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(Alliance News) - Stock prices in London are seen opening higher on Thursday, following a strong finish in New York on Wednesday, after the US Federal Reserve executed another 75 basis points interest rate hike.
In early company news, oil major Shell and lender Barclays handed out generous shareholder returns.
IG futures indicate the FTSE 100 index is to open 19.07 points higher at 7,367.30. The index closed up 41.95 points, or 0.6%, at 7,348.23 Wednesday.
Shell posted a surge in first-half earnings as the oil major continued to benefit from a sharp rise in oil prices.
For the six months to June 30, adjusted earnings before interest, tax, depreciation and amortisation was USD42.18 billion, up sharply from USD25.20 billion last year. Income attributable to shareholders almost tripled to USD25.15 billion from USD9.09 billion.
Tuning to returns, the oil major declared an interim dividend of USD0.50, up 21% from USD0.41 last year.
In addition, Shell launched a share buyback programme of USD6 billion, which is expected to be completed by the third quarter.
"With the current energy sector outlook and subject to board approval, shareholder distributions are expected to remain in excess of 30% of cash flow from operating activities," Shell said.
Shell's free cash flow jumped to USD22.99 billion from USD17.37 billion the year before.
"With volatile energy markets and the ongoing need for action to tackle climate change, 2022 continues to present huge challenges for consumers, governments, and companies alike. Consequently, we are using our financial strength to invest in secure energy supplies which the world needs today, taking real, bold steps to cut carbon emissions, and transforming our company for a low-carbon energy future," said Chief Executive Ben van Beurden.
Barclays reported a drop in first-half profit as the bank took a credit impairment charge, but also launched a share buyback.
For the six months to June 30, total income was GBP13.2 billion, up 17% from GBP11.3 billion last year, but pretax profit was GBP3.73 billion, down 24% from GBP4.90 billion.
Barclays took litigation and conduct charges of GBP1.9 billion for the first half of the year, including a previously disclosed GBP1.3 billion cost related to the "over-issuance of securities" in the US.
Turning to shareholder returns, Barclays declared a half-year dividend of 2.25p per share and said it intends to initiate a further share buyback worth up to GBP500 million.
"We are alert to the pressure that the rising cost of living will have on our customers and colleagues. We have a range of measures in place to help and are looking to do more. With our resilient income growth and balance sheet strength, we can provide that support while distributing excess capital," said CEO CS Venkatakrishnan.
New York ended sharply higher on Wednesday, with the Dow Jones Industrial Average up 1.4%, S&P 500 up 2.6% and Nasdaq Composite up 4.1%.
The US federal funds rate was lifted to a 2.25% and 2.50% range, as widely expected. It had lifted rates by the same increment in June - the first hike of that magnitude since November 1994.
The US central bank also will continue reducing its holdings of treasury securities and agency debt and agency mortgage-backed securities.
All monetary policy board members voted in favour of Wednesday's three-quarter percentage point hike.
Fed Chair Jerome Powell on Wednesday said a period of slower growth may be needed for a US economy characterised by a tight labour market, though he played down recessionary fears.
In addition, he cautioned that a period of detailed forward guidance could come to an end, as the central bank now eyes a "meeting-by-meeting" approach to monetary policy decisions. Powell said Wednesday's rate hike was of the correct magnitude, though the Fed would not hesitate to implement a stronger increase if needed. However, Powell also said going forward, the pace of rate hikes could slow.
"The market appears to have interpreted last night's press conference as dovish, hence the sharp move higher in US markets, slide in short end yields, and a decline in the US dollar," said CMC Markets analyst Michael Hewson.
In Asia on Thursday, Nikkei 225 index in Tokyo closed up 0.4%. In China, the Shanghai Composite was 0.5%, while the Hang Seng index in Hong Kong was down 0.4%. The S&P/ASX 200 in Sydney ended up 1.0%.
The dollar was lower across the board in the wake of the Fed decision. The pound was quoted at USD1.2175 early Thursday, up from USD1.2045 at the London equities close Wednesday.
The euro was priced at USD1.0223, up from USD1.0133. Against the yen, the dollar was trading at JPY135.38, well down from JPY137.17.
Brent oil was quoted at USD107.60 a barrel Thursday morning, up from USD106.68 a barrel late Wednesday. Gold stood at USD1,741.48 an ounce, higher against USD1,718.59.
Thursday's economic calendar has US GDP data at 1330 BST, after an inflation reading from Germany at 1300 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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