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CORRECT: London, US down as markets ready for Fed decision

(Correcting closing price of European stocks.)

London Stocks finished down on Tuesday, despite rallies from Whitbread and HSBC, as Wall Street was in the red ahead of the Fed’s major interest rate decision this week.

The FTSE 100 index closed down 2.90 points at 8,144.13. The FTSE 250 ended down 119.40 points, 0.6%, at 19,965.39, and the AIM All-Share closed down 2.59 points, 0.3%, at 760.74.

The Cboe UK 100 ended down 0.1% at 813.44, the Cboe UK 250 closed down 0.2% at 17,294.57, and the Cboe Small Companies ended up 0.1% at 15,727.95.

In European equities on Tuesday, the CAC 40 in Paris closed down 1.0% and the DAX 40 in Frankfurt ended down 1.1%.

The Federal Open Market Committee meeting kicked off Tuesday, with a decision scheduled on Wednesday. The Fed is expected to leave rates unmoved, with focus on what Chair Jerome Powell has to say at a subsequent press conference.

The decision will be announced at 1900 BST.

Analysts at Brown Brothers Harriman said they are expecting to ‘see a hawkish hold.’ James Knightley at ING also anticipates ‘a hawkish shift.’

Stocks in New York were lower at the London equities close. The DJIA and the Nasdaq Composite were both down 0.8%, while the S&P 500 index was down 0.7%.

The pound was quoted at $1.2523 at the London equities close Tuesday, down compared to $1.2554 at the close on Monday.

The euro stood at $1.0690 at the European equities close Tuesday, lower against $1.0717 at the same time on Monday.

Against the yen, the dollar was trading at JP¥157.44, higher compared to JP¥156.64 late Monday.

In the FTSE 100, Whitbread rose 3.9%.

In the 52 weeks to February 29, the Premier Inn owner said pretax profit rose 21% to £451.7 million from £374.9 million a year prior. Sales rose 13% to £2.96 billion from £2.63 billion.

Reflecting the strong financial performance, Whitbread said it intends to start a further £150 million share buy-back, which will be completed during the first half of the new financial year. It also increased the total dividend by 31% to 97.0p per share from 74.2p.

Whitbread said it plans to convert a large number of restaurants into hotel rooms, and sell-off underperforming sites, as it looks to hit a target of 97,000 open rooms in the UK by 2029. The plan will result in the loss of 1,500 jobs.

HSBC rose 4.1%.

The London-based, Asia-focused lender said first-quarter net interest income fell 3.4% to $8.65 billion from $8.96 billion year-on-year, though came in higher than company-compiled consensus of $8.50 billion. Net operating income increased 1.5% to $20.03 billion from $19.74 billion.

Pretax profit was $12.65 billion, 1.8% lower than the prior year’s $12.89 billion, but ahead of $12.61 billion consensus. HSBC noted the figure included a $4.8 billion gain following the disposal of its Canadian banking business, which was partially offset by a $1.1 billion impairment related to the sale of its business in Argentina.

HSBC said Chief Executive Noel Quinn has informed the board of his intention to retire from the bank after nearly five years leading the company, and 37 years at the firm in total. Quinn said he plans to ‘pursue a portfolio career’ going forward.

On the other hand, Prudential lost 5.5%.

The Asia-focused insurer said first quarter new business profit, excluding economic impacts, rose 11% at constant exchange rates to $810 million, compared to $727 million a year prior. But, after allowing for economic impacts, new business profit was broadly unchanged at $726 million.

In the FTSE 250, Hargreaves Lansdown rose 3.6%.

The Bristol, England-based wealth management platform reported net new business of £1.6 billion for the three months that ended March 31, the company’s financial third quarter. This was unchanged from the same period a year before, but up sharply from £400 million in the second quarter ended December 31.

Assets under administration rose by 5.3% to £149.7 billion on March 31, a record, from £142.2 billion on December 31 and £132.0 billion a year before.

Amongst London’s small-caps, Petrofac plummeted 29%.

It warned at the start of the week that a financial restructuring could see a chunk of its debt converted to equity, resulting in dilution of existing shareholders. The energy infrastructure company also flagged an extra $130 million charge in its engineering and construction division and said the release of full-year results would be delayed.

Brent oil was quoted at $86.42 a barrel at the London equities close Tuesday, down from $87.27 late Monday.

Gold was quoted at $2,298.10 an ounce at the London equities close Tuesday, lower against $2,337.40 at the close on Monday.

In Wednesday’s UK corporate calendar, there are first quarter results from GSK. There are trading statements from Next and Smith & Nephew.

The economic calendar for Wednesday has manufacturing PMIs from the UK at 0930 BST. Later in the afternoon, there is the US ADP jobs report.

Financial markets will be closed for Labor Day in China, Germany, and Ireland.

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