Next Share News (NXT)

(Alliance News) - Trade was lacklustre after the London market opened on Wednesday, as investors await the US Federal Reserve's latest interest rate decision after the European close.

Topping London's blue-chip index was retailer Next, while housebuilder Taylor Wimpey and medical devices firm Smith & Nephew were bringing up the rear.

The FTSE 100 index was down 8.31 points, or 0.1%, at 6,120.95 early Wednesday. The mid-cap FTSE 250 index was down 37.48 points, or 0.2%, at 17,240.75 and the AIM All-Share index was down 0.2% at 889.31.

The Cboe UK 100 index was down 0.3% at 609.91. The Cboe 250 was down 0.3% at 14,641.93 and the Cboe Small Companies flat at 9,113.25.

In mainland Europe, the CAC 40 in Paris was up 0.5% - boosted by results from Kering and Schneider Electric - while the DAX 30 in Frankfurt was down 0.1% early Wednesday.

Stocks lack direction ahead of the US central bank, said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

The Federal Open Market Committee will announce its latest policy decision at 1900 BST. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 BST.

The federal funds rate is currently 0.00% to 0.25%. The CME's FedWatch tool has it fully priced in that the Fed stands pat on rates this week.

"The Fed is not expected to bring any significant changes to its policy stance at this month’s meeting. US policymakers will likely emphasize the lingering risks on the US economy and maintain an ultra-supportive monetary policy to provide support to its economy ravaged by the pandemic. While investors will continue looking for clues regarding alternative policy tools, including the yield curve control, we do not expect to hear any material progress before September," said Swissquote's Ozkardeskaya.

The Fed meeting comes as coronavirus deaths in the US surged to their highest level in months.

The human toll of the disease surged to a level not seen since mid-May in the US, the world's hardest-hit country, with nearly 1,600 deaths recorded in 24 hours, Johns Hopkins University reported on Tuesday. Case numbers have been rising for weeks across swathes of the nation, leaving health authorities and leaders to watch nervously for a feared spike in fatalities.

The US is not the only country to see a flare up in infections. China reported 101 new coronavirus cases Wednesday, its highest single-day figure in three months, as gyms, bars and museums closed in infection hotspots.

Of the new cases, 98 were domestic infections, mostly in the northwestern region of Xinjiang, where a growing cluster first discovered earlier this month has prompted mass testing and restrictions.

In Europe, resurgent virus cases are blasting a similar hole in local hopes for a financial windfall in summer holiday hotspots. Spain, one of the countries hit hardest by the pandemic, insists it is a safe destination for tourists despite tackling 361 active outbreaks and more than 4,000 new cases.

The dollar was trading slightly lower early Wednesday. Sterling was quoted at USD1.2933 early Wednesday, flat on USD1.2930 at the London equities close on Tuesday.

The euro traded at USD1.1744 early Wednesday, firm versus USD1.1731 late Tuesday. Against the yen, the dollar was quoted at JPY105.00, marginally soft against JPY105.10.

Gold was quoted at USD1,957.23 an ounce early Wednesday, up on USD1,953.15 on Tuesday. Brent oil was trading at USD43.46 a barrel early Wednesday, higher than USD43.09 late Tuesday.

In Asia on Wednesday, the Japanese Nikkei 225 index ended down 1.2%. In China, the Shanghai Composite ended up 2.1%, while the Hang Seng index in Hong Kong is up 0.3% in late trade.

The economic events calendar on Wednesday has UK mortgage approvals at 0930 BST.

Next surged to the top of the FTSE 100, up 8.6% in opening trade. The clothing retailer reported a fall in full price sales for the second quarter, but said even this outcome was "much better" than expected.

Full price sales tumbled 28% in the quarter, an improvement on the best case scenario given in its April trading statement. Online warehouse picking and despatch capacity is now back at normal levels and UK and Eire stores are now open, it said.

Online sales in the second quarter were up 9% and like-for-like sales in Retail stores, since they re-opened, were down 32%.

Next now estimates pretax profit to come in at GBP195 million for the full-year.

"The duration of social distancing rules, post-lockdown consumer behaviour, earnings, unemployment, and, most importantly, whether there will be a second wave lockdown, all remain unknowable. Nonetheless, our experience over the last 13 weeks has given us much greater clarity on our Online capabilities during lockdown and the state of consumer demand, and we are now more optimistic about the outlook for the full year than we were at the height of the pandemic," said Next.

Taylor Wimpey fell 4.9% after turning to a half-year loss amid Covid-19 disruption.

Revenue for the first half of 2020 fell 56% to GBP754.6 million, with the firm swinging to an interim pretax loss of GBP39.8 million from a GBP299.8 million profit a year ago.

The first half net private sales rate of 0.70 homes per outlet per week was down on 1.00 a year ago. The sales rate was 0.97 prior to the UK's Covid-19 shutdown, when it then reduced to 0.30. In the nine weeks since sales centres reopened in England, the sales rate has increased to 0.70

"Looking ahead, balance sheet strength, a long order book and our high quality and growing landbank gives us confidence in our ability to navigate the challenges and emerge stronger from the pandemic. While uncertainties remain, we are confident in the underlying fundamentals of the housing market," said Chief Executive Pete Redfern.

The FTSE 100-listed firm expects to recommence dividend payments in 2021, with a 2020 final payout. It will "review the special dividend in 2021 for payment in 2022".

Smith & Nephew was down 4.4% as it also swung to an interim loss but said its performance improved as the second quarter progressed.

Half year revenue was down 18% to USD2.04 billion - falling 30% to USD901 million in the second quarter - with the company swinging to an interim pretax loss of USD34 million from a profit of USD383 million a year ago.

The trading profit margin, at 8.5%, was down significantly on 21.4% a year ago, as previously guided.

"The trading profit margin reflected a number of Covid-related factors, including negative leverage effect from the fixed components of our cost base and the impact of reduced production volumes, as well as additional charges of approximately USD50 million to provisions for inventory excess and obsolescence and trade receivables," said Smith & Nephew.

S&N said performance improved across the second quarter as elective surgeries restarted, with underlying revenue declines of 47% in April, 27% in May, and 12% in June.

Even though Smith & Nephew posted a loss for the half, it still declared an interim dividend of 14.4 cents per share, flat on a year ago.

Barclays shares lost 1.1% after reporting a more than halving in interim profit on hefty credit impairment charges.

Total income for the first half of 2020 was up 8% to GBP11.62 billion, with operating expenses down 4% to GBP6.59 billion. However, pretax profit still dropped 58% to GBP1.27 billion.

Credit impairment charges increased to GBP3.7 billion from GBP900 million a year ago, including GBP1.6 billion in the second quarter, largely due to "revised IFRS 9 scenarios" driven by Covid-19.

The scenarios reflect "forecast deterioration in macroeconomic variables (including a prolonged period of heightened UK and US unemployment), partially offset by the estimated impact of central bank, government and other support measures".

Barclays UK income decreased 11% due to ongoing margin pressure, while Barclays International income increased 16%, with Corporate & Investment Bank income up 31% and Consumer, Cards & Payments income down 21%. Within CIB, Markets income increased due to a strong performance across FICC and Equities.

"Our CET1 ratio stands at 14.2% which underscores the strength of our balance sheet. Although we will remain well capitalised and ahead of our minimum requirements, we may experience stronger capital headwinds in the second half of the year. The board will decide on future dividends and capital returns at the year-end 2020," said Chief Executive Jes Staley.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.