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London open: Stocks retreat ahead of BoE
London stocks were trading lower as investors waited on the Bank of England’s latest policy decision at noon.
Economists were divided among those anticipating a 25 basis point interest rate hike to 5.25% and those who thought it would raise by 50bp.
The latter was a possibility due to wage growth having accelerated past core CPI growth, but Michael Hewson, chief market analyst at CMC Markets UK, thought that would be a mistake.
“Such an aggressive move would be a mistake given that a lot of the pass-through effects of previous rate increases haven’t fully filtered down with some suggesting that the Bank of England should pause,” he said.
As of 0903 BST, the FTSE 100 was falling by 100.73 points to 7,459.11.
In the background, Wall Street equity futures had turned lower with Dow Jones mini futures off by 115.0 points to 35,288 and those for the S&P 500 down by 19 points at 4,518.25.
Asia Pacific stocks were trading mostly lower but the Shanghai Stock Exchange’s composite index was outperforming after it was reported that services sector activity in the Asian giant picked up unexpectedly last month.
Survey compiler Caixin’s services sector Purchasing Managers’ Index improved from 53.9 for June to 54.1 in July (consensus: 52.4).
Final readings for comparable services PMIs were also due out in the euro area and UK at 0900 BST and 0930 BST, respectively.
They would be followed by the US Institute for Supply Management’s services PMI at 1500 BST.
Also due out were weekly initial jobless claims figures in the U.S. at 1330 BST.
Wizz Air and LSE Group retreat
Low-cost carrier Wizz Air swung to a first-quarter profit on the back of soaring demand for travel and record passenger numbers. The company on Thursday reported an operating profit of €79.9m, compared with a loss of €284.5m. Revenue climbed 53% to €1.2bn, while passenger numbers were up by a quarter to 15.3 million. However, chief executive officer, Jozsef Varadi, said he downgraded first-half seat kilometre growth to 25% versus previously guided 30% due to continued infrastructure, supply chain limitations facing the industry and engine inspections.
Rolls Royce was firing on all cylinders during the front half of 2023. For the six months ending on 30 June, Rolls Royce delivered a 31% jump in underlying revenues to reach £6.95bn. Underlying operating profits more than quintupled to £673m and Rolls Royce turned cash flow positive to the tune of £356m after an outflow of -£68m in the year earlier period. Management attributed the improvement to continued growth in its end markets, commercial optimisation and cost efficiencies.
Paper and packaging group Mondi reported a sharp fall in interim earnings due to weaker demand, customer destocking and higher input costs. Pre-tax profit for the six months to June 30 more than halved to €418m from €933m a year ago. “So far in 2023, demand and prices have declined sequentially with the exception of containerboard prices which stabilised in the later part of the half year. We saw some benefit from lower input costs which continue to ease as we progress into the third quarter of the year,” said chief executive Andrew King.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Hikma Pharmaceuticals Plc | +2.36% | +49.00 | 2,124.00 |
| 2 |  |
Admiral Group Plc | +1.94% | +40.00 | 2,098.00 |
| 3 |  |
Direct Line Insurance Group Plc | +1.63% | +2.40 | 149.45 |
| 4 |  |
Rolls-royce Holdings Plc | +0.95% | +1.75 | 185.65 |
| 5 |  |
Next Plc | +0.35% | +24.00 | 6,876.00 |
| 6 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 7 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 8 |  |
London Stock Exchange Group Plc | +0.00% | +0.00 | 8,620.00 |
| 9 |  |
Micro Focus International Plc | +0.00% | +0.00 | 532.00 |
| 10 |  |
Reckitt Benckiser Group Plc | +0.00% | +0.00 | 6,498.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Bt Group Plc | -5.17% | -6.15 | 112.80 |
| 2 |  |
Mondi Plc | -4.23% | -56.50 | 1,279.00 |
| 3 |  |
Tui Ag | -3.24% | -19.50 | 581.50 |
| 4 |  |
Smith & Nephew Plc | -3.00% | -34.50 | 1,117.00 |
| 5 |  |
Fresnillo Plc | -2.89% | -16.80 | 565.20 |
| 6 |  |
International Consolidated Airlines Group S.a. | -2.63% | -4.40 | 163.05 |
| 7 |  |
Lloyds Banking Group Plc | -2.51% | -1.09 | 42.18 |
| 8 |  |
Astrazeneca Plc | -2.51% | -278.00 | 10,818.00 |
| 9 |  |
Easyjet Plc | -2.46% | -11.00 | 435.50 |
| 10 |  |
Ocado Group Plc | -2.31% | -20.40 | 864.60 |
US close: Stocks hit by Fitch debt downgrade
Wall Street shares fell on Wednesday after Fitch cut the U.S. government’s debt rating by one notch.
“Despite the poor eye candy and initial surprise, the recent US downgrade will unlikely cause a significant Treasuries sell-off or prompt a major shift in investor behaviour mainly because investors experienced a similar downgrade from S&P in 2011 and came away unscathed,” said Stephen Innes, Managing Partner at SPI Asset Management.
“While Fitch’s rating change does bring attention to the problem, it is not market-shattering news.”
The Dow Jones Industrials fell 0.98% to 35,282.52, alongside a 1.38% drop for the S&P 500 to 4,513.39.
But it was the Nasdaq Composite that fared worst, erasing 2.17% to 13,973.45.
In parallel, the VIX volatility index, which was known among traders as Wall Street’s ‘fear gauge’, bounced back by 15.51% to 16.09.
The yield on the benchmark 10-year U.S. Treasury note meanwhile was climbed six basis points to 4.092%.
Overnight, ratings agency Fitch had cut the U.S. sovereign debt rating from AAA to AA+.
According to consultancy ADP, the private sector in the U.S. generated 324,000 jobs in July (consensus: 190,000).
“Today’s print has no implications for our July forecast; we’re still looking for 275K headline payrolls and 225K private,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
On the company front, AMD shares were off by 7% despite having beat analysts’ estimates for its second quarter earnings.
Thursday newspaper round-up: Drax, French air traffic, Arm
Drax has been accused of costing consumers more than £600 million after choosing not to run a biomass power plant unit that would have supplied electricity at well below market prices during the energy crisis. Instead it burnt biomass in three other units that were able to cash in on high market prices and also profited by selling some biomass pellets to other companies instead of burning them, an investigation by Bloomberg claimed. – The Times
Strikes by French air traffic controllers have fuelled a sharp rise in flight delays across Europe, creating chaos for passengers and threatening to dent the sector’s recovery. Walkouts by staff have pushed up the number of delayed flights on the continent by 36pc in the year to date, according to figures from air traffic manager Eurocontrol. Air traffic control (ATC) capacity and staffing issues accounted for more than half of the disruption, Eurocontrol has found. – Daily Telegraph
The owners of British chip designer Arm are seeking a record float valuation for a UK company when it lists in New York. Softbank, Arm’s Japanese owners, are hoping for the firm to be valued at £55billion when the chip maker is returned to the public stock markets possibly as early as next month. Sources said the British company, whose products feature in about 90 per cent of the world’s smartphones, could be worth between £50billion and £55billion as SoftBank drums up interest from investors. – Daily Mail
More people in the UK are missing payments for essential bills, including for energy, water or council tax, according to a consumer group, as the cost of living crisis continues to hurt household finances. Which?’s consumer insight tracker found that 2.4m UK households missed or defaulted on essential payments, including for housing, loans or credit cards, in the month to 13 July, returning to the high levels seen last winter. – Guardian
