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LONDON MARKET CLOSE: Europe struggles and US earnings underwhelm

Tue, 21st Nov 2023 16:51

(Alliance News) - A rampant pound hurt London's FTSE 100 on Tuesday, while mixed corporate earnings in New York also damped enthusiasm, with numbers from 2023's stock market darling Nvidia to come.

There is also the release of minutes from the Federal Reserve's most recent meeting to come at 1900 GMT.

The FTSE 100 index closed down 14.37 points, 0.2%, at 7,481.99. The FTSE 250 lost 251.42 points, 1.4%, at 18,347.63, and the AIM All-Share fell 5.64 points, 0.8%, at 716.31.

The Cboe UK 100 ended down 0.2% at 746.55, the Cboe UK 250 lost 1.3% at 15,890.58, though the Cboe Small Companies added 0.2% to 13,535.73.

In European equities, the CAC 40 in Paris closed down 0.2%, while the DAX 40 in Frankfurt ended marginally lower.

The Dow Jones Industrial Average was down 0.3% in New York, the S&P 500 fell 0.4% and the Nasdaq Composite shed 0.8%.

"Ahead of Nvidia's after-hours earnings, Wednesday's [Federal Open Market Committee] minutes and the prolonged Thanksgiving weekend, traders have cashed in some of their last three-week strong equity gains as corporate results from big US retailers disappoint," IG analyst Axel Rudolph commented.

"Fresh 2010-lows in US existing home sales and the lowest US national activity in seven months also dampened the mood. Most European equity indices also slipped into the red as earnings season is coming to an end."

Sales of existing homes in the US slipped more than anticipated in October to a new 13-year low, according to industry data released Tuesday, on stubbornly low inventory and high mortgage rates.

Meanwhile, the Chicago Fed National Activity Index fell to negative 0.49 points in October, from minus 0.02 in September.

On the corporate front, there was a mixed bag of results from New York-listed retailers.

Clothing retailer American Eagle Outfitters set out an underwhelming fourth-quarter outlook, sending its shares lower, while department store chain Kohl's reported a net sales decline.

Impressing, however, was Dick's Sporting Goods, Its stock was up 5.0%. Fellow athleisure retailer JD Sports climbed 4.0% in London in a positive read-across.

Nvidia releases third-quarter results after the closing bell in New York.

"Fasten your seatbelts," Swissquote analyst Ipek Ozkardeskaya advised.

"The company will attempt to beat its own prediction of USD16 billion sales in the [third quarter], up from USD13.50 billion a quarter earlier and around USD10 billion more than the [third quarter] of last year. Even though the S&P 500 CEOs cut down their mentions of AI in earnings call, the gap between the demand and supply for Nvidia chips is comfortably large to allow the company to grow at desired pace," Ozkardeskaya added.

Ahead of the results, the stock traded 1.6% lower in New York.

Also still to come, minutes from the Fed's latest meeting are released at 1900 GMT.

At its meeting at the start of November, the Federal Reserve left interest rates unchanged. In a widely expected move, the central bank unanimously agreed to hold the key federal funds rate in a target range between 5.25%-5.50%, a 22-year-high, where it has been since July.

But since then, Chair Jerome Powell warned the central bank would hike again if need be. Favourable US inflation data followed, however. It showed a slowdown in the annual rate to 3.2% in October from 3.7% in September, restoring hope that the Fed has already enacted its last hike of the cycle.

The dollar largely struggled ahead of the release, though the pound was in decent shape ahead of Wednesday's autumn statement announcement from UK Chancellor Jeremy Hunt.

Hawkish words from Bank of England Governor Andrew Bailey supported sterling.

Lloyds Bank analysts commented: "Bailey has already strongly cautioned against expecting early rate cuts and last night even said that interest rates may have to rise again if there were to be signs of inflation persistence."

Sterling was quoted at USD1.2531 late Tuesday afternoon, higher than USD1.2497 at the London equities close on Monday. The euro traded at USD1.0926, down from USD1.0942. Against the yen, the dollar was quoted at JPY147.91, down versus JPY148.32.

The weaker dollar gave gold a boost. The yellow metal and the buck often move in opposite directions. Gold was quoted at USD1,999.42 an ounce late Tuesday afternoon, higher than USD1,974.08 late Monday.

"Gold prices resumed their climb and opened with a positive performance today which could help extend gains for a second week. However, the market could find some resistance near last month's peak. Gold has been recovering consistently since the beginning of October while monetary policy expectations shifted and bets on another interest rate hike abated," XS.com analyst Mohamad Ibrahim commented.

"However, new economic data releases as well as the publication of the Federal Reserve's November meeting minutes later today could alter traders' view on monetary policy and could impact the trajectory of gold prices. The release of real estate, job market, and PMI data this week could fuel some volatility as well."

Among London-listed large-caps, Admiral closed 2.7%, one of the best performers. Citi raised the insurer to 'buy'.

Elsewhere, Workspace Group shed 7.2%. It reported a swing to a half-year loss, as robust interest rates hurt property valuations, though rental income improved.

The flexible workspace provider said it swung to a pretax loss of GBP147.9 million for the six months to September 30, from profit of GBP35.8 million a year prior.

The London-based firm was hurt by a GBP170.8 million negative fair value move in investment properties, compared to a GBP8.1 million gain a year earlier.

Net rental income rose 8.7% year-on-year, however, to GBP61.0 million from GBP56.1 million. It helped trading profit, which does not factor in fair value moves, improve 11% to GBP49.4 million from GBP44.7 million.

Capita shot up 7.3%. The outsourcer announced that around 900 jobs in its 50,000 workforce are at risk of redundancy, as it ramps up its cost-cutting drive.

It said it will begin to conduct employee consultation programmes. Capita expects to deliver cost savings of around GBP60 million on an annualised basis from the first quarter of next year, with GBP27 million in exceptional costs related to the job cuts to be recognised this year.

Brent oil was trading at USD81.74 a barrel late Tuesday afternoon, lower than USD82.78 at the London equities close on Monday.

In Wednesday's economic calendar, UK Chancellor Hunt delivers his autumn statement address around 1230 GMT. Elsewhere, there is eurozone consumer confidence data at 1500 GMT.

The local corporate calendar has third-quarter results from DIY retailer Kingfisher and full-year numbers from enterprise software firm Sage Group.

By Eric Cunha, Alliance News news editor

Comments and questions to newsroom@alliancenews.com

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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