LONDON MARKET OPEN: Trade muted; Rolls-Royce surges on higher guidance

(Alliance News) - Trading in London was muted on Wednesday morning, as investors eye a key interest rate decision from the US Federal Reserve.

In the FTSE 100 index, Rolls-Royce jumped after it upped its full year guidance.

The FTSE 100 index opened down 6.83 points, 0.1%, at 7,684.97. The FTSE 250 was up 3.54 points at 19,153.42, and the AIM All-Share was up 0.06 of a points at 766.06.

The Cboe UK 100 was down 0.1% at 766.57, the Cboe UK 250 was up 0.1% at 16,823.73, and the Cboe Small Companies was up 0.1% at 13,695.52.

A 25 basis point hike by the Federal Reserve on Wednesday is seen as a foregone conclusion, though analysts are divided over whether it will be "one and done" or more rate lifts ahead for the US central bank.

The decision will be announced at 1900 BST, and a press conference with Chair Jerome Powell will follow shortly after.

According to the CME FedWatch Tool, there is a 99% chance the central bank lifts rates by 25 basis points. It would take the federal funds rate range to 5.25% to 5.50%. The Fed decided against a hike last month, ending a streak of 10 successive rate rises.

"Today's expected 25bps Fed rate hike, after last month's pause, looks set to be the last rate rise this year, whatever Fed policymakers would have you believe, said CMC Markets Michael Hewson.

"We may hear officials try and make the case for at least one more between now and the end of the year but given recent trends around US inflation it's quite likely that [producer price inflation] will go negative in July."

The dollar was slightly weaker in early exchanges in Europe.

The pound was quoted at USD1.2890 early on Wednesday in London, higher compared to USD1.2853 at the equities close on Tuesday. The euro stood at USD1.1066, up against USD1.1044. Against the yen, the dollar was trading at JPY140.67, lower compared to JPY141.03.

In the US on Tuesday, Wall Street ended higher, ahead of the interest rate decision. The Dow Jones Industrial Average up 0.1%, the S&P 500 up 0.3% and the Nasdaq Composite up 0.2%.

Google parent company Alphabet rose 6.1% in after-hours trade in New York. The company net income in the June quarter grew 15% to USD18.37 billion from USD16.00 billion a year prior. Revenue climbed to USD74.60 billion from USD69.69 billion.

In the FTSE 100, Rolls-Royce surged 24%, after it said that its financial results for the first half of the year are expected to be materially above consensus expectations.

The London-based jet engine manufacturer expects higher underlying operating profit of GBP660 million to GBP680 million, versus consensus of GBP328 million, as well as free cash flow of GP340 million to GBP360 million, versus consensus of GBP50 million. Rolls-Royce explained that this reflects continued end-market growth and its focus on commercial optimisation and cost efficiencies across the company.

Looking ahead, it upped its full-year expectations. It now expects underlying operating profit of GBP1.2 billion to GBP1.4 billion, versus consensus of GBP934 million, and free cash flow of GBP900 million to GBP1.0 billion, versus consensus of GBP732 million, in 2023.

British American Tobacco was up 3.5%.

The London-based maker of cigarettes and vaping products saw its pretax profit rise sharply by 73% to GBP5.30 billion for the six months that ended June 30 from GBP3.06 billion a year before.

Revenue though was up just 3.7% to GBP13.34 billion from GBP12.87 billion, driven by New Categories, which made "good progress" towards the GBP5 billion target by 2025.

"Having been in my new role for 10 weeks, I'm pleased with the resilient performance of BAT in the first half of 2023 and the renewed sense of energy across the organisation," said BAT Chief Executive Tadeu Marrocos, who stepped into the CEO role in May.

Looking ahead, BAT kept its full-year guidance unchanged.

NatWest lost 3.4%.

On Tuesday evening, NatWest boss Alison Rose has resigned from her position after admitting to being the source of an inaccurate story about Nigel Farage's finances.

In a statement released early on Wednesday morning, NatWest Group chair Howard Davies said: "The board and Alison Rose have agreed, by mutual consent, that she will step down as CEO of the NatWest Group. It is a sad moment."

NatWest's board of directors announced Paul Thwaite, the current chief executive of the company's commercial and institutional business, will take over Dame Alison's responsibilities for an initial period of 12 months, pending regulatory approval. The board said in a statement that a further process to appoint a permanent successor will take place "in due course".

Earlier, Rose said she made a "serious error of judgment" when she discussed Farage's relationship with private bank Coutts, owned by NatWest Group, with a BBC journalist.

In the FTSE 250, Aston Martin jumped 5.5%.

The Gaydon, England-based luxury car manufacturer said first-half revenue rose to GBP677.4 million from GBP541.7 million.

Its pretax loss in the first half of 2023 narrowed to GBP142.2 million from GBP285.4 million a year earlier. It noted that this included lower year-on-year net financing charges due to a positive non-cash FX revaluation impact of US dollar-denominated debt.

Looking ahead, Aston Martin said it is on track for GBP2 billion revenue and GBP500 million adjusted Ebitda by 2024/25.

Meanwhile, Just Eat Takeaway.com was up 7.8%.

The Amsterdam-based food delivery ordering platform said its pretax loss in the six months that ended June 30 narrowed to EUR317 million from EUR3.54 billion a year before, despite revenue slipping by 6.9% to EUR2.59 billion from EUR2.78 billion, as Just Eat Takeaway cut costs across the board.

Additionally, Chief Financial Officer Brent Wissink has resigned and will depart upon the annual general meeting in May 2024 "to pursue other opportunities", having joined the company in 2011. Just Eat said it will start the search for a successor.

"There are always many fathers of success in stories such as ours, but there are only few that actually deserve that title," commented Chief Executive Officer Jitse Groen.

"Brent is a clear father of the success of JET, and I am confident that we would have not made it this far without him."

In Asia on Wednesday, the Nikkei 225 index in Tokyo closed down marginally. In China, the Shanghai Composite closed down 0.3%, while the Hang Seng index in Hong Kong was down 0.3%. The S&P/ASX 200 in Sydney closed up 0.9%.

Australian consumer price inflation cooled by more than expected in the second quarter, according to data from the Bureau of Statistics.

In the three months to June, consumer prices rose 6.0% from the prior year, cooling from 7.0% rise in the March quarter. Compared to the previous quarter, prices were 0.8% higher in the second quarter, compared to a 1.4% rise in the first quarter.

The figures were lower than FXStreet-cited market consensus, which had expected an annual reading of 6.2% and a quarterly rise of 1.0%.

In European equities on Wednesday, the CAC 40 in Paris was down 1.0%, while the DAX 40 in Frankfurt was down 0.3%.

Brent oil was quoted at USD83.11 a barrel early in London on Wednesday, up from USD82.73 late Tuesday. Gold was quoted at USD1,968.98 an ounce, higher against USD1,962.17.

Wednesday's economic calendar is an otherwise light one with the exception of the Fed decision at 1900 BST. There is a US new homes sales reading at 1500 BST.

By Sophie Rose, Alliance News reporter

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