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LONDON MARKET MIDDAY: Stocks down before expected ECB hold and US data

Thu, 25th Jan 2024 12:07

(Alliance News) - Stock prices in London were down at midday on Thursday, in tepid trade ahead of an expected interest rate hold from the European Central Bank and a US gross domestic product reading.

The FTSE 100 index was down 13.43 points, 0.2%, at 7,514.24. The FTSE 250 was down 58.55 points, 0.3%, at 19,113.13 and the AIM All-Share was down 0.61 of a point, 0.1%, at 744.24

The Cboe UK 100 was down 0.3% at 750.59, the Cboe UK 250 was down 0.2% at 16,569.01, and the Cboe Small Companies was marginally down at 14,876.08.

In European equities on Thursday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both down 0.4%.

Sterling was quoted at USD1.2727 on Thursday at midday, lower than USD1.2744 at the London equities close on Wednesday. The euro traded at USD1.0889, slipping from USD1.0904.

The European Central Bank will announce its first interest rate decision of the year at 1315 GMT, with the market predicting a third-successive hold. The focus will remain on any guidance on the timing of rate cuts.

"A disappointing start to earnings season for the 'magnificent seven' and the prospect of the European Central Bank kicking any sign of rate cuts down the road have caused European markets to slip back," said AJ Bell analyst Russ Mould.

"Tesla's warning about lower sales growth for 2024 cast a dark cloud as it became the first of the magnificent seven to report this year. This group of stocks, which also includes Apple and Nvidia, were key drivers for strong US stock market gains in 2023 and so any disappointment from the pack could have an equally strong influence on markets, albeit dragging them down rather than up."

Shares in Tesla slipped 6.0% in after-hours trading in New York on Wednesday.

It reported fourth quarter earnings below expectations and warned about "notably lower" sales growth in 2024 as it prepares to launch its next-generation vehicle. Elon Musk's electric vehicle maker said the company "is currently between two major growth waves".

It warned "vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next-generation vehicle at Gigafactory Texas".

Stocks in New York were called slightly higher. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite are called to open marginally in the green.

Against the yen, the dollar was quoted at JPY147.50 midday London time, up versus JPY147.33 at the European equities close on Wednesday.

The latest US GDP reading is released at 1330 GMT, alongside the latest jobless claims data.

The US economy is forecast to have grown by 2.0% in the three months through to December, slower than the 4.9% growth recorded in the third quarter.

Analysts at Lloyds Bank commented: "Much of the slowdown is likely to be down to inventories. The final demand picture is expected to be mixed with consumer spending growth not much slower than in Q3 but much weaker outturns in exports and fixed investment.

"Overall, the data is not expected to make a compelling case for an early cut in interest rates by the Fed."

The CME FedWatch tool now places a 42% probability of a rate cut at the March meeting of the US central bank, down from as high as 80% in recent weeks.

In London, RS Group lost 2.9%, after reporting "weaker than anticipated" markets in its third quarter ended December 31.

The industrial products and services provided said revenue increased 1% in the third quarter, but fell 10% on a like-for-like basis. This reflected "weak industrial sentiment" and a "slower unwinding of customer surplus inventory, particularly in electronics and associated products".

RS Group commented: "Notwithstanding continuing geopolitical uncertainty, extended holiday periods and extreme weather, trading in Asia Pacific is improving, [Europe, the Middle East & Africa] is stable and Americas remains challenging with Q4 comparators easing."

St James's Place fell 6.3%. It assured the market it is "reviewing all elements" of the business, as the Cirencester, England-based wealth manager reported a rise in assets under management in 2023 despite slower net inflows.

St James's Place recently has been under pressure from UK regulators over its fee structure, promising in October to remove penalties for early withdrawals by customers starting from the second half of 2025.

On Thursday, it reported funds under management rose to GBP168.20 billion as of December 31 from GBP148.37 billion a year before. Gross inflows slowed to GBP15.39 billion in 2023 from GBP17.03 billion in 2022 and net inflows to GBP5.12 billion from GBP9.78 billion.

This means net inflow to opening funds under management - a key metric for St James's Place - declined to 3.5% in 2023 from 6.4% in 2022. Retention rate, another key measure, edged down slightly to 95.3% from 96.5%.

"While the need for trusted face-to-face financial advice remains as strong as ever, client capacity and confidence to commit to long-term investment have been impacted by the economic environment and short-term alternatives in the form of cash deposit and savings rates," commented Chief Executive Officer Mark FitzPatrick.

He added: "As we start planning our vision for 2030, I am reviewing all elements of our business to ensure we are fully fit for the future and best placed to keep delivering for all our stakeholders."

In the FTSE 250, Wizz Air fell 2.7%.

The Budapest-based firm reported a third quarter of double-digit topline growth in the three months to December 31. The budget airline said revenue grew 17% year-on-year to EUR1.06 billion from EUR911.7 million, as passengers carried jumped 22% to 15.1 million. Its operating loss widened to EUR180.4 million from EUR155.5 million.

The firm will be grappling with lower capacity, as its geared turbofan engines are removed for mandatory inspections. It had flagged the issue back in September, after it was told by RTX - formerly Raytheon - that its Pratt & Whitney GTF engines will be subject to inspection intervals.

Elementis rose 8.9% to 135 pence.

The specialty chemicals firm attracted bid interest from a US private equity firm, which has since decided against tabling another offer, Reuters reported on Thursday.

Citing people familiar with the matter, Reuters reported New York City-based KPS Capital Partners had submitted a 160p per share bid to the chemicals firm's board, which would have valued Elementis at GBP940.5 million.

However, Elementis wanted around 180p per share, implying a GBP1.06 billion valuation.

Among London's small-caps, Treatt lost 6.4%.

Ahead of its annual general meeting, the manufacturer and supplier of extracts and ingredients said revenue declined as expected in its first quarter - the three months to December 31.

Treatt said this reflects the impact of destocking, although it pointed to "encouraging signs" that destocking trends are reversing. As a result, Treatt expects customer demand to normalise somewhat in the second quarter.

Meanwhile, on AIM, Helium One surged 60%.

The primary helium explorer said its Itumbula West-1 well in Tanzania has successfully reached a total depth of 961 metres. Elevated helium shows, which were twenty times above background, were consistently measured while drilling the Lake Beds Formation, Red Sandstone Group, Karoo Group and Basement targets.

Gold was quoted at USD2,017.65 an ounce on Thursday at midday, slightly higher than USD2,012.59 on Wednesday. Brent oil was trading at USD80.99 a barrel, up from USD80.44.

By Greg Rosenvinge, Alliance News senior reporter

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