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London open: NatWest and StanChart pacing early gains
London stocks were trading higher shortly after the session of the session as investors digested a raft of corporate earnings announcements.
As of 0856 BST, the FTSE 100 was up by 22.32 points to 7,367.54, alongside a 0.98% gain for the second-tier index to 20,049.91.
In parallel, futures for the US Nasdaq-100 were climbing by 164.25 points to 12,901.75, as investors cheered the latest quarterly results out of Amazon.com and Apple released overnight.
Shares of the former ran up by nearly 14% in after-hours trading in New York.
Regarding the market backdrop, investors and analysts were still getting their heads around data published the day before, showing that the US economy slipped into a so-called ‘technical recession’ after gross domestic product shrank for a second quarter running over the three months to June.
“With that in mind markets have started to price out the prospect of more aggressive action by central banks when it comes to raising rates, pushing yields lower and giving a boost to equity markets,” said Michael Hewson, chief market analyst at CMC Markets UK.
“In that context we can expect to see a higher European open, as German 2-year yields hit two month lows.”
On the economic calendar for Friday, at 0930 BST the Bank of England was scheduled to release consumer credit and mortgage lending figures for the month of June.
Across the Channel meanwhile, at 1000 BST, preliminary figures from Eurostat were expected to reveal a slight increase in the annual rate of euro area consumer price inflation from 8.6% for June to 8.7% in July.
Another report from Eurostat at that same hour was expected to show that the rate of gross domestic product growth in the single currency bloc slowed from a 0.6% quarter-on-quarter pace over the first three months of 2022 to only 0.1% in the three months to June.
However, earlier figures released in Spain showed the economy bounded ahead at a quarter-on-quarter pace of 1.1% in the second quarter (consensus: 0.4%), while in France it expanded at a clip of 0.5% (consensus: 0.2%).
And in the US, a slew of inflation indicators were due out, including the second quarter employment cost index and price deflators for personal consumption expenditures in June, both at 1330 BST.
Courtesy of the University of Michigan, gauges of consumers’ inflation expectations for the month of July would follow at 1500 BST.
Lenders pace early gains
NatWest beat analysts’ estimates for both operating pre-tax proit and total income for its second quarter. The lender posted pretax profits of £1.4bn on £3.21bn of revenues while net profit came in at £1.05bn. Net interest margins meanwhile improved by 26 basis points against the prior quarter to 2.72%. A dividend payout of 3.5p per share was declared for the quarter.
StanChart shares jumped at the end of the week after delivering what the lender itself labelled a “strong” set of first half figures, announced a new $500m share buyback programme and expressed confidence on its full-year targets. Commenting on the group’s performance, chief executive officer, Bill Winters, highlighted the “continued positive” momentum seen during the quarter, discipline on expenses and significant savings. Income for the half was ahead by 8% to $8.2bn or by 10% at constant currencies and during the second quarter it was 11% higher at constant currencies. That saw a 10% jump in statutory pre-tax profits for the latest six months to $2.8bn.
Drugmaker AstraZeneca raised full-year revenue guidance on Friday as it provided details of its “strong” first trading half and announced that Michel Demaré would take over as the group’s chairman in April 2023. Astra-Zeneca, which reported a 48% increase in interim revenues to $22.16bn, said total revenues were now expected to increase by “a low twenties percentage”, up from previous estimates in the “high teens”.
IAG returned to profit in the second quarter as its Iberia and Vueling airlines were boosted by post-Covid pandemic demand. The company on Friday said operating profits for the three months to June 30 came in at €293m, compared with a loss of €967m a year earlier. IAG, which also owns British Airways, posted an operating loss for the half year of €438m, significantly lower than 2021’s €2.03bn.
Chemicals company Croda International said on Friday that profits had surged in the six months ended 30 June, driven by improved interim sales and margins. Croda said interim pre-tax profits were up 211% at £636.5m, operating profits were 32.1% higher at £288.6m, and basic earnings per share had grown 254% to 389.6p, driven by a 20.7% increase in revenues to £1.12bn.
