LONDON MARKET OPEN: Bright start ahead of US Fed with Lloyds, WPP up

(Alliance News) - The FTSE 100 started Wednesday on a positive note, lifted by Lloyds and WPP ahead of the US Federal Reserve's latest interest rate decision.

The blue-chip FTSE 100 index was up 28.48 points, or 0.4%, at 6,973.45 early Wednesday. The mid-cap FTSE 250 index was up 114.32 points, or 0.5%, at 22,547.40. The AIM All-Share index was down 0.3% at 1,273.09.

The Cboe UK 100 index was up 0.6% at 693.88. The Cboe 250 was flat at 20,063.69, and the Cboe Small Companies up 0.1% at 14,526.41.

In mainland Europe, the CAC 40 in Paris was up 0.3%, while the DAX 30 in Frankfurt was up 0.4% early Wednesday.

"Today's main course is the FOMC meeting," said Danske Bank, though adding: "Probably an uneventful meeting where the Fed will most likely keep monetary policy intact and not give new policy signals."

The Fed announces its latest monetary policy decision at 1900 BST, with a press conference with Chair Jerome Powell at 1930 BST.

Ahead of the Fed, equity markets were cautiously upbeat and the dollar was stronger across the board.

Sterling was quoted at USD1.3867 early Wednesday, lower than USD1.3915 at the London equities close on Tuesday. The euro traded at USD1.2063, down on USD1.2085 late Tuesday. Against the yen, the dollar was quoted at JPY109.01, up from JPY108.50.

In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.2%. In China, the Shanghai Composite ended up 0.4%, while the Hang Seng index in Hong Kong was up 0.3% in late trade. The S&P/ASX 200 in Sydney closed up 0.4%.

Gold was quoted at USD1,766.93 an ounce early Wednesday, lower than USD1,780.50 on Tuesday. Brent oil was trading at USD66.66 a barrel, up from USD66.11 late Tuesday.

In London, Lloyds Banking shares rallied 4.4% as the lender saw profit shoot up in the first quarter of 2021.

Pretax profit for the three months to the end of March surged to GBP1.99 billion from just GBP74 million a year ago, despite net income nudging down 7% to GBP3.66 billion. The impairment charge in the quarter was a net credit of GBP323 million, versus a charge of GBP1.43 billion a year ago.

"The net credit in the quarter was driven by continued strong asset quality with a low charge of GBP209 million given the continued benign credit environment and a GBP459 million release of expected credit loss allowances resulting from improvements to the UK's economic outlook," the lender said.

Given the "solid performance" in the first quarter of 2021, Lloyds enhanced its guidance for 2020. Its net interest margin is now expected to be in excess of 245 basis points, after posting 249 basis points for the first quarter, and operating costs to be reduced to GBP7.5 billion.

"The long-run transformation of the group has positioned the business well to address the challenges of the pandemic. We have made a strong start to the year with the quarterly results and on delivering Strategic Review 2021," said its outgoing chief executive, Antonio Horta-Osorio .

WPP was up 2.7% in early trade after reporting a 6.3% jump in like-for-like revenue for the first quarter.

Chief Executive Mark Read said the advertising and marketing firm had a strong start to the year, with a return to growth in all business lines and most major markets.

Dragging on the other end of the blue-chip index was Sainsbury's, down 2.5% as the supermarket chain reported a swing to loss for its recently ended year, bogged down by coronavirus costs.

Sainsbury's reported a 0.2% rise in revenue for the financial year that ended March 6 to GBP29.04 billion from GBP28.99 billion the year before, but swung to a pretax loss of GBP261 million from the prior year's GBP255 million profit.

Underlying pretax profit of GBP356 million, down 39% on the year before, was hit by GBP485 million of direct Covid-19 costs, offsetting a strong sales performance excluding fuel. Grocery sales were up 7.8%, general merchandise sales up 8.3%, and digital sales doubled. Fuel sales dropped by 39%, however, and Financial Services sales by 24%.

Fuel sales were hurt by reduced demand during lockdown and the impact of lower crude oil prices on the petrol sales price.

The underlying profit figure was, however, ahead of market consensus at GBP338 million.

The grocer will pay a total dividend for the year of 10.6 pence, in line with the year before.

"This year's financial results have been heavily influenced by the pandemic. Food and Argos sales are significantly higher, but the cost of keeping colleagues and customers safe during the pandemic has been high," said Chief Executive Simon Roberts.

"We have a bold three-year plan to put food back at the heart of Sainsbury's and drive improved performance," said Roberts.

Sainsbury's said it has carried good momentum into the new year, but noted it will come up against tough year-on-year comparatives as customer behaviour normalises from the panic seen at the start of the virus pandemic last year.

Sainsbury's expects underlying pretax profit in the year to March 2022 to exceed the GBP586 million reported in the 2020 financial year, and it is "comfortable" with consensus of around GBP620 million.

Reckitt Benckiser shares slipped 2.0%. The consumer health and hygiene giant reported like-for-like revenue growth in the first quarter, leaving its full-year guidance unchanged.

Total net revenue for the first quarter of 2021 grew 4.1% on a like-for-like basis, though fell 1.1% on a reported basis.

"2021 has started well with like-for-like net revenue growth of 4.1% in line with our expectations. This brings two-year growth to over 17% as we lap the pantry loading of March 2020," said Chief Executive Laxman Narasimhan.

Demand for Lysol and Dettol continues to be strong, the company said, amid "ongoing, elevated demand" for its disinfection products overall.

Reckitt continues to expect full-year like-for-like revenue growth of between flat to growth of 2%.

"We continue to be confident in the outlook for both 2021 and the medium-term," said Narasimhan.

In the UK, results are still to come on Wednesday from GlaxoSmithKline at midday, while in the US, Apple and Facebook report earnings after the New York market shuts.

By Lucy Heming; lucyheming@alliancenews.com

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