- • FTSE 100 closses in red
- • US Q2 GDP falls tipping US into technical recession
- • Smith & Nephew tops FTSE 100 fallers
4.56pm: FTSE lower
FTSE 100 closed down a tad as investors mulled over a mixed global economic picture.
Britain's premier share index finished nearly three points lower, or 0.04%, at 7,345.
"It has been a choppy 24 hours in the markets as the Fed Reserve carried out a dovish hike yesterday, and today’s GDP report suggests the country is now in a recession," noted David Madden, market analyst at Equiti Capital, in a note to clients.
"As expected, the Fed lifted interest rates by 0.75%, meeting forecasts but at the same time the bank cautioned that spending and production had “softened”.
"Although further rate hikes are on the agenda, the Fed revealed that it might look to scale back the size of the increases. The fact it even mentioned smaller rate hikes, could be a sign we are over the peak of the hiking cycle."
3.50pm: FTSE heads south
FTSE 100 headed south as the close approached as US markets gave up early gains following news that the US had entered a technical recession and results from Facebook owner, Meta Platforms, disappointed.
At 3.45pm the blue chip index was trading close to session lows, down 36.69 points at 7,316.15, although the broader FTSE 250 bucked the weaker trend gaining 95.97 points to 19,735.06.
According to an advance estimate by the BEA, the US gross domestic product (GDP) decreased at an annual rate of 0.9% in quarter two 2022, an improvement on the 1.6% GDP decrease reported in the first quarter but significantly below the market forecast of 0.5% growth.
After initial gains all major US indices were trading lower with the mood further dampened by news that Facebook’s parent company Meta Platforms Inc (NASDAQ:FB) was down more than 6% at the open after the company posted its first-ever year-on-year revenue decrease with the release of its quarter two earnings after the bell yesterday.
The DJIA fell 166.74 points to 32,030.85, the S&P 500 by 24.34 points to 3,999.77 and the Nasdaq by 133.29 points to 11.899.13.
In the UK, a busy corporate day proved a real mixed bag with winners and losers.
One on the slide was Smith & Nephew PLC (LSE:SN) which fell 10.79% to 1,074.50p.
Michael Hewson Chief Market Analyst at CMC Markets UK noted “The decline was due to a fall in margins, with the company saying that they expected trading profit margins for the year to fall from 18.5% to 17.5%. This appears to be down to supply chain challenges as well as a higher inflation environment.”
2.40pm: FTSE heads back to opening levels, US markets volatile
FTSE 100 pushed back close to parity as US stocks opened slightly higher shrugging off news that the US had entered a technical recession after US Q2 GDP fell.
At 2.40pm the lead index was trading 4.46 points lower at 7,343.77.
Just after the open in the US, the Dow Jones Industrial Average had added 86 points at 32,284 points, while the S&P 500 was up 13 points at 4,037 points and the Nasdaq Composite had gained 44 points at 12,076 points.
According to an advance estimate by the BEA, the US gross domestic product (GDP) decreased at an annual rate of 0.9% in 2Q 2022, an improvement on the 1.6% GDP decrease reported 1Q but significantly below the market forecast of 0.5% growth.
“The smaller decrease reflected an upturn in exports and a smaller decrease in federal government spending that were partly offset by larger declines in private inventory investment and state and local government spending, a slowdown in personal consumption expenditures, and downturns in nonresidential fixed investment and residential fixed investment. Imports decelerated,” the BEA noted.
BRI Wealth Management chief investment officer Dan Boardman-Weston noted that the latest GDP data put the US in a technical recession. “The economic outlook looks increasingly gloomy and is likely to deteriorate during the remainder of 2022,” he said.
“This may be why the Fed seemingly adopted a slightly more dovish tone yesterday, as they recognize that some of the heavy lifting on bringing inflation down may have been completed and that they may need a slightly more supportive policy position for the economy.”
Meanwhile, Facebook’s parent company Meta Platforms Inc (NASDAQ:FB) (Meta Platforms Inc (NASDAQ:FB)) was down more than 6% at the open after the company posted its first-ever year-over-year revenue decrease with the release of its 2Q earnings after the bell yesterday.
2.00pm: FTSE held steady near session lows, US Q2 GDP falls
FTSE 100 held steady in afternoon trading awaiting the open on Wall Street with US stocks seen lower.
