up 0.2%, and the Nasdaq Composite had gained 0.5%.
In London around the same time, the FTSE 100 index was down 58 points, or 0.7% at 7,919, having been on the backfoot all session.
2.30pm: Reshuffle to hurt some mid-caps
With a week to go, the latest FTSE indices reshuffle is expected to see no big-league movements, with the FTSE 100 line-up currently set to stay unchanged
However, in the FTSE 250, based on current market caps, Moonpig and 888 Holdings will both be relegated, while STEM recruiter SThree will be promoted to the mid-caps and North Sea oil producer Ithaca Energy will join as well following its IPO.
The FTSE All Share Index Quarterly Review is based on closing prices and market capitalisations on 28 February and will be announced after the market close on 1 March. Changes will take effect the close of business on Friday 17 March.
Susannah Streeter, head of money and markets, Hargreaves Lansdown noted: ‘’Moonpig looks set to fly out of the FTSE 250 as it’s lashed by multiple headwinds as consumers shift their buying behaviour faced with the economic pressures. Shares have come down to earth with a bump as high inflation has prompted a proliferation of problems for the e-card retailer."
She added: "‘888 holdings has been in the relegation zone for some time, with investors betting that revenues will continue to be sideswiped as customers shift back to pre-pandemic habits. It again looks set to leave the index as its now grappling with a fresh series of issues. There are concerns about the amount of leverage the company is coping with amid higher interest rates, following the acquisition of William Hill. An internal compliance review into anti-money laundering processes which revealed that best practices weren’t adhered to for some accounts in the Middle East and the departure of both the CFO and CEO rocked share price further."
2.20pm: EV advocacy
Sticking with Budget Day fun, FairCharge, the national EV campaign group founded by motor journalist and electric vehicles (EV) advocate, Quentin Willson, is urgently calling on the UK Government to cut the VAT rates on public EV charging, in line with the 5% rate for those who charge at home, part of a six-point action plan to accelerate the electric car revolution.
New analysis shows a shocking disparity between those areas most ready for the switch to EVs and those in need of greater support from central government, FairCharge noted.
Willson founder of the FairCharge campaign said: “America and Europe can clearly see the massive economic, social, and public health benefits of electrification. If we’re not careful the UK will claim last place in the race for global investment and become the land of diesel-driving dinosaurs.
“The Chancellor should use the Spring Statement to make a generational commitment to the future of UK electrification to create investment confidence for the industry, increase energy security, and help clean up our urban air. Cutting VAT on public charging is essential. The Treasury is disadvantaging drivers by forcing them to pay four times the rate of VAT simply because they don’t have a driveway. These higher costs are also slowing EV adoption.
“Since the Government grandly announced the halt of new combustion car and van sales in 2030 it feels like it’s rammed on the handbrake. UK EV manufacturing industrial strategy has all but disappeared, car makers are moving EV production abroad, subsidies have gone - along with hopes of a British battery factory."
2.10pm: Budget Day strife
London Underground drivers are to strike on Budget Day, March 15, 2023, the union Aslef has announced.
The train drivers' union said the dispute was over a failure to accept that changes to working arrangements and pensions should happen by agreement.
Tube train drivers voted by 99%, on a turnout of 77%, in favour of a walkout, the union said. Those taking industrial action include thousands of drivers and some in management grades.
Finn Brennan, Aslef's full-time organiser on London Underground, told BBC News that this would be the first day of action "in a protracted dispute" with Transport for London (TfL).
He said: "Our members are not prepared to put up any longer with the threats to their working conditions and pensions. We understand that TfL faces financial challenges, post-pandemic, but our members are simply not prepared to pay the price for the government's failure to properly fund London's public transport system."
1.30pm: London's movers
Here's a look at today's risers and fallers among London's small caps.
Risers
Science in Sport- up 4% to 13p
Shares in Science in Sport, the performance nutrition company, jumped following a pre-close trading update in which it confirmed revenue growth of 1.5%.
