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(Alliance News) - Stocks in London are called to open lower on Wednesday, following a slew of earnings from UK companies, as well as an interest rate decision from the US Federal Reserve.
"Today's expected 25 basis point Fed rate hike, after last month's pause, looks set to be the last rate rise this year, whatever Fed policymakers would have you believe," said Michael Hewson, chief market analyst at CMC Markets.
"We may hear officials try and make the case for at least one more between now and the end of the year but given recent trends around US inflation it's quite likely that [producer price inflation] will go negative in July."
A 25 basis point hike by the Federal Reserve on Wednesday is seen as a foregone conclusion, though analysts are divided over whether it will be "one and done" or more rate lifts ahead for the US central bank.
The decision will be announced at 1900 BST on Wednesday. A press conference with Chair Jerome Powell will follow shortly after.
According to the CME FedWatch Tool, there is a 99% chance the central bank lifts rates by 25 basis points. It would take the federal funds rate range to 5.25% to 5.50%. The Fed decided against a hike last month, ending a streak of 10 successive rate rises.
On the FTSE 100 Wednesday morning, Rolls-Royce and Lloyds both upped full-year expectations. Meanwhile, Rio Tinto saw its half year profit drop.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 9.7 points, 0.1%, at 7682.1
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Hang Seng: down 0.4% at 19,349.79
Nikkei 225: closed down marginally at 32,668.34
S&P/ASX 200: closed up 0.9% at 7,402.00
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DJIA: closed up 26.83 points, or 0.1%, at 35,438.07
S&P 500: closed up 12.82 points, 0.3%, to 4,567.46
Nasdaq Composite: closed up 26.06 points, 0.2%, at 14,058.87
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EUR: up at USD1.1061 (USD1.1044)
GBP: up at USD1.2901 (USD1.2853)
USD: down at JPY140.99 (JPY141.03)
Gold: up at USD1,964.62 per ounce (USD1,962.17)
(Brent): down at USD82.71 a barrel (USD82.73)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
13:30 EDT Canada Bank of Canada summary of monetary policy deliberations
08:45 CEST France consumer confidence survey
10:00 EDT US new home sales
14:00 EDT US Federal Reserve interest rate decision
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Japan's population fell by a record in 2022, government data showed, as the country struggles to reverse its perennial low birthrates. While many developed countries face low birthrates, the problem is particularly acute in Japan where the population has now fallen for 14 straight years. The country has the world's second oldest population, after tiny Monaco, and in January, Prime Minister Fumio Kishida warned Japan was "on the verge of whether we can continue to function as a society". Last year, the number of Japanese fell by 800,523, or 0.65%, to 122,423,038 from a year earlier, a survey by the internal affairs ministry shows. For the first time, the population fell in all 47 prefectures. The overall drop was the steepest decline recorded since 1968, when the government survey began, the ministry said
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BROKER RATING CHANGES
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HSBC cuts Glencore to 'hold' (buy) - price target 510 (550) pence
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Berenberg raises Tyman to 'buy' (hold) - price target 360 (250) pence
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Liberum cuts Babcock International to 'hold' (buy) - price target 400 (460) pence
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COMPANIES - FTSE 100
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Rolls-Royce said that its financial results for the first half of the year are expected to be materially above consensus expectations. The London-based jet engine manufacturer expects higher underlying operating profit of GBP660 million to GBP680 million, versus consensus of GBP328 million, as well as free cash flow of GP340 million to GBP360 million, versus consensus of GBP50 million. Rolls-Royce explained that this reflects continued end-market growth and its focus on commercial optimisation and cost efficiencies across the company. Looking ahead, it upped its full-year expectations. It now expects underlying operating profit of GBP1.2 billion to GBP1.4 billion, versus consensus of GBP934 million, and free cash flow of GBP900 million to GBP1.0 billion, versus consensus of GBP732 million, in 2023. Chief Executive Tufan Erginbilgic said: "Our multi-year transformation programme has started well with progress already evident in our strong initial results and increased full year guidance for 2023. There is much more to do to deliver better performance and to transform Rolls-Royce into a high performing, competitive, resilient, and growing business."
