ADVFN Morning London Market Report: Thursday 28 July 2022

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London open: Stocks fall amid earnings barrage, despite more dovish Fed


London stocks were a little weaker in early trade on Thursday, unable to hold on to opening gains despite a less hawkish stance from the US Federal Reserve, amid a barrage of corporate news.

At 0925 BST, the FTSE 100 was down 0.3% at 7,323.74.

Overnight, the FOMC raised the Fed Funds target by 0.75% to a target range of 2.25%-2.50%, as expected. But investors breathed a sigh of relief after Chair Jerome Powell hinted that the US central bank could slow the pace of rate hikes and adopt a meeting-by-meeting approach.

Victoria Scholar, head of investment at Interactive Investor, said: says: “European markets have opened on a stronger footing thanks to risk-on sentiment across global markets after the Fed suggested that the pace of rate increases could slowdown in the months ahead while lifting rates by 75 basis points.

“Fed Chair Jay Powell’s comments lead to a surge in the Nasdaq which closed up by more than 4%. However after-hours Meta shares slumped on disappointing quarterly revenue numbers.

“It is another mega day for corporates with earnings from FTSE 100 heavyweights Shell and Barclays while tech behemoths Apple and Amazon deliver their quarterly scorecards after the bell. Economic data is also centre stage stateside with investors paying close attention to key US GDP and PCE price data out today.”

In equity markets, medical technology group Smith & Nephew slid after it posted a drop in first-half pre-tax profit.

Airtel Africa was also in the red after first-quarter results, along with BT Group.

Barclays fell as it reported a decline in half-year pre-tax profits due to higher costs and a £300m impairment provision for bad debts amid the cost-of-living crisis. The bank said pre-tax profits fell 24% to £3.7bn. Group income was £13.2bn, up 17% year-on-year, including £800m from hedging arrangements related to the over-issuance of securities.

Credit impairment charges were £300m compared with a £700m release of cash last year that had been set aside for debts expected during the Covid pandemic.

CMC Markets tumbled after the online trading platform said operating costs were set to be 5% higher than initially expected.

On the upside, miners rallied, with Anglo American also in the black despite reporting a 28% fall in first-half earnings.

Smurfit Kappa got a boost after JPMorgan Cazenove lifted its price target on the shares.

Shell gushed a little higher after the oil giant reported a better-than-expected second-quarter profit of $11.5bn, driven by soaring energy prices.

National ExpressHammersonWeir and DiscoverIE also lost ground after updates.


Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Anglo American Plc +4.38% +121.50 2,896.50
2 Antofagasta Plc +4.26% +46.00 1,125.00
3 Smurfit Kappa Group Plc +4.25% +121.00 2,971.00
4 Ashtead Group Plc +3.98% +165.00 4,310.00
5 Fresnillo Plc +3.84% +25.20 680.60
6 Schroders Plc +3.66% +100.00 2,830.00
7 Rentokil Initial Plc +3.26% +16.40 519.20
8 Smith (ds) Plc +3.14% +8.70 285.60
9 Rio Tinto Plc +2.62% +125.50 4,913.50
10 Bhp Group Limited +2.25% +49.00 2,231.50


Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Smith & Nephew Plc -11.33% -136.50 1,068.00
2 Sse Plc -5.39% -96.00 1,683.50
3 Bt Group Plc -4.83% -8.50 167.60
4 Centrica Plc -3.61% -3.28 87.70
5 Whitbread Plc -2.24% -60.00 2,615.00
6 British American Tobacco Plc -2.13% -73.50 3,375.50
7 Barclays Plc -1.97% -3.10 154.56
8 National Grid Plc -1.93% -21.50 1,090.00
9 Bae Systems Plc -1.82% -14.20 767.80
10 Flutter Entertainment Plc -1.53% -124.00 7,962.00


US close: Stocks higher following Fed interest rate decision

Wall Street stocks closed firmly higher on Wednesday as investors digested another fat stack of corporate earnings and mulled the outcome of the Federal Reserve’s latest policy meeting.