Revenue in the year ended 31 December 2022 was £63.5mln compared to £62.7mln the year earlier, which was broadly in line with expectations.
Sanderson- up 12% to 133p
The luxury interior design and furnishings group saw its shares surge after it signed its first “major” licensing agreement for its Clarke & Clarke brand with Next.
Sanderson Design said Next will hold a master agreement giving it exclusive rights to produce a very broad range of Clarke & Clarke homeware products, including bedding, towelling, tableware, furniture and lighting.
Conroy- up 18% to 20p
Shares in Conroy Gold shone after the gold explorer announced a new discovery in the Longford-Down Massif in Ireland.
Visible gold was observed at two locations within the new discovery area and assay results from five quartz samples returned values of up to 123.0 grammes per tonne (g/t) gold, the company said in a statement.
Fallers
Synergia- down 18% to 0.12p
Synergia tumbled after announcing a new convertible loan agreement for £650,000.
The AIM-quoted firm, which changed its name from Oilex in July 2022, is issuing loan notes that will mature in a years’ time, carry 5% interest and will be convertible into equity from November onwards at a price of 0.08p.
12.45pm: US shares seen opening higher
London blue chips are continuing to ease away from the morning's lows as the US wakes up. The FTSE is down 62 points or 0.78% at 7915.
New York stocks are expected to enjoy a slight rebound at the open, recuperating from the previous session's sharp falls.
The release of minutes from the Federal Reserve’s latest meeting will be the main theme of the day, providing more insight on the central bank’s future policy agenda.
Futures for the Dow Jones Industrial Average (DJIA) are pointing to a 0.2% gain, while the S&P 500 is seen rising 0.3% and the Nasdaq-100 by 0.4%.
Losses on the tech-heavy Nasdaq Composite were the biggest yesterday, with a 2.5% dive, while the S&P 500 slumped 2% and the Dow dropped 2.1%.
This saw the Dow turn negative for the year, though the Nasdaq is still up 10% and the S&P 4.5%.
The worst sell-off of 2023 so far was sparked by mounting concerns the Fed will continue hiking rates, with disappointing results from Home Depot also reigniting concerns about the health of the consumer.
Fed minutes, due out at 7pm London time (2pm ET), will be pored over for clues to the central bank’s future rate hiking path after its recent 25 basis point increase.
Analyst Fawad Razaqzada at City Index noted that renewed strength in bond yields seen since the start of this month followed both the Fed and ECB both appeared more hawkish than the markets had anticipated.
Data on inflation and jobs data since has been better than expected, which he said supported the view that more rate hikes are needed to cool the economy.
"But will today’s FOMC minutes match the recent hawkish Fedspeak? And [...] will the dollar and yields have further to run on the Fed story?
"There’s been some talk that policymakers are looking to return to 50 basis point rate hikes again, but I highly doubt this is going to be the case as the Fed has already tightened its policy aggressively and will now go in with smaller increments so as to avoid an unwanted hard landing. Still, markets have realised that the Fed wants to keep its contractionary monetary policy in place longer than they had expected at the back end of last year and start of this year, owing to further improvement in US data and sticky inflation."
The US corporate earnings season rolls on with results due later from Nvidia and Etsy (NASDAQ:ETSY).
Among the early movers pre-market, shares of Palo Alto Networks rose after the cybersecurity company lifted its earnings forecast for the year and crypto exchange platform Coinbase was flat to lower despite topping revenue expectations.
12.10pm: UK inflation to plunge to almost 2% by end of year
UK inflation will plunge from its current 10.1% to 2.3% by the end of this year, according to economists at Citigroup.
Based on nosediving natural gas prices, the bank now sees the consumer price index more rapidly plummeting to below the Bank of England’s 4% fourth quarter forecast.
As gas prices fallen more than 80% from last summer's peaks in the wake of the Ukraine invasion, Citi economists now forecasts UK CPI will tumble below 5% from July, having previously estimated this would take until October.
Having started to ease towards the end of last year, UK gas prices have halved in the past two months from £2.60 a therm to £1.26 a therm.
