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LONDON MARKET MIDDAY: FTSE 100 prospers but mid-caps lack sparkle

London’s blue-chips made steady progress on Thursday, whilst mid-caps struggled for direction, as investors took stock of the latest US interest rate call.

The FTSE 100 index rose 28.57 points, 0.4%, at 8,149.81. The FTSE 250 edged down just 3.93 points to 19,922.66, and the AIM All-Share was up 0.50 of a point, 0.1%, at 765.48.

The Cboe UK 100 was up 0.3% at 813.60, the Cboe UK 250 added 0.2% to 17,259.51, and the Cboe Small Companies was 0.4% higher at 15,829.81.

In Paris and Frankfurt, where equities re-opened after public holidays on Wednesday, stocks were lower. The CAC 40 in Paris lost 0.8%. The DAX 40 in Frankfurt was down fractionally.

‘Today’s somewhat indecisive start in Europe has highlighted the mixed feelings around yesterday’s FOMC interest rate decision, with Jerome Powell treading a fine line given the recent uptick in inflation pressures. The past month saw market expectations for the first Fed rate cut pushed from June to December, although Powell managed to moderately lift hopes of an earlier shift in November. All eyes turn to Friday’s US jobs report, with the average earnings figure expected to remain at a concerning 4.1%. With the quarterly employment cost index having surged to a lofty 1.2% this week, there is a distinct risk that we could similarly see average earnings strengthen to throw another curveball in the direction of the Fed,’ Scope Markets analyst Joshua Mahony commented.

The US central bank left interest rates unchanged on Wednesday, but flagged a ‘lack of progress’ towards its inflation target. In a widely expected move, the Federal Reserve kept its benchmark borrowing rate in a targeted range between 5.25% to 5.50%.

Fed Chair Jerome Powell downplayed fears that the next move on interest rates could be upwards, suggesting policy will prove restrictive enough to lower inflation. However, he also dashed hopes for a near-term rate cut, noting it was taking longer to gain confidence that inflation was on track to hit the central bank’s 2% target.

‘It’s unlikely that the next policy rate move will be a hike,’ Powell told reporters.

The pound was quoted at $1.2515 early Thursday afternoon, rising from $1.2487 at the time of the London equities close on Wednesday. The euro stood at $1.0704, up from $1.0679. Against the yen, the dollar was trading at JP¥155.25, down markedly from JP¥157.72.

Equities in New York are called to open higher. The Dow Jones Industrial Average is called up 0.3%, the S&P 500 up 0.6% and the Nasdaq Composite 0.8% higher.

Eyes will be on Apple, as the iPhone maker reports earnings after the closing bell on Thursday.

XTB analyst Kathleen Brooks commented: ‘The Magnificent 7’s performance in Q1 has been mixed: Meta disappointed, Amazon and Google outperformed, and Tesla managed to shift the narrative around the troubled EV maker. We already know that sales of the iPhone, Apple’s flagship product, have fallen substantially in China in the first quarter, so the question is what this does to earnings. The market is expecting revenue of more than $90 billion for the quarter, which is a 5% drop on the prior quarter, with net income of $23 billion and adjusted earnings per share of $1.5. It is worth noting that analysts have revised down their expectations for Apple’s results in the past month. Although the bar has been lowered, it is also a sign that the market is bearish going into these results.’

In London, Standard Chartered shot up 5.6% as it affirmed financial guidance for 2024, reporting a strong start to the year.

The Asia-focused bank reported operating income of $5.13 billion in the first quarter, a 13% increase from $4.56 billion. Net interest margin increased to 1.76% from 1.63%, outperforming company-compiled consensus expectations of 1.74%.

Pretax profit rose 5.9% to $1.91 billion from $1.81 billion, beating the company-compiled market consensus of $1.39 billion.

The firm reaffirmed its previous guidance for 2024 as a whole.

In February, it had guided for operating income to increase between 5% and 7% in the period from 2024 to 2026, and around the top of this range in 2024. Net interest income for 2024 is forecast to be between $10 and $10.25 billion at constant currency.

It plans to return ‘at least’ $5 billion to shareholders over 2024 to 2026, with its RoTE, or return on tangible equity, to ‘increase steadily’ from 10% towards a 12% target by 2026.

HSBC, another Asia-focused lender which reported earlier this week, added 1.7%. Its stock is up some 7% so far this week.

Shell added 1.1%. It launched a new $3.5 billion share buyback and delivered first quarter earnings ahead of City hopes.

Chief Executive Wael Sawan commented: ‘Shell delivered another quarter of strong operational and financial performance, demonstrating our continued focus on delivering more value with less emissions.’

In the first quarter, Shell said total revenue, which includes its share of joint ventures and associates, fell 16% to $74.70 billion from $89.02 billion a year prior.

Shell’s pretax profit slipped 23% to $11.04 billion from $14.35 billion a year prior.

Adjusted earnings fell 20% to $7.73 billion from $9.65 billion a year prior, ahead of the $6.25 billion Bloomberg-cited consensus.

Peer BP, which reports on Tuesday, added 0.2%.

Smurfit Kappa added 5.0% as it said integrations plans with WestRock were ‘progressing well’, and unveiled a drop in first quarter sales and earnings, which nonetheless topped market expectations.

The Dublin-based packaging maker said revenue in the first quarter fell 10% to €2.7 billion from €3.00 billion a year prior.

Earnings before interest, tax, depreciation and amortisation fell 16% to €487 million from €579 million and the Ebitda margin declined to 18.0% from 19.3%.

Analysts at Jefferies said Ebitda was 12% ahead of its €433 million forecast.

Chief Executive Tony Smurfit called it ‘a very strong first quarter,’ reflecting the ‘continuing benefits of our multi-year capital plans.’

He noted box demand has ‘continued to improve’ with volume growth in Europe and the Americas of around 3% and 2% respectively.

Smurfit said integration planning with WestRock is ‘progressing well and as expected. We remain on-track to complete the transaction in early July.’

He said the combination with WestRock would create a ‘global leader in innovative and sustainable packaging with a very exciting future for all stakeholders.’

On AIM, Kinovo surged 21%, as the provider of safety and regulatory compliance services for the property sector predicted results for the financial ended March 31 will top expectations.

It expects £6.7 million in adjusted earnings before interest, tax, depreciation and amortisation, up 22% from £5.5 million the previous year and ahead of the company’s £6.2 million forecast. Kinovo also expects £64 million in revenue, up 2.1% on-year from £62.7 million.

Food wholesaler Kitwave declined 7.5%. It expects operating profit for the six months ended April 30 to weaken on-year.

‘This reflects lower levels of demand in the hospitality customer base of the higher margin Foodservice division, due to a historically high and sustained period of wet weather over recent months,’ Kitwave said.

‘The group has also increased investment in its infrastructure ahead of the revenue generating opportunities associated from these investments. Some of the benefits of these investments, in addition to the H2 inclusion of trade from the recent acquisition of Total Foodservice, will further increase this year’s weighting of trading toward the second half of the year.’

It added it is trading in line with market expectations for the full-year.

Brent oil was quoted at $84.04 a barrel early Thursday afternoon, up from $83.78 late Wednesday. Gold was quoted at $2,297.09 an ounce, down from $2,308.30.

The economic calendar for Thursday has the latest US initial jobless claims data at 1330 BST.

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