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Rio Tinto said pretax profit in the first half of 2023 came in at USD6.93 billion, down from restated USD12.32 billion a year ago. Sales revenue fell to USD26.67 billion, down from USD29.78 billion. Net debt on June 30 is USD4.35 billion, up from USD4.19 billion a year ago. On the back of the results, Rio Tinto cut its dividend. It declared a 177.0 US cents interim dividend, down 34% from 267.0 cents year-on-year. CEO Jakob Stausholm said: "We have a clear pathway to building an even stronger Rio Tinto and continue to gain momentum in our strategy to set the business up for long-term success. We are making good progress on pursuing our four objectives as we build further momentum in our Pilbara iron ore business, mindful that we need to raise our game across many of our other operations."
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Lloyds Banking said pretax profit in the half year ended June 20 jumped 23% to GBP3.87 billion from GBP3.15 billion year-on-year. Net income rose 11% to 9.19 billion from GBP8.29 billion. On the back of the interim results, Lloyds declared a 0.92p interim dividend, up 15% from 0.80p a year earlier. Looking ahead, Lloyds raised its 2023 guidance. It now expects banking net interest margin to be greater than 310 basis points. "Although the macroeconomic outlook remains uncertain, our people, business model and financial strength ensure that we can continue to support our customers and Help Britain Prosper. As we continue to make progress against our strategic ambitions we remain confident that successful delivery will create a more sustainable business and deliver increased shareholder returns in the medium to longer-term," it said.
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NatWest boss Alison Rose has resigned from her position after admitting to being the source of an inaccurate story about Nigel Farage's finances. In a statement released early on Wednesday morning, NatWest Group chair Howard Davies said: "The board and Alison Rose have agreed, by mutual consent, that she will step down as CEO of the NatWest Group. It is a sad moment." Earlier, Rose said she made a "serious error of judgment" when she discussed Farage's relationship with private bank Coutts, owned by NatWest Group, with a BBC journalist. Davies initially said the board members had decided the chief executive retained their "full confidence" but her position became ever more uncertain after the chancellor and Downing Street were said to have "serious concerns" over her conduct.
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COMPANIES - FTSE 250
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Aston Martin Lagonda Global said its pretax loss in the first half of 2023 narrowed to GBP142.2 million from GBP285.4 million a year earlier. The Gaydon, England-based luxury car manufacturer noted that this included lower year-on-year net financing charges due to a positive non-cash FX revaluation impact of US dollar-denominated debt. First-half revenue rose to GBP677.4 million from GBP541.7 million. The company explained that revenue was boosted by higher volumes, strong pricing dynamics in the core portfolio and favourable mix dynamics from the DBX707 and V12 Vantage Roadster. Looking ahead, Aston Martin said it is on track for GBP2 billion revenue and GBP500 million adjusted Ebitda by 2024/25 .
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Primary Health Properties said net rental income in the first half of 2023 rose by 6.2% to GBP75.5 million from GBP71.1 million a year ago. However, the London-based healthcare facility investor pretax profit plummeted to GBP38.8 million, versus GBP107.7 million. Primary Health Properties upped its interim dividend by 3.1% to 3.35p from 3.25p. "The security and longevity of our income, near full occupancy together with stronger rental growth are the key drivers of our predictable cash-flows and underpin our progressive dividend policy with 27 years of continued growth," said CEO Harry Hyman.
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OTHER COMPANIES
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WANdisco announced board changes. Stephen Kelly will join the board as CEO having served as interim CEO since May 10. Ijoma Maluza will join the as chief financial officer having served as interim CFO, since April 11. Xenia Walters and Chris Baker will join as non-executive directors. Interim Non-Executive Chair Ken Lever: "Following the successful refinancing of WANdisco and the lifting of the share suspension, we are now able to formally shape the Board to support growth and value creation for shareholders. I am delighted that Chris and Xenia have agreed to join us at this very important juncture in the re-establishment of the company as a leading business in the data-integration software market." On Tuesday, WANdisco saw 96% of its value wiped, in its return to equity market trading for the data migration platform. WANdisco shares had been suspended from trading in London since March, after uncovering signs of possible "fraudulent irregularities" on its books, days after announcing it was exploring a potential US listing.
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By Sophie Rose, Alliance News reporter
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