Based on this, Cornwall Insight forecast this week that household energy bills will fall by nearly £850 from July.
The cap for April is predicted to hit £3,294 when Ofgem releases the information next Monday, 27 February, though typical households bills will rise to around £3,000 from the current rate of £2,500, due to government support.
In July, the household price cap is forecasted to fall again to £2,153 and then rise in October to £2,161, Cornwall Insight predicted.
Over in the land of FTSE, the index's losses have been trimmed, it is now down 73 points or 0.9% at 7905.
11.42am: London rebound
Despite the falls today, London has regained its place as the world's sixth-largest equity market for the first time since last May, according to new data from Bloomberg.
The recent highs for the FTSE 100 and rebound for the FTSE 250 from last autumn's dip have come amid help from a softer sterling, which has sparked extra buying of the shares in London's multinational blue chips and a UK shares being seen in a new light and undervalued in comparison with rivals on other exchanges.
The combined market capitalisation of primary listings in the UK have now re-overtaken India's, with stocks in Mumbai recently dragged lower by the Adani rout.
Excluding ETFs and UK stocks dual listed in the US, the LSE's collective market cap reached about £2.58 trillion (US$3.11 trillion) yesterday, roughly £4.2bn higher India's.
It might be different today though, with the Footsie extending its losses, down 97 points or 1.22% to 7,880.65, the mid cap 250 index down 1.3% and the All-Share down 1.1%.
11.11am: Investors need quick reactions
I hope this FTSE report is being updated regularly enough for you.
I say that because investors who react fast to company news can beat the market, according to strategist Joachim Klement at broker Liberum.
He notes that it needs to be the right sort of news that investors should keep an eye out for, with small caps the ripest for this opportunity.
“Information about major company X missing its revenue or profit targets immediately leads to a reaction in the share price,” he said.
“If news about a company is incorporated immediately, investors have no chance of jumping in on a stock to benefit from it. Markets are efficient in incorporating that news and actively trading these stocks is a losing game.”
But not all news travels so fast, he noted, with some news only incorporated slowly into the share price, which "provides opportunities for investors".
The opportunity is greatest in smaller stocks, those companies followed by fewer analysts and those that don’t get as much coverage by mass media, Klement said, pointing to research from the University of Reading has shown.
Investors are reacting slowly to last week's news today (see below), with the FTSE 100 extending its losses, now down 87 points or 1.1% at 7,890.65.
10.38am: Impact of consumer debt
The performance of financial markets today and yesterday reflects the impact of central bank battles against inflation.
Looking to provide an insight into the effects of the heightened cost of living, the Office for National Statistics has issued some research on the impact on how it is impacting people's wellbeing.
An ONS survey found more than one in ten (12%) adults responsible for paying energy bills reported finding it “very difficult” to afford their energy bills, with 51% of these people reporting high levels of anxiety.
Around 22% of those surveyed found affording these bills “very easy”.
Affording rent or mortgage payments was “very difficult” for 7% of adults who pay them, with half of these reporting high levels of anxiety.
Most recently, 6% of adults reported being behind on their gas or electricity bill payments, with half of this group reporting high levels of anxiety, compared with only 33% of those who were not in arrears.
Adults who reported borrowing more money or using more credit than usual, were twice as likely to report a low levels of happiness as those who had not done so, a 22% compared with 11%, and also slightly more likely to report high levels of anxiety compared with those who were not borrowing more, at 35% compared with 31%.
Myron Jobson, senior personal finance analyst at Interactive Investor, says the figures "clearly illustrate the devasting impact money worries can have on mental health", with personal finance "intrinsically tied to our sense of wellbeing [and] a significant impact on mental health".
While inflation is cooling, Jobson noted the economy is not out of the woods yet and those struggling to keep on top of their finances could find support via energy company schemes to help people who are struggling to afford their bills, or a debt advice charity such as StepChange or Turn2Us.
10.07am: Markets 'running on fumes'
London's blue-chip index is down 80 points, or 1% lower, at 7,897.49, while its mid-cap sibling the FTSE 250 is also down 1% at 19,656.87.
