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LONDON MARKET OPEN: FTSE 100 higher but hawkish Powell expected later

Large-cap London stocks in London opened in the green on Wednesday, despite nervy trade in New York overnight ahead of the Federal Reserve’s interest rate decision later.

A host of financial markets in mainland Europe and beyond, including Paris, Frankfurt and Shanghai, are closed for public holidays.

The FTSE 100 index rose 24.30 points, 0.3%, at 8,168.43. The FTSE 250 was down 17.21 points, 0.1%, at 19,948.18, and the AIM All-Share was up 0.98 of a point, 0.1%, at 761.72.

The Cboe UK 100 was up 0.2% at 814.75, the Cboe UK 250 fell 0.2% to 17,254.36, and the Cboe Small Companies was down 0.1% at 15,720.32.

In New York, the Dow Jones Industrial Average tumbled 1.5% on Tuesday. The S&P 500 lost 1.6% and the Nasdaq Composite plunged 2.0%.

In Tokyo, the Nikkei 225 ended 0.3% on Wednesday. In Sydney, the S&P/ASX 200 slumped 1.2%.

Financial markets in Shanghai and Hong Kong are closed on Wednesday. In Shanghai, they do not re-open until Monday. Financial markets are also closed in Frankfurt, Paris, Madrid and elsewhere in Europe on Wednesday.

The pound was quoted at $1.2485 early Wednesday, down from $1.2523 at the time of the London equities close on Tuesday. The euro stood at $1.0660, down from $1.0690. Against the yen, the dollar was trading at JP¥157.95, up from JP¥157.44.

The Fed announces its latest interest rate decision at 1900 BST. It is expected to keep rates on hold this week, with Chair Jerome Powell likely to say that the central bank is not yet confident enough to cut as inflation remains lofty.

‘Mood among investors is not cheery into the Federal Reserve’s latest monetary policy decision due later today. And it’s understandable. The Fed must respond to a three straight month jump in inflation and probably take a step back in its plans to cut the interest rates this year. There is even a risk that the Fed drops the expectation of a rate cut in 2024,’ Swissquote analyst Ipek Ozkardeskaya commented.

The economic calendar for Wednesday has a UK manufacturing PMI at 0930 BST. In the afternoon, there is the US ADP jobs report at 1315 BST, before the Fed decision in the evening.

The ADP data is expected to show employment in the US private sector grew by 175,000 last month, according to FXStreet cited consensus, easing from 184,000 in March.

The official nonfarm payrolls follow on Friday, with jobs growth of 245,000 expected, easing from 303,000 in March.

Brown Brothers Harriman analysts commented: ‘Of note, non-farm payrolls has outperformed ADP for eight straight months.’

In London, Smith & Nephew shares rose 3.5%, the best large-cap performer. The medical devices maker said first-quarter revenue rose 2.2% on a reported basis to $1.39 billion from $1.36 billion.

‘Revenue growth in the first quarter was driven by solid performance in our Orthopaedics and Sports Medicine & ENT businesses, partially offset by some anticipated softness in Advanced Wound Management,’ Chief Executive Officer Deepak Nath said.

‘We are confident in our outlook and look forward to all three of our business units contributing as we deliver another year of strong revenue growth.’

Smith & Nephew maintained annual guidance, expecting reporting revenue growth of 4.3% to 5.3%.

GSK added 0.7% as it raised annual guidance. Shingles drug, Shingrix, was one stand-out performer in its first-quarter, but the drugmaker reported momentum across all business areas.

Haleon fell 1.9%. GSK’s former consumer healthcare business backed yearly guidance, but said reported revenue was lower amid a weaker Covid season in China in the first quarter of the year compared to a year ago.

Next fell 1.0% as it reported a first-quarter that went ahead of plan, but maintained its outlook as it predicts the second-quarter will be more tepid.

In the 13 weeks to April 27, its first-quarter, full price sales rose 5.7% on-year. The outcome was ahead of guidance, with the clothing and homewares seller having predicted growth of 5%.

It still expects pretax profit to grow 4.6% in the full-year to £960 million.

Next added: ‘We are maintaining our guidance for full price sales in the first half to be up 2.5%. This implies that our sales in Q2 will be down -0.3%. We expect the sales performance in the second quarter to be weaker than the first quarter because last year benefited from particularly warm weather from late May through to the end of June.’

Aston Martin shares fell 7.6%, the worst mid-cap performer as it recorded weaker results, for a first-quarter of a year it is labelling a ‘period of transition’.

The carmaker said revenue in the first-quarter fell 10% to £267.7 million from £295.9 million a year earlier. Its pretax loss widened to £138.8 million from £74.2 million.

Executive Chair Lawrence Stroll commented: ‘2024 is a year of immense product transformation at Aston Martin, with the introduction of four new models to the market before the end of the year. Our first quarter performance reflects this expected period of transition, as we ceased production and delivery of our outgoing core models ahead of the ramp up in production of the new Vantage, upgraded DBX707 and our upcoming V12 flagship sports car which we’ve confirmed today. As part of our ongoing programme of ultra-exclusive models, we will deliver a new Special in the fourth quarter of the year.’

It expects a second-quarter performance to be ‘broadly similar’ to the first.

Edison analyst Neil Shah commented: ‘Looking ahead, despite the current headwinds, AML maintains its 2024 guidance and medium-term targets, with anticipated positive free cash flow generation in H2 and beyond. These results reflect a transformative phase for AML, symbolised by the impending arrival of incoming CEO Adrian Hallmark. His appointment, slated for no later than October, signals a strategic shift as the company navigates a transition away from outgoing models towards a more sustainable future.’

On AIM, Trinity Exploration surged 47%. Touchstone Exploration fell 4.4%. Touchstone said it has struck an all-share deal to acquire Trinity.

The all-share agreement values the latter at £24.1 million. Touchstone Exploration, an oil and natural gas exploration and production active in Trinidad & Tobago, said the deal will create a ‘leading Trinidadian operator of scale’.

It said: ‘The addition of Trinity’s existing production portfolio, along with its exploration and development assets, will position the combined group as one of the leading independent operating companies dedicated to investing in both onshore and offshore activity to grow Trinidadian oil and gas production.’

As part of the deal, Trinity shareholders will receive 1.5 new Touchstone shares for each Trinity share owned. Trinity Shareholders will own just under 20% of the combined firm. Trinity directors consider the terms of the deal to be ‘fair and reasonable’.

Brent oil was quoted at $85.28 a barrel on Wednesday morning London time, down from $86.42 late Tuesday. Gold was quoted at $2,285.55 an ounce, down from $2,298.10.

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