LONDON MARKET MIDDAY: Stocks edge lower as US bank earnings begin

(Alliance News) - Stock prices in London were lower at midday on Friday against a backdrop of rising inflation, while US bank earnings season got underway in New York with contrasting performances from JPMorgan and Wells Fargo.

The FTSE 100 was marginally lower, down 2.17 points at 7,561.68. The mid-cap FTSE 250 index was down 87.36 points, or 0.4%, at 22,871.12. The AIM All-Share index was down 5.94 points, or 0.5%, at 1,165.80.

The Cboe UK 100 index was down 0.1% at 750.12 points. The Cboe 250 was down 0.4% at 20,480.55, and the Cboe Small Companies up 0.2% at 15,765.50.

The CAC 40 stock index in Paris was down 0.7%, while the DAX 40 in Frankfurt was 0.6% lower.

"Investors cannot make up their minds whether they're worried about inflation and rising interest rates, or that they're comfortable central banks can work their magic and get inflation under control," commented Russ Mould, investment director at AJ Bell.

New York was pointed mostly higher.

The Dow Jones Industrial Average was pointed up 0.1% and the S&P 500 up 0.2%, but the Nasdaq Composite was called marginally lower, based on futures trading.

Major banks Citigroup, JPMorgan Chase and Wells Fargo all report fourth-quarter results before the market open in New York.

JPMorgan shares were off 1.3% in pre-market trade as its earnings underwhelmed.

For the fourth quarter to December 31, JPMorgan posted revenue of USD29.26 billion, down slightly from USD29.34 billion in the fourth quarter of 2020. Fourth quarter net income was USD10.40 billion, or USD3.33 per diluted share, down from USD12.14 billion, or USD3.79, the year before.

Chair & Chief Executive Officer Jamie Dimon commented on the financial results: "JPMorgan Chase reported solid results across our businesses benefiting from elevated capital markets activity and a pick up in lending activity as firmwide average loans were up 6%. The economy continues to do quite well despite headwinds related to the Omicron variant, inflation and supply chain bottlenecks.

"Credit continues to be healthy with exceptionally low net charge-offs, and we remain optimistic on US economic growth as business sentiment is upbeat and consumers are benefiting from job and wage growth."

Wells Fargo reported fourth-quarter revenue of USD20.86 billion, up from USD18.49 billion the year before. Fourth quarter net income up to USD5.75 billion, or USD1.38 per diluted share, from USD3.09 billion, or USD0.66 per diluted share, a year ago.

The stock was up 1.8% in pre-market.

Meanwhile, BlackRock said its assets under management rose above USD10 trillion at the end of 2021. The stock was down 0.3% in pre-market activity.

In London, RELX was up 1.8% after UBS raised the information and analytics provider to Buy from Neutral.

Berkeley Group was up 1.2%. Deutsche Bank upgraded the housebuilder to Buy from Hold.

Underperforming among London large-caps, B&M European Value Retail was down 4.1% at 572.00 pence after SSA Investments confirmed that it sold a 4% stake in the variety retailer.

Goldman Sachs International was sole bookrunner for the placing of 40 million shares at 585p each, raising gross sales proceeds of GBP234 million.

SSA owned 109.9 million shares in Luxembourg-based B&M, or an 11% stake. Following the sale, SSA will now own about 7% of B&M.

SSA is the investment vehicle of the Arora family. Simon Arora is B&M's chief executive. The intention to sell the shares was first announced after the London market close on Thursday.

Experian was down 2.0% despite the credit-checking agency raising annual guidance and posting double-digit revenue growth in the third quarter.

The Dublin-based firm said third-quarter results were at the upper end of expectations, with 14% revenue growth at actual exchange rates. Organic revenue growth was 11%.

Looking ahead, Experian expects organic revenue growth for the full year to be in the range of 12% to 13%, with total revenue growth now expected in the range of 16% to 17%, at constant exchange rates

Experian's previous guidance for financial 2022, outlined in November, was for an organic revenue climb of between 11% and 13%.

