LONDON MARKET CLOSE: Tech shines but tepid trade elsewhere

Wed, 26th Apr 2023 17:03

(Alliance News) - European equities closed lower on Wednesday, with lingering banking sector worries hurting sentiment, while tech stocks outperformed wider markets in New York after well-received earnings overnight.

In London, the FTSE 100 was hurt by share price falls for pharmaceutical stocks and building materials company CRH. Housebuilders and banking shares climbed, however.

The FTSE 100 index ended down 38.49 points, or 0.5%, at 7,852.64. The FTSE 250 fell just 7.42 points to 19,207.97. The AIM All-Share closed down 2.42 points, or 0.3%, at 821.84.

The Cboe UK 100 ended down 0.6% at 785.31, the Cboe UK 250, however, added 0.2% at 16,842.98. The Cboe Small Companies lost 0.2% at 13,293.67.

Stocks in New York were mixed on Wednesday. The Dow Jones Industrial Average was down 0.1%, while the S&P 500 index was up 0.3%, and the Nasdaq Composite surged 1.2%.

The tech-focused Nasdaq was an outlier in an otherwise tepid day for major indices.

Helping to boost the Nasdaq was a 7.8% share price rise for Microsoft.

It reported late Tuesday increased revenue and earnings in its financial third quarter, boosted by solid growth in its cloud division.

However, it received a blow on Wednesday after the UK's antitrust watchdog prevented its deal to acquire video game maker Activision Blizzard. Activision was down 11% in New York.

Microsoft said it would appeal the decision, and said the Competition & Markets Authority's decision reflects a "flawed understanding of this market and the way relevant cloud technology actually works".

The CMA said deal was blocked to "protect innovation and choice in cloud gaming".

In European equities on Wednesday, the CAC 40 in Paris closed down 0.9%, while the DAX 40 in Frankfurt ended down 0.5%.

"For today, the luxury sector appears to be seeing some profit-taking with Kering lower along with LVMH, Hermes, and Burberry weighing on the wider market, helping to push the CAC 40 sharply lower.

The FTSE 100 is also under pressure with the weakness very much broad-based across various sectors, with defensives feeling the pressure along with cyclicals, with health care a particular drag," CMC Markets analyst Michael Hewson commented.

In Paris, LVMH and Hermes each lost 1.6% and Kering gave back 2.3%. The latter late Tuesday reported first-quarter sales growth, though the Gucci owner's progress fell well short from growth seen from its peers. In London, Burberry fell 1.9%.

GSK and AstraZeneca lost 4.0% and 3.9%. The former reported a slip in quarterly sales on Wednesday. Astra reports on Thursday.

GSK said its top-line shrunk by 3.3%, reflecting less Covid-19 solution sales compared to the previous year.

Also hurting the FTSE 100, CRH fell 3.3%. It backed its half-year outlook but noted a challenging environment in Europe.

The building materials company said that reported sales in the first quarter of 2023 were up 7% year-on-year.

However, the company expects a more challenging backdrop in Europe, driven by continued inflationary pressures and some slowdown in the new-build residential sector.

Reckitt fell 2.6%. The consumer goods firm reported that price hikes supported its first-quarter outturn, though volumes slid.

The company said volumes fell 4.5% on-year in the first quarter of 2023, though it logged price/mix improvements of 12%. Reckitt said total net revenue in the first quarter rose 14% year-on-year to GBP3.92 billion from GBP3.42 billion a year earlier, or 7.9% on a life-for-like basis.

Unilever fell 0.9% in a negative read across. It reports a first-quarter trading statement on Thursday.

Housebuilders were on the up, however, lifted by an encouraging update from Persimmon. Persimmon closed up 5.1%.

The housebuilder said it expects to reach the top end of its 2023 expectations, despite a drop in sales in the first quarter on an annual basis.

Numbers suggest that the housing market has picked up from the fourth quarter, however.

It reported net private sales per outlet of 0.62, down 37% from 0.98 a year ago, but up from 0.30 in the final quarter of 2022.

The firm noted that forward sales also dropped on a yearly basis to GBP1.7 billion, 30% less than GBP2.4 billion the year prior, but up compared to GBP1.0 billion in the final quarter of 2022.

Persimmon said it expects full-year new home completions at the top end of its 8,000-9,000 guidance, "if sales rates continue around the level seen year to date".

Crest Nicholson and Redrow climbed 7.0% and 4.5%, respectively, in a positive read-across.

Standard Chartered added 2.8% on improved first-quarter earnings, bolstered by rate hikes.

The Asia-focused bank reported pretax profit of USD1.81 billion, up 21% from USD1.49 billion year-on-year.

Operating income climbed 6.2% to USD4.56 billion from USD4.29 billion. This was helped by net interest income rising 13% year-on-year to USD2.01 billion from USD1.78 billion, as it benefited from rising interest rates.

In addition, the company said it plans to return "in excess" of USD5 billion to shareholders by 2024.

Shares in banking sector peer Barclays, which reports on Thursday, climbed 1.7%.

Elsewhere in London, Warpaint added 7.1%.

The cosmetics supplier, which owns W7 and Technic makeup brands, said pretax profit multiplied in 2022 to GBP7.7 million from GBP3.7 million in 2021, driven by a 28% increase in revenue to GBP64.1 million from GBP50.0 million.

Looking ahead, Warpaint said trading has remained strong so far in 2023. Revenue in the first quarter was GBP18.5 million, up 40% from GBP13.2 million a year before, while margin improved on the 2022 full-year result.

The pound was quoted at USD1.2472 late Wednesday afternoon in London, higher compared to USD1.2404 at the London equities close on Tuesday. The euro stood at USD1.1046, higher against USD1.0983. Against the yen, the dollar was trading at JPY133.54, lower compared to JPY133.98.

The dollar suffered as Federal Reserve tightening expectations eased, though a hike next week still looks likely.

Fed tightening expectations eased after poor results from First Republic Bank reminded markets of the stress being felt by some US regional banks.

According to the CME FedWatch tool, there is an 81% chance that the central bank lifts rates by 25 basis points to a range of 5.00%-5.25% on Wednesday next week. The Fed is expected to pause hikes thereafter.

Still to come on Wednesday are results from Facebook owner Meta Platforms. Online retailer Amazon and pharmaceutical firm Merck & Co report on Thursday.

Aside from updates from AstraZeneca, Barclays and Unilever, the UK corporate diary has annual results from grocer Sainsbury's and a trading statement from advertising company WPP on Thursday.

The economic calendar has a US gross domestic product reading at 1330 BST.

Brent oil was quoted at USD80.29 a barrel late Wednesday, down from USD80.52 late Tuesday. Gold was quoted at USD1,995.53 an ounce, up against USD1,987.63.

By Eric Cunha, Alliance News news editor

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