LONDON MARKET OPEN: Mondi and Shell lift FTSE 100 after strong updates

(Alliance News) - Stock prices in London opened sharply higher on Thursday after the US Federal reserve assuaged fears over further aggressive monetary policy tightening, while positive updates from Mondi and Shell boosted the FTSE 100.

Fed Chair Jerome Powell said more half-point interest rate hikes will be on the table at forthcoming meetings after the central bank on Wednesday lifted interest rates by 50 basis points, as expected.

This was the first time the US central bank has hiked rates by a half-point at one meeting since 2000, and takes the federal funds rate to now stand at 0.75% to 1.00%.

However, on the prospect of an even chunkier 75 basis point hike, Powell said it is not something the central bank is "actively considering".

The Fed also decided to start reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at the start of June.

The FTSE 100 index was up 107.00 points, or 1.4%, at 7,600.45 early Thursday. The mid-cap FTSE 250 index was up 321.46 points, or 1.6%, at 20,540.94. The AIM All-Share index was up 8.55 points, or 0.9%, at 1,007.11.

The Cboe UK 100 index was up 1.4% at 756.58. The Cboe 250 was up 1.2% at 18,092.13. The Cboe Small Companies rose 0.1% to 15,088.94.

In mainland Europe, the CAC 40 stock index in Paris was up 2.0% and the DAX 40 in Frankfurt was up 2.1%.

In the FTSE 100, Mondi was the best performer, up 8.2%, after the packaging firm posted a strong quarterly performance and decided to pull the plug on its Russian businesses.

The Weybridge, England-based firm said it has decided to divest its Russian assets after assessing all options for its interests there.

For the three months to March 31, underlying earnings before interest, tax, depreciation and amortisation rose 63% to EUR574 million from EUR353 million in the same period a year prior.

Mondi said its pipeline currently includes around EUR1 billion of expansionary projects already approved or under advanced evaluation, which it anticipates will generate mid-teen returns when in full operation.

Looking ahead, Mondi expects to deliver a year of good progress, with the annual performance benefiting from shorter planned maintenance shuts and the contribution from the capital investment programme.

Shell was up 3.8% after the oil major reported a substantial rise in first-quarter earnings due to the surging price of oil.

Rival BP was up 2.0% in a positive read-across.

For the the three months to March 31, Shell's income attributable to shareholders was USD7.12 billion, up 26% from USD5.66 billion in the first quarter last year. Current cost of supply earnings attributable to shareholders for the first quarter was USD5.02 billion, up 15% from USD4.35 billion.

Shell explained income attributable to shareholders reflected post-tax charges of USD3.9 billion related to the phased withdrawal from Russian oil and gas activities.

The oil major posted adjusted earnings of USD9.1 billion, nearly tripled from USD3.23 billion the year before. First quarter cash flow from operating activities was USD14.82 billion, up nearly 80% from USD8.29 billion.

Turning to returns, Shell raised its first quarter dividend by 47% to USD0.25 per share from USD0.17 a year ago.

The strong results come as calls mount from UK politicians in the opposition Labour and the Liberal Democrats parties for a windfall tax on oil and gas firms to help ease the cost-of-living crisis in the country.

The sector is reaping the benefits of rocketing oil and gas prices, which have been pushed to record levels by Russia's invasion of Ukraine and surging demand as economies emerge from the pandemic.

UK Chancellor Rishi Sunak has so far resisted pressure to make the firms pay more tax, instead looking to companies making big profits to invest the cash back into the UK.

Melrose Industries rose 2.8% after the industrial turnaround specialist said trading for the four months to April 30 was in line with expectations for the year.

The London-based firm said that, consistent with industry trends, its Aerospace division was experiencing continued growth, with like-for-like sales up 6%.

At the other end of the large-caps, Hikma Pharmaceuticals was the worst performer, down 10%. The drugmaker downgraded guidance for its Generics business due to the delayed launch of a generic of the Xyrem treatment for narcolepsy.

In 2017, Hikma entered into a settlement agreement with Jazz Pharmaceuticals to sell an authorised generic of Xyrem.

Under the terms of the agreement, Hikma had a date certain launch of January 1, 2023, or earlier depending on market conditions and also had 180 days exclusivity.

However, Jazz Pharmaceuticals now expects authorised generic entry of Xyrem to occur "in late 2022, or possibly even January 2023". As a result, Hikma now does not expect revenue and profit contribution from its agreement with Jazz to sell the generic until the first half of 2023.

For 2022, Hikma now expects Generics revenue to be in the range of USD710 million to USD750 million and core operating margin to be around 20%, with the lower end of the range reflecting the possibility of further price erosion in the US generic market. This is down from previous guidance of Generics revenue growth in the range of 8% to 10% over 2021 revenue of USD820 million and core operating margin in the range of 24% to 25%.

In Asia on Thursday, the Shanghai Composite closed up 0.7%, while the Hang Seng index in Hong Kong was up 0.4%. The S&P/ASX 200 in Sydney ended up 0.8%. Financial markets in Tokyo were closed on Thursday for the Children's Day holiday.

The pound was quoted at USD1.2530 early Thursday, up from USD1.2501 at the London equities close Wednesday, ahead of a Bank of England interest rate decision at midday.

Markets overwhelmingly expect the BoE to hike rates for the fourth meeting in a row, which would bring Bank Rate to 1.00% - a level it has not stood at since 2009.

The euro was priced at USD1.0605, higher against USD1.0560. Against the yen, the dollar was trading at JPY129.46 in London, down from JPY129.93.

Brent oil was quoted at USD110.00 a barrel Thursday morning, up from USD108.55 late Wednesday. Gold stood at USD1,896.44 an ounce, higher against USD1,866.98.

Thursday's economic calendar has UK services PMI at 0930 BST and the latest US jobless claims numbers at 1330 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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