European indices are also lower, with Germany's Dax down 0.5%, France's CAC 0.6% and Spain's Ibex 1.1%.
Here's some further analysis of the reasons behind wobbling markets this morning.
UBS strategists say the market is "running on fumes", while chief investment officer Mark Haefele notes that sentiment continues to be driven by expectations over whether the US economy is headed for a 'hard' or 'soft' landing.
With "multiple combinations of growth and inflation trajectories" in coming months to determine which way the 'landing' goes, but Haefele is confident that US growth and inflation rates "should both fall from their current levels during 2023, with the main uncertainty being over just how much".
"Historically, in macro environments of falling growth and inflation, high-quality bonds have typically performed well, while equities and riskier credit have produced low or negative returns."
On the UK, JPMorgan economists said the stronger macro data yesterday makes it more likely that first-half growth forecast will need to up nudged, with firms signalling their pricing power is enabling them to pass on the recent gains in wages via higher prices.
"This is a problem for the BoE, and reinforces our view that the Bank is far from done despite its dovish communications and the large downside surprise in the January CPI.”
And Citi reckons the "likely contours of global performance in 2023 are increasingly coming into focus".
While the growth outlook for China is "stronger and less uncertain" than envisioned a few months ago, warmer-than-usual weather is enabling Europe to merely experience "stagnation rather than outright contraction” and US data shows the resilience of that economy, "it is apparent that the campaign against inflation still has a long way to go”.
"Countering these pressures will require sustained vigilance from central banks, with the resulting headwinds likely to restrain global growth. Accordingly, we have notched up our global growth forecasts (in response to recent developments), but we continue to envision relatively weak overall performance this year, including 'rolling' country-level recession."
9.40am: Bucket of cold water for markets
Over at AJ Bell, Russ Mould noted that recent days have seen "a bucket of cold water" poured on the global stock market rally that started in January, which had been based on the US Federal Reserve and other central banks being close to the end of the interest rate rise cycle.
The cold water came from two Fed committee members indicating they would support a 50 basis-point hike in the next US interest rate decision.
"In essence, a larger hike than some expected, and a signal that the Fed would be nowhere near the end of its rate hike cycle, let alone the prospect of seeing rates come down later in the year.
"With US markets closed on Monday for a holiday, investors had three days over the extended weekend to let the prospect of further rate hikes sink in. The reaction was to start taking some money off the table as markets reopened on Tuesday.
"Contagion spread across Asia and Europe and now we’ve got investors wondering if they should be more cautious again.
"That’s reflected by what’s in vogue on the FTSE today. It’s no coincidence that pharmaceuticals, tobacco and consumer goods companies outperformed the market – all defensive names whose goods and services are in demand no matter the state of the economy."
We currently have eight FTSE names in green, led by RELX and Rentokil.
Following them are consumer goods groups, Reckitt Benckiser Group PLC (LSE:RKT, ETR:3RB), Coca-Cola HBC and Unilever PLC (LSE:ULVR). Then a utility, BT Group PLC and caterer Compass Group PLC (LSE:CPG).
9.25am: Bonus bonanza at Lloyds
Lloyds Banking Group PLC (LSE:LLOY) staff will share their largest bonus pot in four years, despite the lender reporting flat profits as it put aside more money to protect against a potential jump in defaults amid ongoing economic uncertainty.
The FTSE 100 listed bank, which owns Halifax and is the UK’s largest mortgage lender, said its top performing bankers would share a bonus pool worth £446mln in 2022, up 11% from £399mln in 2021, and the largest sum to be distributed among employees since 2018.
The lender also revealed a £3.8mln pay packet for its chief executive, Charlie Nunn. However, that is down 31% from the £5.5m he received in 2021.
The bank remains lower after its figures as the market as whole continues to head lower, at 7,904.96, down 72.79 points, or 0.91%.
9.00am: FTSE rattled by rate fears, miners a weak feature
FTSE 100 remained in the doldrums in early exchanges with weak mining stocks adding to the downbeat mood.
