LONDON MARKET MIDDAY: Caution Ahead Of US Interest Rate Guidance

(Alliance News) - Stock prices in London continued to trade in a lacklustre fashion ahead of a widely expected interest rate cut by the US Federal Reserve, with Wall Street also pointed to a flat open as investors eye the central bank's policy outlook.

The FTSE 100 index was just 1.16 points higher at 7,307.42 Wednesday midday. The FTSE 250 was down 54.48 points, or 0.3%, at 20,113.85, and the AIM All-Share was flat at 889.93.

The Cboe UK 100 index was up 0.1% at 12,391.29. The Cboe UK 250 was down 0.2% at 18,058.16 and the Cboe UK Small Companies was down 0.2% at 11,204.69.

In European equities, the CAC 40 index in Paris was up 0.2% and the DAX 30 in Frankfurt down 0.1% in early afternoon trade.

"European markets are following their Asian counterparts lower this morning, as markets prepare for what could be the final accommodative step from the Fed for a number of months. With market expectations signalling a 93% chance of a rate cut today, we are instead seeing a focus on the outlook, with markets expecting to wait until April 2020 to see the next 25 basis-point move," said Joshua Mahony, senior market analyst at IG.

The Fed will announce its latest monetary policy decision at 1800 GMT, followed by a press conference with Chair Powell at 1830 GMT.

Before this, there is a US third-quarter gross domestic product reading at 1230 GMT. In Europe, there is German inflation at 1300 GMT.

Ahead of the rate decision, stocks in the US are headed for a cautious open, with the Dow Jones, S&P 500 and Nasdaq all seen flat. After the New York market close come earnings from iPhone maker Apple and social network Facebook.

In London, Standard Chartered was the top performer in the FTSE 100, up 2.9% after reporting solid profit growth in the third quarter.

In the six months to June 30, the emerging markets lender's pretax profit grew 2.5% to USD2.41 billion from USD2.35 billion the year before. Standard Chartered's underlying pretax profit expanded 11% to USD2.61 billion. In Greater China & North Asia, StanChart's underlying profit increased 3.1% to USD1.33 billion.

Within units, Corporate & Institutional Banking unit saw underlying profit grow 24% to USD1.35 billion. StanChart attributed the increase to its Cash Management and Financial Markets divisions.

"Standard Chartered's strong third-quarter is perhaps a little surprising given the disruption caused by protests in Hong Kong, the bank's largest market," commented Adam Vettese, an analyst at investment platform eToro.

"These strong set of Q3 results prove that the turnaround strategy [Chief Executive Bill] Winters embarked on a couple of years ago is continuing to bear fruit, despite the challenges facing the global economy and the banking sector in particular," Vettese added.

BP was up 1.0% after confirming that no decision has yet been made over a fourth quarter, or any future, dividend.

"Any decisions with respect to future dividends will be made by the board of BP PLC following the end of each quarter," the FTSE 100 constituent said.

Analysts on Tuesday had paid close attention to BP's dividend.

"BP stock was hit hard following its 3Q earnings, which we attribute primarily to a likely deferral in a dividend increase. The company had set expectations for a dividend hike during 2H19 on its 2Q earnings call, but on the 3Q call indicated that any increase was now likely beyond 4Q19," said Jefferies.

At the bottom of the FTSE 100 was Next, down 2.9% despite holding its annual guidance.

Total full price sales were up 2.0% in the quarter to October 26, being last Saturday, which Next said was "slightly ahead" of guidance given in September. Retail sales were down 6.3%, online sales up 9.7% and finance interest income up 7.0%.

In the year to October 26, total full price sales were up 3.5%.

The UK retail bellwether said it thinks strong sales in July pulled forward sales from August, while sales in September were "adversely affected by unusually warm weather". This was followed by a "significant improvement" in October when temperatures fell and so did rain.

In the FTSE 250, ConvaTec surged 9.7% after posting robust organic growth in the third quarter of 2019.

ConvaTec said total revenue in the three months ended September 30 was USD462.9 million, 2.4% higher than the USD452.2 million reported a year before. The company said the improvement was driven by 4.6% growth in organic revenue.

Group performance was boosted by growth in all of the company's units - Advanced Wound Care, Ostomy Care, Continence & Critical Care, and Infusion Devices.

Elsewhere in London, De La Rue sank 20% following a profit warning.

De La Rue said it expects its first-half adjusted operating profit, for the period ended September 28, to be "low-to-mid single digit millions". As a result, the company said its full-year adjusted operating profit, for the period ending March 2020, will be "significantly" lower than market expectations.

"Management, led by the new chief executive officer, is conducting a detailed review of the business and will update the market further when it reports its first half results on November 26 2019," the company said Wednesday.

In the UK, the prospect of a Christmas general election is all but certain as a bill cleared by the House of Commons makes it way to the House of Lords.

The Bill passed the Commons by 438 votes to 20 – although a vote to alter the date, which Downing Street warned would scupper the whole thing, was much closer with a government majority of just 20.

The one-page bill enabling the election to be held on December 12 now goes to the House of Lords, but it is unlikely to be held up in the unelected upper chamber. Once it receives the royal assent, it will pave the way for Parliament to be dissolved on November 6 marking the start of the campaign in earnest.

"The fact sterling hasn't freaked out suggests the currency is hoping for increased political clarity heading into 2020, a result that would give one party a workable majority and allow the Commons to avoid the repeated Brexit deadlock that has become the norm post-referendum. Yet if the last few UK votes are anything to go by, that hope might be a bit naive..." commented Spreadex analyst Connor Campbell.

The pound was quoted at USD1.2889 at midday, flat compared to USD1.2887 late Tuesday.

By Lucy Heming; lucyheming@alliancenews.com

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