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LONDON MARKET OPEN: FTSE 100 climbs as Fed soothes rate hike worries

London’s FTSE 100 made a bright start to trading on Thursday, after Federal Reserve Chair Jerome Powell played down fears of an interest rate increase, although cuts remain on the back-burner.

The FTSE 100 index rose 18.12 points, 0.2%, at 8,139.36. The FTSE 250 edged up just 4.56 points to 19,931.15, and the AIM All-Share was up 1.19 points, 0.2%, at 766.17.

The Cboe UK 100 was up 0.2% at 812.66, the Cboe UK 250 added 0.1% to 17,250.82, and the Cboe Small Companies was largely unmoved at 15,761.59.

In Paris and Frankfurt, where equities re-opened after public holidays on Wednesday, stocks were mixed. The CAC 40 in Paris lost 0.8%. The DAX 40 in Frankfurt added 0.1%.

In Tokyo on Thursday, the Nikkei 225 ended 0.1% lower, while Sydney’s S&P/ASX 200 climbed 0.2%. The Hang Seng Index in Hong Kong shot up 2.4%, as traders returned to desks there following a public holiday on Wednesday. Financial markets in Shanghai remain closed.

In New York on Wednesday, the Dow Jones Industrial Average rose 0.2%, though the S&P 500 and Nasdaq Composite each lost 0.3%.

Powell downplayed fears that the next move on interest rates could be upwards, suggesting policy will prove restrictive enough to lower inflation.

But 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.

Powell said he believed policy was ‘restrictive’ and expects over time, it will be ‘sufficiently restrictive’.

In a widely expected move, the Federal Reserve kept its benchmark short-term borrowing rate in a targeted range between 5.25% to 5.50%. The federal funds rate has been at that level since July 2023, when the Fed last hiked rates, which took the range to its highest level in more than two decades.

In a statement at the conclusion of its two-day meeting, the Federal Open Market Committee said inflation has eased over the past year but remains elevated.

‘Comments from Fed Chair Powell after the latest US Federal Reserve policy meeting that pushed back against the possibility that the next policy move would be an interest rate hike. He did, however, acknowledge recent strong data, including signs that disinflation has stalled. Nevertheless, he said that he still thought policy was sufficiently restrictive, although the implication seemed to be that cuts will probably take longer to occur than was previously expected. Overall, his comments were more hawkish than the Fed’s last update in March but were less hawkish than markets feared,’ analysts at Lloyds Bank commented.

The pound was quoted at $1.2535 early Thursday, rising from $1.2487 at the time of the London equities close on Wednesday. The euro stood at $1.0723, up from $1.0679. Against the yen, the dollar was trading at JP¥155.32, down markedly from JP¥157.72.

In London, Standard Chartered shot up 6.2% 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.

Shell added 0.7%. 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.

Spectris fell 3.5%, it backed annual guidance but reported a ‘slightly softer than anticipated’ first-quarter.

The supplier of high-tech instruments, test equipment and software for industrial applications said first-quarter sales were 8% lower on a like-for-like basis.

Chief Executive Andrew Heath said: ‘While conditions in some of our end markets were softer than expected in the first quarter, notably China, we continue to expect to deliver progress this year as markets improve, with progress weighted towards the second half. As a higher quality, more resilient business, facing off to attractive markets, we are well placed to deliver continued organic growth, expand operating margins towards our target of 20%+ and compound growth through M&A.’

Daily Mirror owner Reach leapt 8.4%, while Smiths News, a distributor of newspapers, climbed 4.5%.

Reach said revenue in the first-quarter of 2024 slipped 6.7% on-year, with advertising revenue alone down 11%. Print revenue, which as well as advertising also includes circulation, declined 6.0%. Circulation revenue dropped 3.4%. Revenue in the digital offering slipped 8.5%.

‘The factors affecting trading in Q1 remain unchanged from those outlined at the full year results with performance continuing to be robust. These include the well publicised deprioritisation of news during 2023 by major platforms which meant that year-on-year page views declined 33%. This has been partially offset by the strengthening yield per page,’ Reach said.

‘In Print, circulation revenues remain a predictable and reliable revenue stream with the expected volume decline mitigated by actions on cover prices and availability. Print advertising revenue outperformed volume trends due to higher spend levels from advertisers.’

It said it is on track for its 2023 expectations, noting adjusted operating profit consensus of £97.6 million. Adjusted operating profit in 2022 had slipped 9.0% to £96.5 million.

Smiths News reported weaker first-half earnings but expects an annual outcome in line with market expectations.

Revenue in the 26 weeks to February 24 fell 1.9% to £539.8 million from £550.1 million a year prior. Pretax profit fell 8.2% on-year to £15.7 million from £17.1 million.

Smiths News lifted its interim dividend by 25% to 1.75 pence from 1.40p.

In addition, it announced a refinancing agreement with removes an ‘existing cap on dividends and distributions’.

‘The new refinancing agreement with two of the company’s existing lending syndicate, Santander and HSBC, comprises a £40 million revolving credit facility, with an additional £10 million uncommitted accordion facility,’ it said.

‘The agreement removes the existing cap on dividends and distributions, which was previously capped at £10 million per financial year. The removal of this restriction will enable the company to implement its revised capital allocation policy.’

Brent oil was quoted at $83.96 a barrel early Thursday, up from $83.78 late Wednesday. Gold was quoted at $2,311.94 an ounce, up from $2,308.30.

The economic calendar for Thursday has manufacturing PMIs from Germany and the eurozone. At 1330 BST, there is the weekly US initial jobless claims data.

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