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LONDON MARKET OPEN: Stocks slide; banks rise as Barclays outperforms

Tue, 20th Feb 2024 08:52

(Alliance News) - Stock prices in London opened in the red on Tuesday, as European markets failed to find upward momentum amid muted trading in Asia, and Monday's public holiday in the US.

The FTSE 100 index opened down 7.57 points, 0.1%, at 7,720.93. The FTSE 250 was down 51.49 points, 0.3%, at 19,165.41, and the AIM All-Share was down 1.89 points, 0.3%, at 754.44.

The Cboe UK 100 was down 0.1% at 772.89, the Cboe UK 250 was down 0.3% at 16,583.62, and the Cboe Small Companies down 0.1% at 14,499.28.

In European equities, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was down 0.4%.

Sterling was quoted at USD1.2582 early Tuesday, down slightly from USD1.2589 at the London equities close on Monday. The euro traded at USD1.0773, higher than USD1.0764. Against the yen, the dollar was quoted at JPY150.32, up versus JPY150.17.

In the FTSE 100, Barclays was by far the top performer, up 5.5%.

"Barclays has a habit of delivering mixed news – and today's results are no different," said John Moore, senior investment manager at RBC Brewin Dolphin.

Barclays said its total income in 2023 rose 1.7% year-on-year to GBP15.38 billion from GBP24.96 billion, with growth in Barclays UK of 4.5% to GBP7.59 billion. However, pretax profit fell 6.5% to GBP6.56 billion from GBP7.01 billion, as its credit impairment charge widened to GBP1.88 billion from GBP1.22 billion. In the fourth quarter, total income fell 3.5% to GBP5.60 billion, while pretax profit plunged 92% to GBP110 million, after restructuring costs of GBP927 million.

For 2023, the total dividend rose to 8.0 pence from 7.25p the year before. The bank plans to begin another share buyback worth GBP1.0 billion, bringing total capital distributions for the year to GBP3.0 billion, which is up around 37% on 2022. It is also planning at least GBP10 billion in capital returns to shareholders between 2024 and 2025.

Barclays' return on tangible equity fell to 9.0% in 2023 from 10.4% in 2022, but the bank is targetting a RoTE of over 10% in 2024.

"The acquisition of Tesco Bank also looks like a good, low-risk deal in terms of overlap, cost savings, and gaining some market share. Barclays is in a reasonable position and appears to be cautiously optimistic about the future, but execution of the plan set out today will be key to its performance," RBC's Moore continued.

Barclays announced it will now be managed and report via five focused operating divisions, allowing it to provide an "enhanced and more granular disclosure" on its performance. It will unveil its new three-year plan at an investor update later in the day.

NatWest added 1.0% in a positive read-across. Lloyds and HSBC edged up 0.4% and 0.3% respectively.

Airtel Africa struggled in early trading, falling 5.1%, as JPMorgan cut its price target for the stock by 28%.

In the FTSE 250, Mobico dropped 6.6%.

The transport provider - formerly known as National Express - announced a delay to the publication of its annual results for 2023, which were due on February 29. This is due to account judgements relating to its German Rail business which "should be subject to further review".

Mobico said it continues to expect adjusted earnings and interest for tax for 2023 to be in the guided range of GBP175 to GBP185 million. However, it warned its onerous contract provision as at the end of December is expected to increase by between GBP40 million and GBP70 million, resulting from issues within its German Rail arm.

"The German Rail business has been impacted by industry-wide driver shortages, energy price volatility and lower energy cost recovery than previously anticipated," Mobico explained. The firm now expects results to be published "before the end of March".

Among London's small-caps, Superdry was up 13%.

According to a Sky News report, the British clothing retailer's founder Julian Dunkerton is courting prominent US investor Davidson Kempner - who owns Oak Furnitureland - to take the embattled firm private. Sky reported that the talks are at an early stage, with no guarantee of any deal being sealed.

On AIM, Horizonte Minerals plunged 87%.

After the market close on Monday, the mineral developer provided an updated capital expenditure outlook for its 100%-owned Araguaia nickel project in Brazil. Following a review, it now estimates the capital required to complete construction, commission the project and deliver first metal is around USD454 million. The estimate at completion now stands at USD1.00 billion, which is some 87% higher than its previously disclosed capex budget of USD537 million. Mechanical completion is expected in the first quarter of 2026.

"It is important to note that while completing the Cost-to-Complete estimate is a significant milestone, resuming and completing construction activities at Araguaia are still subject to the successful completion of a full financing solution, which the company will seek to develop in the coming weeks, but with no guarantee of success," Interim CEO Karim Nasr warned.

Meanwhile, US financial markets will reopen on Tuesday, after being closed on Monday for Washington's birthday. There will be annual results from retailers Home Depot and Walmart, which will give insight into the health of consumer spending. Investors are also keenly awaiting Nvidia's annual results, which are due on Wednesday after the closing bell in New York.

In Asia on Tuesday, the Nikkei 225 index in Tokyo closed down 0.3%. In China, the Shanghai Composite added 0.4%, while the Hang Seng index in Hong Kong was up 0.6%.

China's central bank cut a key benchmark lending rate used to price mortgages, as Beijing seeks to rescue its housing market from a deepening crisis and boost flagging growth in the country's economy.

The five-year loan prime rate was lowered to 3.95% from 4.2%, the People's Bank of China announced, in the first cut since June. It is the largest cut to the rate since it was introduced in 2019, according to Bloomberg, deeper than that expected by economists polled by the financial newswire. The one-year LPR, which serves as a benchmark for corporate loans, remained unchanged at 3.45%.

"China's property woes extend deep into the economy. Construction fired up growth in China over the last few decades as urbanisation accelerated, fuelled by debt, and efforts to rein that in and tighten regulation have caused a big wobble. This matters because the property sector accounts for some 30% of GDP. Already chunks of the property house of cards have begun to collapse, such as the giant Evergrande, now in liquidation in Hong Kong. Although given the high savings rates in China, mortgage defaults are less of a concern, falling prices affect household wealth perceptions and consumption across the economy," commented Susannah Street, head of money & markets at Hargreaves Lansdown.

The S&P/ASX 200 in Sydney closed down 0.1%.

Gold was quoted at USD2,021.47 an ounce early Tuesday, higher than USD2,013.67 on Monday. Brent oil was trading at USD83.48 a barrel, little changed from USD83.53.

By Elizabeth Winter, Alliance News deputy news editor

Comments and questions to newsroom@alliancenews.com

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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