At 2.00pm the lead index was trading down 15.51 points at 7,332.72 while the broader FTSE 250 index was up 86.45 points at 19,725.54.
The market was initially little moved by news that the US was technically in recession, confirmed by a 0.2% decline in the second quarter GDP versus quarter one (down 0.9% y/y), following an annualised fall of 1.6% in quarter one.
CMC Markets slumped 19.81% after the online trading platform warned of higher annual costs due to a weakening pound and higher professional fees and software expenses.
The group said it expects operating costs to be in the order of 5% above previous guidance.
Trackwise Designs PLC (AIM:TWD) saw its shares tumble 10% after warning that it would miss full year revenue forecasts.
The printed circuit manufacturer cautioned that delays to its UK EV OEM customer's own progression meant that some revenue originally forecast for 2022 will not materialise.
Philip Johnston, CEO of Trackwise, added: “Despite this 2022 is still expected to see a further increase on 2021, continuing the sales growth in the business, in particular in IHT. “
“It remains a difficult time to be in business, with labour supply, inflation, supply chain dislocation and Brexit-related customs issues all posing their own challenges to the business.”
12:20pm: FTSE steady, US seen opening lower
FTSE 100 steady, narrowly in negative territory, ahead of an expected weak open on Wall Street.
At 12.20pm the lead index was down 9.06 points at 7,339.17 with the FTSE 250 up 86.56 points at 19,725.65.
Shares in National Express Group PLC (LSE:NEX) rallied 5% to 188.10p, from recent lows for the year, following better than expected first half results.
Underlying pre-tax profit of £68.7mln was slightly ahead of analyst forecasts although exceptional costs of £48.2mln were higher than assumed.
The transport operator said it was well positioned for growth with £2.1bln of bidding and inorganic growth opportunities adding 16 new contracts had been won during the period.
The company remained confident in meeting full year guidance, with the UK Coach recovery expected to build in the second half and the UK Division expected to return to full year profit as customers regain confidence in travelling after Covid.
National Express also anticipated reinstating a full year dividend for the full year 2022.
11.45am: FTSE slips back, US seen weaker at open
FTSE 100 remained in negative territory approaching midday with US stocks seen opening lower on Thursday.
Key US GDP data is due to be released together with more earnings news from corporate America, a day after the Federal Reserve delivered a much-anticipated 75-basis point rate increase.
At 11.45am the blue chip index was down 10.04 points at 7,338.19 although the broader FTSE 250 index held its gains, up 84.40 points at 19,723.70.
Futures for the Dow Jones Industrial Average were trading 0.2% lower pre-market, while those for the broader S&P 500 index were down 0.3%, and futures for the tech-laden Nasdaq-100 shed 0.7%.
“US GDP could well print a second negative quarter this evening, but forecasts vary widely,” said Jeffrey Halley, senior market analyst at Oanda.
“Perversely, a negative print will probably see another stock market rally and US Dollar sell-off in the context of the price action overnight,” he added.
Second quarter GDP for the world’s biggest economy is expected to show a small growth after a drop in the first three months of the year, technically avoiding a recession.
The US Federal Reserve delivered a 75 basis point rate increase after its latest policy meeting on Wednesday as it seeks to rein in inflation, bringing an element of certainty to markets. The latest hike took the short-term US borrowing rates to between 2.25% and 2.50%
“The fact is the message is clear from Fed now, and that is they want to bring the inflation lower no matter what the cost is. Although, they are trying their best to avoid a recession,” said Naeem Aslam, chief market analyst at avatrade.com.
“Jerome Powell, like Janet Yellen and President Biden, said that the US economy isn't in a recession. This is purely on the basis of the new definition of recession which doesn't define a recession as two consistent quarters of negative growth,” he added.
Looking ahead, Aslam noted that market players expect a smaller rate hike in September.
“Traders expect the next interest rate hike to be around 50 basis points, and the one after that will be around 25 basis points. The important point here is that investors and traders would like to see the Fed assess the situation more carefully and not set the monetary policy on autopilot. Putting anything on autopilot could be extremely dangerous for the US economy," he concluded.
On the earnings front, quarterly results from Pfizer and Mastercard are due during the session today, along with tech heavyweights Amazon and Apple after the markets close, and will provide further market direction.