At 9.00am London's lead index was at 7,903.87, down 73.88 points, or 0.93%.
Neil Wilson at markets.com noted, “Treasury yields up + market expectations for the path of Fed interest rate hikes up = bad news for stocks. Stocks in Europe and Asia slipped Wednesday after US markets registered their worst day in two months.”
Rio Tinto PLC (LSE:RIO) was top of the fallers down 2.1%, followed by Anglo American PLC (LSE:AAL), down 2.1% and Endeavour Mining PLC (LSE:EDV), down 1.9%.
The fall in Rio Tinto’s shares came as the global miner slashed its annual dividend and reported a 38% drop in full-year 2022 profit impacted by weaker iron ore prices as demand from China slowed, as well as by higher labour and material costs.
The FTSE 100-listed miner posted underlying earnings of $13.3bn for the year to December 31, 2022, compared with a record $21.4bn in 2021, and below estimates of $13.8bn.
Victoria Scholar, head of investment at Interactive Investor said, “China’s draconian zero-tolerance to covid approach, which is finally being unwound, weighed on iron ore prices last year, negatively impacting Rio Tinto.”
“While’s China’s economic reopening looks set to provide a tailwind to Rio this year, the risk of further restrictions from Beijing and another spike in infections remain potential hurdles.”
“The inflationary backdrop is also adding to Rio Tinto’s cost burden with higher fuel and raw material costs as well as higher wage bills because of labour shortages.”
Just behind on the fallers list was high street lender, Lloyds Banking Group PLC (LSE:LLOY) following its annual results which included a £2bn buyback, an increased dividend but flat profits as rising bad debts took their toll.
The bank also issued enhanced guidance for the year ahead. Shore Capital’s Gary Greenwood suggested the market “may find this a little disappointing”, which is shown by the 2.5% fall in the shares to 49.72p this morning.
He noted Lloyds is forecasting a return on total equity of around 13% in 2023, below rival NatWest’s target of 14-16%.
Net interest margin guidance of greater than 3.05% is a little worse than expected (consensus: 3.15%) while impairment ratio guidance of circa 30 basis points (bps) is a little better (consensus 35bps).
Costs guidance of £9.1bn is in line with consensus but capital generation of around 175bps should support further significant shareholder distributions, he added.
Greenwood still sees good value in the stock and has a fair value of 60p.
“While the market may be a little disappointed today by the near-term RoTE guidance, the stock still looks good value relative to its target returns,” he added.
On the upside, and one of only five risers in the FTSE, was Rentokil Initial PLC (LSE:RTO), up 0.4% as JP Morgan reiterated an ‘overweight’ rating after taking a further look at the Terminix deal.
While suggesting the integration of the business is likely to be lengthy, the bank believes “the upside to both the cost base and the ongoing levels of organic growth is material.”
“We believe this is an opportune time to be looking at Rentokil, especially for investors with longer-term horizons, and reiterate the stock as a top pick for 2023,” JPM commented.
8.30am: Wizz Air voted worst short-haul airline
Wizz Air Holdings PLC (AIM:WIZZ) has been voted the worst short-haul airline by UK passengers.
Passengers surveyed by consumer group Which? gave the Hungary-based carrier one star out of five for boarding experience, cabin environment and seat comfort.
The budget airline’s seat pitch, the difference between two rows in standard economy, is 28 inches, two inches smaller than rival Ryanair.
No more than two stars were awarded in any of the remaining categories, including value for money and cleanliness.
Which? survey rates Wizz Air as UK’s worst short-haul airline https://t.co/ighW75Ihin
— Travel Weekly (@travelweekly) February 22, 2023
Wizz Air operates short-haul flights from eight UK airports including Birmingham, Edinburgh, Gatwick and Luton.
The airline’s overall customer score of 48% put it at the bottom of the ranking, below Ryanair (52%), Eurowings (53%) and British Airways (56%).
