LONDON MARKET CLOSE: Markets downbeat ahead of US Fed minutes

(Alliance News) - Stock prices in London closed lower on Tuesday, hurt by a stronger pound and share price falls for the mining sector.

It was a largely difficult session for European equities, while stocks in New York were firmly in the red as traders there returned to desks. The mood in equity markets has been soured by unfavourable US data recently, as well as hawkish remarks from central bankers there.

The Federal Reserve releases minutes from its most recent meeting on Wednesday.

The FTSE 100 index ended down 36.56 points, or 0.5%, at 7,977.75. It closed below 8,000 points for the first time since last week Wednesday.

The FTSE 250 closed down 247.56 points, or 1.2%, at 19,850.85, and the AIM All-Share ended down 4.08 points, or 0.5%, at 862.16.

The Cboe UK 100 ended down 0.4% at 798.77, the Cboe UK 250 dropped 1.2% at 17,323.71. The Cboe Small Companies, however, climbed 0.4% to 14,052.73.

In European equities on Tuesday, the CAC 40 in Paris lost 0.4%, while the DAX 40 in Frankfurt closed down 0.5%.

The pound was quoted at USD1.2121 at the time of the London equities close on Tuesday, sharply higher compared to USD1.2034 at the equities close on Monday. The pound was supported by favourable UK data on Tuesday.

The S&P Global/CIPS UK flash composite purchasing managers' index marched to an eight-month high of 53.0 points in February from 48.5 in January. Crossing over the 50-point no-change mark, it shows the UK private sector has returned to growth.

The reading was well above the 48.7-point market consensus, as cited by FXStreet,which would have indicated continued contraction.

Meanwhile, the UK public sector budget enjoyed a higher-than-expected surplus in January, thanks to record self-assessed tax receipts, according to the Office for National Statistics.

UK public sector borrowing - excluding public sector banks - was in surplus by GBP5.4 billion last month.

The euro stood at USD1.0673 late Tuesday, lower against USD1.0687 at the London equities close on Monday. Against the yen, the dollar was trading at JPY134.74, higher compared to JPY134.07.

Stocks in New York were weaker at the time of the closing bell in London. The Dow Jones Industrial Average and S&P 500 were down 1.6%. The Nasdaq Composite tumbled 2.0%.

Stocks in New York struggled ahead of the release of the latest meeting minutes from the US Federal Reserve. Several Fed officials in recent speeches have offered a hawkish stance. The minutes from the US central bank's last policy meeting are due out at 1900 GMT on Wednesday.

SPI Asset Management analyst Stephen Innes commented: "While most anticipate that the Fed will continue in 25bp increments and that the bar for returning to a 50bp pace is high, it is not insurmountable. Indeed, if US economic data continues to run hot, it would likely make for a more compelling case for returning briefly to a larger incremental rate hike regime."

In London, HSBC climbed 4.3% as a dividend hike, as well as the prospect of more shareholder returns further down the line, supported the stock. It did report an annual profit fall, however.

In 2022, the Asia-focused lender said pretax profit fell 7.3% to USD17.53 billion from USD18.91 billion. This was slightly better than company-compiled market consensus of USD17.49 billion, however.

HSBC also updated on the USD10 billion sale of its Canadian banking business to the Royal Bank of Canada.

As a "priority use" of the sale proceeds, the board will consider a special dividend of USD0.21 per share. Any additional surplus capital from the sale would then be put towards organic growth and investment opportunities, as well as potential share buybacks, it said.

HSBC's board approved a second interim dividend of USD0.23 per share for 2022, bringing the annual total to USD0.32. This is up from the total of USD0.25 in 2021.

Chair Mark Tucker said the firm would be establishing a dividend payout ratio of 50% to reported earnings per share in 2023 and 2024, excluding "material significant items".

"We aim to restore the dividend to pre-Covid-19 levels as soon as possible. We also intend to return to paying quarterly dividends from the start of 2023," Tucker said.

Smith & Nephew added 4.2%. For 2022, the medical technology company said annual revenue edged up 0.1% to USD5.22 billion from GBP5.21 billion a year ago. Pretax profit, meanwhile, fell to USD235 million from USD586 million.

In 2023, S&N expects underlying revenue growth of 5.0% to 6.0% and a trading profit margin of at least 17.5%. In the longer term, it plans to expand trading profit margin to "at least 20%" by 2025.

While HSBC and Smith & Nephew rallied, the mining sector served as a laggard to the FTSE 100.

Antofagasta dropped 2.2% as it reported a drop in both profit and revenue in 2022 due to poor copper production and prices and the impact of inflation on costs.

For 2022, the Chile-focused mining group reported pretax profit of USD2.56 billion, down 26% from USD3.48 billion a year prior. Revenue also fell, down 22% to USD5.86 billion from USD7.47 billion the previous year.

A stronger pound also hurt the stock. Antofagasta is one of the FTSE 100's many international earners.

Elsewhere in London, BHP gave back 3.6%. The former FTSE 100 constituent reported a sharp drop in interim profit, mostly due to falling prices for iron ore and copper, as it put two Queensland coal mines up for sale.

In its half year to December 31, the mining company said revenue fell 16% to USD25.71 billion from USD30.53 billion a year before.

Events organiser Hyve jumped 16%. It has received a preliminary and conditional approach from media-focused equity investment firm Providence Equity for a possible cash offer of 105 pence per Hyve share, around GBP306 million in total.

Zoo Digital closed 12% higher as it announced it is now operating as a key vendor for a major content producer in Hollywood.

The cloud-based localisation and digital distribution services provider did not provide financial details for the deal, adding that it could not name the content creator for contractual reasons.

Brent oil was quoted at USD82.73 a barrel late Tuesday in London, down from USD83.29 late Monday. Gold was quoted at USD1,837.01 an ounce, lower against USD1,843.50.

Ahead of the release of the Fed minutes on Wednesday, the economic calendar has a German inflation reading at 0700 GMT.

The local corporate calendar has annual results from lenders Lloyds Banking Group and TBC Bank.

By Eric Cunha, Alliance News news editor

Comments and questions to newsroom@alliancenews.com

Copyright 2023 Alliance News Ltd. All Rights Reserved.