UK luxury sportscar maker Aston Martin said first-half losses had widened as supply chain constraints hit production. The company reported a pre-tax loss of £285.4m in the six months to June 30, compared with a loss of £90.7m a year ago. It sold 2,676 vehicles wholesale, compared with 2,901 a year earlier. Aston Martin, which is pinning its hopes on the lucrative Chinese market, said it expected the supply chain issues to unwind in the second half and forecast higher sales after ramping up production of its DBX707 and the V12 Vantage.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | +5.01% | +39.40 | 825.20 |
| 2 |  |
Fresnillo Plc | +4.47% | +31.20 | 729.00 |
| 3 |  |
Scottish Mortgage Investment Trust Plc | +3.45% | +28.80 | 864.40 |
| 4 |  |
Carnival Plc | +3.22% | +20.80 | 666.20 |
| 5 |  |
Rentokil Initial Plc | +2.89% | +15.40 | 547.40 |
| 6 |  |
Standard Chartered Plc | +2.82% | +16.00 | 582.80 |
| 7 |  |
Barclays Plc | +2.81% | +4.22 | 154.56 |
| 8 |  |
Croda International Plc | +2.61% | +186.00 | 7,324.00 |
| 9 |  |
Tui Ag | +2.54% | +3.30 | 133.20 |
| 10 |  |
Kingfisher Plc | +2.52% | +6.40 | 260.50 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Intertek Group Plc | -4.05% | -181.00 | 4,283.00 |
| 2 |  |
British American Tobacco Plc | -3.34% | -112.50 | 3,260.00 |
| 3 |  |
Bae Systems Plc | -2.90% | -22.60 | 756.80 |
| 4 |  |
Centrica Plc | -2.14% | -1.90 | 86.94 |
| 5 |  |
Imperial Brands Plc | -1.75% | -32.00 | 1,800.50 |
| 6 |  |
Compass Group Plc | -1.74% | -34.00 | 1,919.00 |
| 7 |  |
Pearson Plc | -1.54% | -11.80 | 754.00 |
| 8 |  |
Astrazeneca Plc | -1.47% | -160.00 | 10,710.00 |
| 9 |  |
Admiral Group Plc | -0.13% | -2.50 | 1,881.50 |
| 10 |  |
Rightmove Plc | -0.12% | -0.80 | 644.00 |
US close: Stocks extend gains following Fed interest rate decision
Wall Street stocks closed higher on Thursday after the Federal Reserve Bank enacted its second 0.75 percentage point interest rate hike overnight as part of an effort to ease rampant inflation without bringing about a recession.
At the close, the Dow Jones Industrial Average was up 1.03% at 32,529.63, while the S&P 500 was 1.21% weaker at 4,072.43 and the Nasdaq Composite saw out the session 1.08% softer at 12,162.59.
The Dow closed 332.04 points lower on Thursday, extending gains recorded in the previous session.
The Federal Reserve’s decision to raise its benchmark interest overnight borrowing rate up to a range of 2.25-2.5% still drew a chunk of investor attention after the opening bell, with its moves in June and July representing the bank’s most stringent consecutive actions since it began using the overnight funds rate as its principal method of monetary policy back in the early 1990s.
Earnings were also firmly in focus, with Southwest Airlines reporting a record quarter thanks to gains from fuel hedging, Stanley Black & Decker shares slumping after posting an earnings miss and slashing full-year guidance, and Carlyle Group delivering a 34% increase in second-quarter earnings thanks to strong asset sales.
Merck & Co topped estimates on higher-than-expected Q2 earnings and revenues, Comcast revealed it hadn’t added any broadband customers in the quarter, Honeywell earnings rose on the back of a rebound in travel demand and office working, while Pfizer quarterly sales surged to a record high.
MoneyGram posted second-quarter earnings and revenues that surpassed estimates and MasterCard shares traded higher after topping expectations with earnings amid ‘robust’ spending throughout the quarter.
On the macro front, America’s economy shrank unexpectedly over the three months ended 30 June, according to the Department of Commerce, which said US gross domestic product dropped at a quarterly annualised pace of 0.9% during the second quarter. Consensus had been for growth of 0.5%.
Elsewhere, Americans filed first-time unemployment claims at a slightly slower pace in the week ended 23 July, dropping by 5,000 to 265,000, according to the Department of Labor. The initial jobless claims print fell short of expectations for a drop to 253,000. On a non-seasonally adjusted basis, claims fell by 42,417 week-on-week to 216,469, with notable decreases in Massachusetts, New York, and South Carolina.
Friday newspaper round-up: Liz Truss, Taiwan, Russia
Ben Wallace has endorsed Liz Truss for the Tory leadership and said she is the “only candidate” with the experience to lead the nation from day one in the job. Writing in The Times, the defence secretary said that he was backing Truss because she is “straight and means what she says”. “Liz Truss is a winner not because she’s a slick salesperson but because she is authentic,” he adds. – The Times
President Xi has warned President Biden against “playing with fire” over Taiwan amid tension heightened by a planned visit to the self-governing island by Nancy Pelosi, the most senior Democrat in Congress. Chinese state media said Xi had told Biden that America should abide by the principle that Taiwan was a renegade province. Xi emphasised that China opposed Taiwanese independence and the interference of external forces. – The Times
Russia’s economy is being “catastrophically” crippled by Western sanctions according to experts, despite Vladimir Putin’s efforts to hide the damage. Analysts at Yale looking at “private Russian language and unconventional data sources” say imports have “collapsed” and domestic production “has come to a complete standstill”. Russia has lost companies representing around two-fifths of its GDP amid an exodus of Western businesses, they claim, undoing about three decades of foreign investment. – Daily Telegraph
West London faces a de facto ban on new homes for over a decade because the electricity grid has run out of capacity. Housebuilders have been told it could take until 2035 to get new developments in Hillingdon, Ealing and Hounslow hooked up to the electricity network because it lacks the capacity to serve them. Energy companies and regulators are scrambling to fix the problem while Business Secretary Kwasi Kwarteng has ordered officials to monitor the situation. – Daily Telegraph