11.05am: FTSE 100 heads lower, Weir delivers "punchy" update
FTSE 100 was in negative territory late morning giving up earlier gains as the market digested a mixed bag of corporate updates.
At 11.05am the blue chip index was trading 8.87 points lower at 7,339.36 while the broader FTSE 250 was off its highs but still 66.12 points to the good at 19,706.84.
Weir Group was a star performer in the FTSE 250 as it said it expects to report full-year operating profits towards "the upper end" of analysts' forecasts after strong growth in earnings and revenue in the first half.
Shares in the engineering group rose by 5.31% to 1,566.50p as Peel Hunt analyst Harry Philips described the statement as “punchy.”
He said “Operating profit of £168m beat consensus of £157mln and our estimate of £155mln.”
“The company is saying that current year expectations for operating profit will be towards the upper end of the current £320mln to £386mln - the Peel Hunt estimate is £350mln followed by £382m lnin 2023 so it lis like we are jumping a year forward. “
Virgin Wines UK PLC (AIM:VINO) slipped back as analysts trimmed revenue and EBITDA forecasts despite a solid trading update today.
The online wine retailer reported total revenues for the year to June 30th of £69m, down 6%, year on year but said the key WineBank scheme increased revenues by 21%.
Analysts at Liberum, said “Virgin Wines significantly outperformed the UK online wine market increasing its market share to 8.4% from 6.1%.” but cautioned "That the weaker consumer environment and inflationary pressures had led it to prudently lower its revenue growth forecasts to +5% and +4% respectively for full year 2023 and full year 2024 respectively (from +7% and +5% previously)."
10.45am: FTSE 100 slips into negative territory
FTSE 100 fell into negative territory mid-morning, after a bright start, as a number of disappointing corporate updates dented sentiment.
At 10.15am the lead index was down 20.48 points at 7,327.75 although the broader FTSE 250 held its gains, up 90.70 points, to 19,729.79.
BT Group PLC (LSE:BT.A) shares dipped 5.74% to 166p ahead of strike action tomorrow with more than 40,000 workers taking action.
Third Bridge analyst Albie Amankona cautioned that the strikes and any resultant pay increases “may force BT Group to slow down their full fiber network build.”
But he added that “It is likely BT Group will achieve its goal of £2.5bn cost savings by 2025 despite inflation and a potential recession in the UK.”
AIM listed Dekel Agri-Vision plc (AIM:DKL) was a star performer after a positive update on production levels.
Recent instalments of machinery left the West African agriculture company confident of delivering a material increase in revenue and profitability in 2023.
9.00am: FTSE slips back to opening levels on mixed bag of corporate news
FTSE 100 fell back after a bright start to trading as investors digested a hefty batch of corporate news from a number of index heavyweights.
At 9.00am the FTSE 100 was just 1.81 points higher at 7,350.04 with the broader FTSE 250 index 143.02 points to the good at 19,782.11.
The market was given an early lift by a strong finish in the US following reassuring comments by Federal Reserve Chairman, Jerome Powell on the state of the US economy and the likely pace of any future US interest rate increases.
Anglo American led the FTSE 100 risers despite a slump in half year underlying EBITDA to US£8.7bln from $12.1bln and a 27% cut to the interim dividend.
The number still topped City forecasts and sent shares in the global mining group 4.07% higher.
Not such good news at BT as shares in the telecoms and media group slumped 4.91% to 167.45p following a trading update for the three months to June.
The telecoms and media group held full year guidance with no changes to the outlook for the full year but highlighted challenging market conditions in its Enterprise division.
Revenue of £5.1bln was up 1% due to improved pricing and trading in Consumer and Openreach, while profit before tax was down 10% to £482m.
Barclays PLC (LSE:BARC) slipped after warning that full year operating costs would be much higher than expected after taking a £1.9bln pound hit in the first half, including a £1.3bln cost related to what the bank calls the “over-issuance of securities” in the US.
The news marred the figures and sent the shares 1.83% lower to 154.78p.
On the upside the banking giant reiterated its guidance that fully year return on tangible equity would be above 10% better than the market consensus of 8.3% leaving scope for full year forecasts to be raised.
Richard Hunter, Head of Markets at interactive investor, commented: “The numbers have unsurprisingly received a lukewarm response, with the share price dip adding to a decline of 7% over the last year, as compared to a gain of 4.7% for the wider FTSE100 index. Investors have been choosing to look through the current issues with the benefits of a longer-term view in mind and, despite a mildly disappointing update, the market consensus of the shares as a strong buy remains intact.”
