Stocks lower as eyes on US Fed's next move

(Alliance News) - Stock prices in London were lower at midday on Wednesday, following a busy morning of earnings, as well as a key interest rate decision from the US this evening.

The FTSE 100 index was down 42.35 points, 0.6%, at 7,649.45. The FTSE 250 was down 52.76 points, 0.3%, at 19,097.12, and the AIM All-Share was down 0.23 of a points at 765.77.

The Cboe UK 100 was down 0.6% at 762.99, the Cboe UK 250 was down 0.2% at 16,771.68, and the Cboe Small Companies was up 0.1% at 13,705.30.

The US Federal Reserve's policy-setting Federal Open Market Committee ends its two-day meeting on Wednesday, with an interest rate decision expected at 1900 BST on Wednesday. A news 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.

"Forward guidance will be key," said BBH Global Currency Strategy.

"We strongly believe the Fed should not signal another skip in September, as doing so for the June meeting really handcuffed the Fed at a time when it needed maximum flexibility. Given how firm the labor market remains, we believe the right thing for the Fed to do is to emphasize a more data-dependent approach and stress that a skip in September should not be assumed."

Stocks in New York were called lower, ahead of the interest rate decision. The Dow Jones Industrial Average and the Nasdaq Composite were both called 0.2%. The S&P 500 index was called down 0.1%

The pound was quoted at USD1.2908 at midday on Wednesday in London, higher compared to USD1.2853 at the equities close on Tuesday. The euro stood at USD1.1074, up against USD1.1044. Against the yen, the dollar was trading at JPY140.40, lower compared to JPY141.03.

On the FTSE 100, NatWest lost 2.9%, amid Alison Rose's departure.

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

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.

Davies initially said the board members had decided the chief executive retained their "full confidence" but her position became ever more uncertain after the chancellor and Downing Street were said to have "serious concerns" over her conduct.

"Despite a stellar performance as the first woman to take the helm of a UK bank, her mistake in discussing sensitive customer details with a journalist broke a sacred trust with the British public and her decision to step down was the only viable path. She will be a loss, having worked her way up the ranks and championed diversity and inclusion in the sector with a huge focus on getting more women in financial services," said Danni Hewson, head of financial analysis at AJ Bell.

Rolls-Royce jumped 20%.

The London-based jet engine and power plant manufacturer said it expects to report underlying operating profit of GBP660 million to GBP680 million, well above consensus of GBP328 million and GBP125 million in the first half of 2022. Free cash flow is estimated at GP340 million to GBP360 million, versus consensus of GBP50 million and negative GBP77 million a year before.

Rolls-Royce explained that this reflects improved margins, led by its Civil and Defence arms, thanks to higher volumes, "commercial improvements", and cost savings. Margins in Power Systems narrowed in the first half but are expected to improve in the second half, the company said, on the back of price hikes.

Rolls-Royce upped its full-year expectations in response to the strong first half. It now expects underlying operating profit of GBP1.2 billion to GBP1.4 billion in 2023, versus consensus of GBP934 million, and free cash flow of GBP900 million to GBP1.0 billion, versus consensus of GBP732 million. These compare to underlying operating profit of GBP652 million and free cash flow of GBP505 million in 2022.

In the FTSE 250, FDM lost 8.2% amid market uncertainty.

The provider of IT services said pretax profit for the six months ended June 30 was GBP29.8 million, up from GBP22.2 million year-on-year. Revenue increased 18% to GBP179.9 million, from GBP152.8 million.

FDM declared an interim dividend of 17 pence per share unchanged from the prior year.

CEO Rod Flavell said: "We delivered a resilient performance in the first half against a backdrop of uncertain market conditions, with some clients delaying and deferring decisions around budget commitment and consultant places."

Tyman was up 5.7%.

Tyman is a London-based supplier of engineered fenestration components and access solutions to the construction industry. Berenberg raised Tyman to 'buy' from 'hold'.

On AIM, Actual Experience shares more than doubled to 1.41 pence.

The Bath, England-based analytics-as-a-service company said it has signed a letter of intent with Logicalis International Ltd for its digital workplace management platform. The deal secures the first customer for a new joint product offering based on its digital workplace management platform, which is delivered through Logicalis' digital fabric platform.

Logicalis is a Maidenhead, England-based technology services provider, and according to Actual Experience, it is one of three main operating divisions of Datatec, a major technology and services group with annual revenues of USD4.6 billion, operating in over 50 countries and with more than 10,000 customers.

RTC shares more than doubled to 39.84p.

The recruitment company said revenue in the first half of 2023 surged 33% to GBP45.6 million from GBP34.4 million a year earlier. It swings to pretax profit of GBP1.4 million from a loss of GBP400,000 a year earlier.

It noted that no dividends were paid in the period, unchanged year-on-year, but it plans to propose an interim dividend of 1.0p, up from no dividend previously.

Looking ahead, RTC said: "We remain cautiously confident that our progress will continue in the second half of 2023. We continue to invest in our businesses and to further strengthen our balance sheet through retained profits."

In European equities on Wednesday, the CAC 40 in Paris was down 1.7%, while the DAX 40 in Frankfurt was down 0.8%.

At the bottom of the CAC 40, luxury retailer LVMH Moet Hennessey Louis Vuitton was down 4.8%.

On Tuesday, LVMH said revenue in the first-half of 2023 jumped 15% to EUR42.24 billion, from EUR36.73 billion a year prior. For the whole of the first-half, LVMH's net profit jumped 30% to EUR8.48 billion from EUR6.53 billion.

The company declared an interim dividend of EUR5.50 per share, up from EUR5.00 a year ago.

Overall, LVMH hailed an "excellent first half despite a disrupted environment".

Brent oil was quoted at USD82.37 a barrel at midday in London on Wednesday, down from USD82.73 late Tuesday. Gold was quoted at USD1,969.87 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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