At the close, the Dow Jones Industrial Average was up 1.37% at 32,197.59, while the S&P 500 was 2.62% firmer at 4,023.61 and the Nasdaq Composite saw out the session 4.06% stronger at 12,032.42.

The Dow closed 436.05 points higher on Wednesday, easily reclaiming losses recorded in the previous session after earnings from retail giant Walmart weighed on sentiment.

Earnings were again in focus on Wednesday, with Bristol-Myers Squibb posting a second-quarter earnings and revenue beat, while Kraft Heinz also beat on earnings and raised full-year sales guidance, and T-Mobile boosted full-year subscriber growth forecasts.

Hilton Worldwide posted second-quarter earnings that smashed estimates and also raised full-year guidance, while Boeing reiterated its 2022 cash flow forecasts as it prepared to resume deliveries of its Dreamliner aircraft.

The Federal Reserve also drew a considerable amount of investor attention on Wednesday after the central bank enacted its second 0.75 percentage point interest rate hike as part of an effort to ease rampant inflation without bringing about a recession. The central bank took its benchmark interest overnight borrowing rate up to a range of 2.25-2.5%, 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.

Elsewhere on the macro front, mortgage applications fell 1.80% on a seasonally adjusted basis in the week ended 22 July, according to the Mortgage Bankers Association of America, with the refinance index decreasing 4% week-on-week and the purchase index slipping 1% on the prior seven-day stretch.

Still on data, orders for goods made to last more than three years posted a sharp and unexpected rise last month, principally due to a near doubling in orders for defence aircraft. According to the Department of Commerce, total durable goods orders jumped at a month-on-month pace of 1.9% in June to reach approximately $272.6bn, with defence aircraft and parts orders soaring 80.6% to $9.76bn.

On another note, America’s shortfall on trade in goods with the rest of the world shrank more quickly than expected last month, according to the Department of Commerce. In seasonally adjusted terms, the international trade deficit in goods narrowed 5.6% in June from roughly -$104.0m to -$98.2bn. Exports jumped by 2.5% in comparison to May, hitting $181.5bn, while imports dipped 0.5% to $279.7bn.

The Census Bureau revealed retail inventories, excluding automobiles, had increased 1.6% month-on-month in June, following an upwardly revised 1.4% rise in May, while the National Association of Realtors said pending home sales had decreased 20% year-on-year in June for their biggest drop since April 2020’s record 33.1% slump.


Thursday newspaper round-up: Exporters, UK car industry, Phoenix Group

Britain’s exporters have seen their overseas trade stagnate over the past year despite strong growth in domestic demand for their products and booming export markets, according to a survey. The British Chambers of Commerce (BCC) said that a survey of 2,600 exporters found a quarter had suffered a fall in exports and another 46% reported no change. – Guardian

The UK car industry has said it will not be able to produce a million vehicles a year until 2025, two years later than expected, after the global sector was hit by a string of crises. Russia’s invasion of Ukraine, Covid-19 lockdowns in China and continued shortages of computer chips have all combined to stall the recovery in car-making, leaving manufacturers unable to supply enough cars to willing buyers. – Guardian

A Saudi Arabian prince has taken a £190m stake in Britain’s biggest pension provider as the Gulf state expands its foothold in the City of London. Saudi royal Alwaleed bin Talal Al Saud revealed he had taken a stake of just over 3pc in Phoenix Group through his Kingdom Holding Company. The investment makes the Saudi royal the sixth biggest investor in Phoenix. – Telegraph

British courts will have the power to award damages in Bitcoin under new proposals to bring the legal system into the crypto era. The Law Commission has told the Government English law needs a new category of property to cover crypto assets, including digital currencies such as Bitcoin and non-fungible tokens (NFTs). – Telegraph

The owner of Facebook and Instagram has suffered its first drop in revenue as it struggles with a global advertising slowdown, stronger dollar and mounting competition. Meta Platforms fell short of Wall Street’s expectations in the latest quarter and forecast another drop in sales in the next. Shares in the world’s largest social media group retreated by 4.1 per cent, or $6.88, to $162.70 during after-hours trading in New York last night. – The Times


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