Smith & Nephew PLC (LSE:SN) slumped after reporting a 3.1% fall in revenue to $1,293m, down from $1,335m, with falls in the Orthopaedics and Sports Medicine & ENT divisions.
Full year guidance was held with revenue growth expected of between 4% to 5% and the trading profit margin is now expected to be around 17.5% reflecting the prolonged impact of the inflationary environment and continued external supply challenges.
Oil heavyweight, Shell PLC (LSE:SHEL, NYSE:SHEL), rose in early trading after reporting Q2 income of US$18,040mln, up from US$7,116mln in Q1 boosted by a tripling of refining profits and strong gas trading.
The company also announced a share buyback programme of $6bln billion for the current quarter, but did not raise its dividend of 25c. It said shareholder returns would remain "in excess of 30% of cash flow from operating activities".
Michael Hewson (Chief Market Analyst commented: “Today’s Q2 numbers have gone one better, posting another record quarter, even though the bar had been raised earlier this month when Shell announced it was revising up the value of its oil and gas assets on the back of higher refining margins, as it generated higher returns from higher prices.”
Shares advanced 1.8% on the news to 2,156.50p.
The market warmed to full year results from Diageo after upbeat comments going forward.
Shares in the beverage company rose 1% to 3,802.50p as Chief Executive Ivan Menezes said he remained confident that the business was “well-positioned to deliver our medium-term guidance for fiscal 23 to fiscal 25 of organic net sales growth consistently in the range of 5% to 7% and organic operating profit growth sustainably in the range of 6% to 9%.”
He made his comments as the group reported full year numbers which showed a 21% increase in sales to £15.5bn with growth broad-based across categories, with particularly strong growth of scotch, tequila and beer.
Basic EPS rose by 23.2% to 140.2p and the final dividend by 5% to 46.82p.
8.30am: FTSE 100 makes bright start as investors digest plethora of news
FTSE 100 kicked off Thursday in positive fashion boosted by reassuring comments by the Federal Reserve Chairman, Jerome Powell, about the state of the US economy, and as investors digested a hefty batch of results.
At 8.30am the FTSE 100 was up 23.22 points at 7,371.45 while the broader FTSE 250 rose 136.56 points to 19,782.72.
Powell said “He did not believe the US is in a recession, noting that “There are too many areas of the economy that are performing too well.”
He also indicated rate rises might slow in the coming months.
Barclays PLC (LSE:BARC) slipped after warning that full year operating costs would be much higher than expected after taking a £1.9bln pound hit in the first half, including a £1.3bln cost related to what the bank calls the “over-issuance of securities” in the US.
The news marred the figures and sent the shares 1.83% lower to 154.78p.
On the upside the banking giant reiterated its guidance that full year return on tangible equity would be above 10% better than the market consensus of 8.3%.
Shore Capital analyst Gary Greenwood said this leaves scope to increase his full year EPS forecast closer to 30p from his current 27p.
The bank also announced plans for a 3500m share buy back, better than Greenwood expected.
BT shares fell back sharply as a trading update for the three months to June disappointed.
The telecoms and media group held full year guidance with no changes to the outlook for the full year.
Revenue of £5.1bn was up 1% due to improved pricing and trading in Consumer and Openreach, while profit before tax was down 10% to £482m.
The group said market conditions remain challenging in the Enterprise division.
Shares fell 3.72% on the news to 169.55p.
Oil heavyweight, Shell PLC (LSE:SHEL, NYSE:SHEL), rose in early trading after reporting quarter two income of US$18,040mln, up from US$7,116mln in quarter one boosted by a tripling of refining profits and strong gas trading.
The company also announced a share buyback programme of $6bln billion for the current quarter, but did not raise its dividend of 25c. It said shareholder returns would remain "in excess of 30% of cash flow from operating activities".
Michael Hewson (Chief Market Analyst commented: “Today’s Q2 numbers have gone one better, posting another record quarter, even though the bar had been raised earlier this month when Shell announced it was revising up the value of its oil and gas assets on the back of higher refining margins, as it generated higher returns from higher prices.”
Shares advanced 0.5% on the news to 2,127.00p.
The market warmed to full year results from Diageo after upbeat comments going forward.
