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(Alliance News) - Stocks in London were called to open on Wednesday higher ahead of the US interest rate decision announcement, amid mostly positive updates from London's large-cap companies.
Market focus for Wednesday is squarely on the US Federal Reserve, which is set to announce its latest interest rate decision at 1900 BST.
The market is expecting another 25 basis point hike, bring the target rate to 5.00% to 5.25%. The US central bank is then expected to halt its rate hiking cycle.
"There is a chance that the Fed might leave rates unchanged, however that might signal a wider concern to markets that the central bank is concerned about the stability of the US banking system considering yesterday's sell-off," said CMC Market's Michael Hewson.
Equities in New York had tumbled on Tuesday, as further jitters in the banking sector drove shares of regional banks lower, with blue-chip bank stocks also suffering. Bank of America lost 3.0%, while Wells Fargo closed 3.9% lower. JP Morgan Chase, the buyer of First Republic Bank, fell 1.6%.
In early UK company news, Lloyds Banking reported a 46% jump in profit in its first quarter. Barratt Developments said it was on track to meet market expectations for annual profit.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 37.0 points, 0.5%, at 7,810.03
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Hang Seng: down 1.6% at 19,619.44
S&P/ASX 200: closed down 1.0% at 7,197.40
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DJIA: closed down 367.17 points, or 1.1%, at 33,684.53
S&P 500: closed down 48.29 points, or 1.2%, at 4,119.58
Nasdaq Composite: closed down 132.09 points, or 1.1%, at 12,080.51
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EUR: up at USD1.1019 (USD1.0986)
GBP: up at USD1.2489 (USD1.2463)
USD: down at JPY135.96 (JPY136.55)
Gold: up at USD2,015.07 per ounce (USD2,011.85)
(Brent): down at USD75.25 a barrel (USD76.17)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
China Labour Day holiday continues. Financial markets closed.
Japan Constitution Memorial Day. Financial markets closed.
11:00 CEST EU unemployment
07:00 EDT US MBA weekly mortgage applications survey
08:15 EDT US ADP national employment report
09:45 EDT US S&P Global services PMI
10:00 EDT US ISM services PMI
14:00 EDT US interest rate decision
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The UK Financial Conduct Authority said it intends to reform the listing rules in the UK to help attract a wider range of companies, encourage competition and improve choice for investors. The FCA said it is proposing "significant" changes to the listing rulebook, including replacing its existing standard and premium listing segments with a single category for equity shares in commercial companies. The financial watchdog said a single equity category would remove eligibility requirements that can deter early-stage companies, be more permissive on dual class share structures, and remove mandatory shareholder votes on transactions such as acquisitions to reduce frictions to companies.
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The number of new UK homes being registered to be built in the first quarter of this year fell by 40% compared with the same period a year earlier, according to an industry body. The National House Building Council said 27,673 new homes were registered to be built in the first quarter of 2023. The NHBC has a 70% to 80% share of the UK warranty market. Its figures indicate the stock of new properties in the pipeline as homes are registered with the NHBC before being built.
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BROKER RATING CHANGES
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Berenberg raises HSBC to 'buy' (hold) - price target 780 pence
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COMPANIES - FTSE 100
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Lloyds Banking said net interest income rose 18% to GBP3.43 billion in the first quarter from GBP2.90 billion a year before. It swung to positive total income of GBP9.31 billion from a GBP2.11 billion loss in the previous year. On an underlying basis, net income rose 15% to GBP4.65 billion from GBP4.03 billion. Pretax profit jumped 46% to GBP2.26 billion from GBP1.54 billion. Customer deposits fell by GBP2.2 billion to GBP473.1 billion. This was "including a reduction in Retail current account balances of GBP3.5 billion, partly driven by seasonal customer outflows, including tax payments, higher spend and a more competitive market," Lloyds said, noting it was partially offset by deposit increases in Commercial Banking. Looking ahead, Lloyds backed annual guidance of a banking net interest margin over 305 basis points, and return on tangible equity of around 13%.
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Housebuilder Barratt Developments updated on the period from January 1 to April 31, ahead of its year end on June 30. The company said it is now fully forward sold for financial 2023, thanks to an improved sales rates. Net private reservations per active outlet per average week was 0.65, compared to 0.93 a year before. Barratt expects to deliver adjusted pretax profit in line with current market expectations of GBP876.8 million. Trading for the full year is in line with the board's expectations, and it remains on track to complete between 16,500 and 17,000 homes, including around 750 joint venture completions.
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Gambling company Flutter Entertainment reported a strong start to 2023, with revenue in the first quarter up 54% year-on-year to GBP2.41 billion. Average monthly players rose 30% to 12.3 million, with strong recreational customer growth seen across all divisions. The firm's US division saw 92% growth in revenue. "We added over 1.5 million customers [in the US] in the quarter, and we remain the clear market leader. Our US sports betting handle of USD10.9 billion represented almost 60% of the group's total sportsbook stakes," said Chief Executive Peter Jackson. Following shareholder approval at its recent annual general meeting, Dublin-based Flutter expects its additional listing in the US to happen late in the fourth quarter.
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COMPANIES - FTSE 250
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Aston Martin Lagonda backed annual guidance as it reported results for its first-quarter. The luxury sports car maker said revenue rose 27% year-on-year to GBP295.9 million from GBP232.7 million, with retails outpacing wholesales. "Since the start of the year, we have continued to see strong demand across our product range, with our current range of sports cars essentially sold out for the year," said Executive Chair Lawrence Stroll. Loss before tax narrowed to GBP74.2 million from GBP111.6 million, thanks in part to lower net financing charges. Its expectations for 2023 are unchanged from March 1, with "significant" growth in profit expected, driven by higher volumes and higher gross margin in Core and Special vehicles. "We expect significant year-on-year growth and positive free cash flow in the second half of the year," Aston Martin added.
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OTHER COMPANIES
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Gym Group has hired Will Orr as its new chief executive officer. Orr joins from Times Media, which publishes the Times and Sunday Times newspapers, and he has previously held managing director roles at RAC and British Gas. "Will brings valuable skills and experience from customer-led growth in membership businesses, particularly through digital growth strategies, which are perfectly suited to deliver on our strategic ambitions for the business," said Chair John Treharne.
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Clothing retailer Superdry on Tuesday noted a press report regarding a potential fundraising by the company. It confirms it is in positive discussions with "certain institutional and other investors" over a proposed equity fundraising of up to around 20% of its issued share capital. Founder & Chief Executive Officer Julian Dunkerton intends to "significantly participate" in the equity raise and provide a "material underwriting commitment, reflecting his confidence in the long-term prospects of the business", Superdry said, adding a further announcement will be made in due course "as appropriate".
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By Elizabeth Winter, Alliance News senior markets reporter
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