8.15am: Footsie on the back foot
FTSE 100 opened sharply lower on Wednesday following heavy falls in the US and Asia as renewed concerns that US interest rates may rise further knocked equities.
At 8.15am London’s blue chip index was at 7,929.23, down 48.52 points, or 0.61%, while the FTSE 250 was at 19,753.22, down 97.63 points, or 0.49%.
Susannah Streeter, head of money and markets, Hargreaves Lansdown said, “’Investors are waking up to a stark realisation that the Fed’s work is not done, and that interest rates may have to be hiked even higher to cool hot inflation.”
“Wave of exuberance, which have propelled equities higher since the start of the year, have turned into tides of disappointment and apprehension about the difficulties that still may lie ahead for the mighty US economy.”
“High hopes that the Federal Reserve could cut rates by the end of the year have been dashed, replaced by worries that up to three hikes in quick succession may be needed to tame the price spiral.”
“The decision by the Reserve Bank of New Zealand to hike rates to a 14-year high of 4.75%, with warnings of more to come, highlights the extent to which inflation is still a thorn in the side of many economies across the world,” she added.
Back in London and Lloyds Banking Group PLC (LSE:LLOY)’s shares fell reflecting the broader market as it closed the banking reporting season.
Annual profits were flat at £6.93bn while the lender launched a £2bn share buyback alongside an increased total dividend of 2.40p, up from 2.0p in 2021.
The lender forecast net interest margin of 305 basis points in 2023, below the 320 basis points forecast by rivals Barclays and NatWest in their numbers.
Richard Hunter, head of markets at interactive investor, commented, “Lloyds has brought the curtain down on the banks’ reporting season in some style, exhibiting its traditional strengths of efficiency, profits and generous levels of shareholder returns.”
John Moore, senior investment manager at RBC Brewin Dolphin, described the numbers as, “80% NatWest and 20% Barclays.”
“Profits have been flat year-on-year, with bad loan provisions adding extra costs, among other moving parts.”
“The bank has a history of prioritising its dividend, which is up 20% on last year, and acts as a good indicator of sentiment from management.”
“Alongside the dividend increase is a £2bn share buyback programme, underpinned by enhanced guidance for the years ahead – all of which suggests a relatively positive outlook for Lloyds.”
“The bigger question, though, is what Lloyds will do with its existing portfolio of businesses – while there are no answers on that front today, updates will likely be a feature of future statements.”
But the market was unimpressed with shares down 1.6% in early exchanges.
Future PLC (LSE:FUTR) was in focus after naming Jon Steinberg as its new chief executive.
The former Daily Mail will replace Zillah Byng-Thorne, who announced her intention to stand down last September.
Shares rose 0.8% to 1,449p.
But Rio Tinto Ltd dipped 0.5% as it lowered its dividend after profits fell more than expected, adding to a mixed earnings season for the world's commodity giants as demand wavers while costs creep higher.
Elsewhere and Intercontinental Hotels Group PLC (LSE:IHG) fell 1.2 as Deutsche Bank downgraded to hold from buy following yesterday’s results. The German bank did however raise its price target from 5730p to 5850p.
7.45am: Jobs going at British Steel - BBC
British Steel is expected to announce on Wednesday the closure of its coking ovens in Scunthorpe with the loss of 300 jobs.
The timescale for the closure is unclear, as is how many compulsory redundancies it will involve.
Coking ovens are used to turn coal into coke which burns at the higher temperature needed for the two blast furnaces that remain in operation.
The closure means British Steel will import coke.
The closure of the coking ovens is seen as a worrying indicator about the health of the UK steel industry.
Union officials told the BBC that the industry "is on a knife edge".
Government sources described the decision as "disappointing" given that negotiations are still ongoing between British Steel's Chinese owners Jingye, Tata, and the Treasury about a support package worth £300m to each company.
A British Steel spokesman said: "Unfortunately, like many other businesses we are reluctantly having to consider cost cutting in light of the global recession and increased costs."