Shares in the beverage company rose 1% to 3,802.50p as Chief Executive Ivan Menezes said he remained confident that the business was “well-positioned to deliver our medium-term guidance for fiscal 23 to fiscal 25 of organic net sales growth consistently in the range of 5% to 7% and organic operating profit growth sustainably in the range of 6% to 9%.”
He made his comments as the group reported full year numbers which showed a 21% increase in sales to £15.5bn with growth broad-based across categories, with particularly strong growth of scotch, tequila and beer.
Basic EPS rose by 23.2% to 140.2p and the final dividend by 5% to 46.82p.
7.40am: FTSE set for strong start
FTSE 100 expected to make a strong start to trading on Thursday after a positive finish to trading in the US following the Federal Reserve’s widely expected decision to raise interest rates by 75 basis points.
Spread betting companies are calling the FTSE 100 around 40 points higher in early trading.
What reassured the US markets were comments by Fed Chairman Jerome Powell that rate hikes could slow in the coming months.
Powell also commented that he did not believe the US is in a recession, noting that “there are too many areas of the economy that are performing too well.”
The Dow closed Wednesday up 436 points, 1.4%, at 32,198, the Nasdaq Composite jumped 470 points, 4.1%, to 12,032 and the S&P 500 added 103 points, 2.6%, to finish at 4,024.
Another busy day of corporate news in the UK will also provide direction with a number of FTSE 100 heavyweights reporting results.
Oil heavyweight, Shell PLC (LSE:SHEL, NYSE:SHEL), reported quarter two income of US$18,040mln, up from US$7,116mln in quarter one reflecting higher realised prices, higher refining margins, and higher gas and power trading and optimisation results, partly offset by lower LNG trading and optimisation results.
This included a US$4.3bn net impairment charge following revision og the group’s mid and long-term commodity price assumptions.
Barclays PLC (LSE:BARC) announced plans for a further £500m share buy back scheme as it announced a half year attributable profit of £2.5bn against £3.8bn in the first half of 2021.
But the banking giant said additional litigation and conduct charges in quarter two meant that full year 2022 total operating expenses would now be around £16.7bln against previous guidance of £15.0bln.
Group income was £12.4bn, up 10% year on year, driven strong client activity in Markets, recovery in both Consumer, Cards and Payments (CC&P) and Barclays UK more than offsetting the impact of a weak fee pool in Investment Banking.
BAE Systems held full year guidance and launched a new three-year share buyback programme as it reported half year numbers this morning.
Sales in the six months to June were £10,581mln, up from £10,035mln in the six months to June 2021.
It said it expects full year sales growth of between 2% to 4%, underlying EBIT growth of 4% to 6% and underlying EPS to rise by between 4% to 6%.
Charles Woodburn, Chief Executive said "Good operational performance, execution on our strategy and confidence in the outlook enables us today to announce a 5% increase in the interim dividend as well as initiating a new, three-year share buyback programme for up to £1.5bn."
Diageo PLC (LSE:DGE) chief executive Ivan Menezes remained confident that the business was “well-positioned to deliver our medium-term guidance for fiscal 23 to fiscal 25 of organic net sales growth consistently in the range of 5% to 7% and organic operating profit growth sustainably in the range of 6% to 9%.”
He made his comments as the group reported full year numbers which showed a 21% increase in sales to £15.5bn with growth broad-based across categories, with particularly strong growth of scotch, tequila and beer.
Basic EPS rose by 23.2% to 140.2p and the final dividend by 5% to 46.82p.
6.50am: FTSE seen higher, busy day of corporate news
The FTSE 100 is seen starting Thursday on the front foot, though much of this morning’s attention will be on company announcements as several blue-chip report on their second quarters.
CFD firm IG Markets has the FTSE 100 about 30 points stronger, making a price of 7,380 to 7,382 with just over an hour to go until the open.
Blue-chip investors will be getting their teeth into updates from the likes of Shell, Barclays, BAE, Centrica, and ITV.
Last night, on Wall Street, the Dow Jones gained 436 points or 1.37% as the Federal Reserve raised US interest rates by 75 basis points, as expected.
The S&P 500 gained 2.62% to 4,023 whilst the Nasdaq rallied stronger, rising just over 4% to 12,032. And the small-cap Russell notched 2.39% higher to 1,848.