Steve Clayton, Hargreaves Lansdown Select fund manager, commented: "Overall, this is a strong report from Experian, but few were expecting anything else. So on a weak day for the wider market, following tumbles on Wall Street overnight, it was always going to be heavy going this morning. Perhaps on a stronger day these numbers would have been better received...But when sentiment picks up, Experian is likely to still be growing strongly, which rarely stays out of fashion for long."

In the FTSE 250, Renishaw was up 4.8%, after Goldman Sachs promoted the precision instruments maker to its Conviction Buy List.

Cineworld was up 2.7%. The movie theatre operator said it generated positive cash flow in the fourth quarter of 2021 as a result of improvements in revenue.

For the second half 2021, the Brentford, west London-based cinema chain said December box office and concession revenue was at 88% of 2019, the last period pre-pandemic.

Cineworld said the recovery was driven by an "excellent" slate of movies including the record breaking 'Spider-Man: No Way Home' which it said was the first film to gross more than USD1.5 billion at the box office since the onset of the pandemic.

Looking forward, Cineworld commented that there remains challenges ahead due to the Covid-19 situation, but it remains confident due to a "strong" 2022 film slate.

Cineworld also confirmed that it has served an appeal against the Ontario Superior Court of Justice's decision in the case brought by jilted acquisition target Cineplex.

Currys was down 3.7%, after the electrical goods retailer broke a string of positive Christmas trading updates by UK retailers.

Currys said the technology market was challenging over Christmas, with uneven customer demand and supply disruption.

For the 10 weeks that ended January 8, group like-for-like revenue fell 5% compared to growth of 4% two years before.

Looking ahead, Currys expects to deliver full-year adjusted pretax profit of around GBP155 million. This would be flat on the year before. It posted adjusted pretax profit of GBP156 million in financial 2021.

On AIM, Sensyne Health dropped 68%. The healthcare technology company announced the signing of a non-binding term sheet with several shareholders for up to GBP12.4 million in funding, warning that the company will not be able to trade beyond February without the cash injection.

The pound was quoted at USD1.3730 at midday on Friday, down slightly from USD1.3738 at the London equities close Thursday.

On the economic front, UK economic growth picked up in November, with gross domestic product exceeding its pre-pandemic size for the first time, according to the Office for National Statistics.

UK gross domestic product advanced 0.9% in November from October, accelerating from month-on-month growth of 0.2% in October. The November print beat the market estimate, cited by FXStreet, of 0.4% growth. The ONS said the monthly figure for GDP is estimated to be above its pre-coronavirus pandemic level of February 2020 for the first time.

However, the figures represented the state of the UK economy prior to the impact of the Omicron variant of Covid-19.

Dutch bank ING believes the Omicron hit will not be enough to deter the Bank of England's monetary policy course.

"In short, the hit to GDP across December and January may not amount to much more than half a percent, not least because the recent booster vaccine and testing expansions may help boost health spending yet further, offsetting weakness elsewhere," said ING's James Smith.

"For the Bank of England, this suggests the chances of a February rate hike are rising. While there's a reasonable case for waiting to get full clarity on Omicron, December's surprise rate hike decision showed that the committee, like that of the Federal Reserve, is less worried by Covid-19 than it was previously," Smith added.

Meanwhile, pressure was mounting on UK Prime Minister Boris Johnson amid fresh allegations that two further Downing Street parties were held while coronavirus restrictions were in place, the night before the Duke of Edinburgh's funeral.

The events were held in April last year, while the country was in a period of national mourning, it was reported. The prime minister was said to have been away from Downing Street at the time.

The news came as Andrew Bridgen, the Conservative MP for North West Leicestershire, was the latest to publicly announce he had submitted a letter of no confidence in the prime minister on Thursday night. He was the fifth MP to say he had written to Graham Brady, the chair of the 1922 Committee, calling for a vote on the PM's future as head of the party.

The Telegraph reported that as many as 30 letters have been submitted so far. A total of 54 are needed to trigger a vote.

The euro was priced at USD1.1457, down from USD1.1471. Against the Japanese yen, the dollar was trading at JPY113.90, down from JPY114.05.

Brent oil was quoted at USD84.62 a barrel on Friday at midday, down from USD84.80 late Thursday. Gold stood at USD1,822.50 an ounce, firm against USD1,817.65.

Friday's economic calendar has US retail sales at 1330 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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