Union Unite said it believes that the proposed job losses are a direct result of the Jingye's failure to make good on its investment commitments in the plant and the government’s "abject inability to produce a coherent industrial strategy to protect the UK’s steel making capability".
British Steel failed to provide any evidence for the financial justification for closing the coking ovens nor has it provided any information about where it intends to source coke from in the future, the union added.
Unite general secretary Sharon Graham said: “British Steel workers are faced with the toxic combination of a greedy employer that is reneging on investment promises and a shambolic UK government that has no serious plan for the industry.”
“Unite’s members in British Steel are clear that they will fight this and they will have the full support of their union.”
7.33am: Flat profits at Lloyds, £2bn buyback
The last of the big banks has reported. Lloyds Banking Group PLC (LSE:LLOY) announced a £2bn share buyback alongside flat annual profits which were hit by rising bad debts.
The high street lender reported pre-tax for the year to December 31 of £6.93bn, little changed from £6.90bn in 2021, and broadly in line with City expectations.
Net income of £18.0bn, up 14%, supported by continued recovery in customer activity and UK Bank Rate changes, while underlying net interest income jumped 18%, primarily driven by a stronger banking net interest margin of 2.94% in the year (3.22% in the fourth quarter).
But the FTSE 100 listed bank booked a £1.5bn impairment charge for the year and £0.5bn in the fourth quarter reflecting a deteriorating economic outlook.
The pro forma CET1 ratio of 14.1% remained ahead of the ongoing target of 12.5% .
Shareholders were rewarded with a final dividend of 1.60p making a total dividend of 2.40p, up from 2p in 2021, while the strong capital position prompted the bank to announce a £2bn share buyback.
Lloyds intends to maintain a “progressive” dividend policy and expects to pay down to its target CET1 ratio by the end of 2024.
Looking ahead the lender forecast banking net interest margin to be greater than 305 basis points, below the 320 basis points forecast by rivals Barclays and NatWest, operating costs of around £9.1bn, an asset quality ratio of around 30 basis points and return on tangible equity of around 13%.
Lloyds said it has enhanced its enhanced its medium and longer-term guidance, with operating costs now expected to be £9.2bn in 2024, with a cost:income ratio of less than 50% by 2026.
Asset quality ratio now expected to be around 30 basis points in 2024 and return on tangible equity now expected to be c.13% in 2024 and greater than 15% by 2026.
Additional revenues from strategic initiatives of c.£0.7 billion by 2024 and c.£1.5 billion by 2026 were forecast.
7.00am: FTSE set to fall further
FTSE 100 is expected to open lower following heavy falls in the US as fears that the Federal Reserve might increase interest rates further rattled investors.
Spread betting companies are calling the lead index down by around 31 points.
As Michael Hewson at CMC Markets put it, “Long story short, the market thought that the inflation job was done, or at least close to it, even though the recent non-farm payrolls report, and ISM services report muddied the waters in that regard.”
US stocks nursed heavy losses at the close on Tuesday as fears of higher interest took hold. Among individual stocks, eyes were on earnings from retailers Walmart and Home Depot. Railroad stocks struggled after the US government ordered Norfolk Southern (NYSE:NSC) to pay for the clean-up of toxic waste in the town of East Palestine, after a cargo train derailment in Ohio earlier in February.
On Wall Street, the Dow Jones Industrial Average closed down 697.10 points, or 2.1%, at 33,129.59. The S&P 500 fell 81.75 points, or 2%, to 3,997.34 and the Nasdaq Composite tumbled 294.97 points, or 2.5%, to 11,492.30.
Susannah Streeter, head of money and markets, Hargreaves Lansdown said, "Worries that disinflationary winds aren't blowing hard enough to cool hot inflation have seeped into trading, pushing stocks on Wall Street lower."
A further indication as to the Fed’s mindset will come with today with the publication of Federal Open Market Committee meeting minutes.
In Europe German CPI numbers will grab attention along with the Ifo business climate index.
In London, results from Lloyds Banking Group PLC (LSE:LLOY) and Rio Tinto PLC (LSE:RIO) top the agenda.