LONDON MARKET MIDDAY: FTSE 100 rises as Lloyds brightens bank sector

(Alliance News) - London stocks sustained moderate gains on Wednesday morning, with banks helping to prop up the FTSE 100 ahead of the latest US interest rate decision after the European close.

As well as the US Federal Reserve's policy announcement due later, focus also is on results from New York-listed tech stocks Apple and Facebook.

The blue-chip FTSE 100 index was up 21.89 points, or 0.3%, at 6,966.86 midday Wednesday. The mid-cap FTSE 250 index was up 99.83 points, or 0.5%, at 22,532.91. The AIM All-Share index was down 0.3% at 1,272.55.

The Cboe UK 100 index was up 0.5% at 693.21. The Cboe 250 was up 0.3% at 20,121.44, and the Cboe Small Companies up flat at 14519.66.

In mainland Europe, the CAC 40 in Paris was up 0.5%, while the DAX 30 in Frankfurt was up 0.4% on Wednesday.

Joshua Mahony, senior market analyst at IG, remarked that markets were posting "tentative gains" on Wednesday.

"Markets are waiting patiently for the latest update from the Federal Reserve today, although they could be disappointed. Despite a resurgence in jobs and inflation data, we are unlikely to see Powell lay the groundwork for any tapering in asset purchases today," said Mahony.

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

The dollar climbed ahead of the US interest rate decision.

Sterling was quoted at USD1.3881 midday Wednesday, lower than USD1.3915 at the London equities close on Tuesday. The euro traded at USD1.2072, soft on USD1.2085 late Tuesday. Against the yen, the dollar was quoted at JPY108.92, up from JPY108.50.

However, stocks in New York were set for a largely lower open. The Dow Jones was called down 0.1% and the Nasdaq Composite was seen 0.2% lower, but the S&P 500 was set for a 0.1% rise.

Likely to weigh on the Nasdaq at the open are shares in Microsoft, trading 2.2% lower pre-market despite the software firm reporting quarterly profit growth. For its financial third quarter ended March 31, revenue was USD41.7 billion, up 19% from USD35.02 billion the year before and net income jumped 44% to USD15.46 billion from USD10.75 billion.

"One-off tax and currency advantages have boosted Microsoft's third quarter numbers, and as a result the market isn't being quite as welcoming of expectation-beating numbers as you might expect. That is the danger of trading on the kind of valuation Microsoft enjoys, 32.8 times next year's earnings, disappoint even a little and the market will be unforgiving," said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

More positively, Alphabet shares jumped 5.1% pre-market on sharp growth in earnings and revenue for the first quarter of 2021, driven by a rise in online consumer activity and advertiser revenue. For the three months to the end of March, the Google parent posted net income of USD17.93 billion, more than doubled from USD6.84 billion the same period the year before.

Focus switches to the next raft of US tech earnings, with reports from iPhone maker Apple and social media behemoth Facebook after the New York market close.

In London, a strong first quarter showing from high street lender Lloyds was helping the boost other UK banks. NatWest shares rose 2.0% and Barclays was up 1.2%.

Lloyds topped the FTSE 100 at midday, shares up 4.4%, as profit shot up in the first quarter of 2021 in outgoing Chief Executive Antonio Horta-Osorio's last set of results at the bank.

Pretax profit for the three months to the end of March surged to GBP1.90 billion from just GBP74 million a year ago, aided by a net impairment credit of GBP323 million, versus a charge of GBP1.43 billion a year ago.

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.

HSBC Wealth & Personal Banking head Charlie Nunn will become the new Lloyds CEO on August 16. Lloyds Chief Financial Officer William Chalmers will be interim-CEO after Horta-Osorio departs and before Nunn comes in.

Horta-Osorio is heading to Credit Suisse to be its new chair - joining at a rocky time for the Swiss bank after it last week swung to a first quarter loss due to the implosion of US hedge fund Archegos.

The FTSE 100 also was supported by advertising and marketing firm WPP, shares up 3.6% at midday. In the first quarter of 2021, revenue rose 1.8% annually to GBP2.90 billion. On a like-for-like basis, WPP's first quarter revenue was 6.3% higher.

At the bottom of the FTSE 100 was precious metals miner Fresnillo, down 3.1% after a slightly mixed first quarter.

Gold output in the first quarter of 2021 rose 16% annually to 228,193 ounces. This represented a 5.9% quarter-on-quarter hike from 215,581 ounces in the fourth quarter of 2020.

Total silver output, however, fell 4.5% annually to 12.6 million ounces from 13.2 million and 2.4% on a quarterly basis from 13.0 million.

Gold was quoted at USD1,767.66 an ounce on Wednesday, lower than USD1,780.50 on Tuesday. Brent oil was trading at USD66.43 a barrel, up from USD66.11 late Tuesday.

J Sainsbury fell 2.6% as the grocer was pulled to a full-year loss on virus-related costs.

In the year ended March 8, the London-based grocer's revenue rose 0.2% to GBP29.04 billion, from GBP28.99 billion. It swung to a pretax loss of GBP261 million from the prior year's GBP255 million profit.

Underlying pretax profit fell 39% to GBP356 million, topping consensus of GBP338 million as well as the company's own forecast of GBP330 million. Profit was hit by GBP485 million of direct Covid-19 costs, offsetting a strong sales performance excluding fuel. Fuel sales were hurt by reduced demand during lockdown and the impact of lower crude oil prices on the petrol sales price.

Reckitt Benckiser slipped 2.2% despite reporting like-for-like revenue growth in the first quarter, leaving its full-year guidance unchanged.

The Slough, Berkshire-based consumer health and hygiene products company's 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. Demand for Lysol and Dettol continues to be strong, the company said, amid "ongoing, elevated demand" for its disinfection products overall.

Reporting at midday, pharmaceutical firm GlaxoSmithKline confirmed its earlier financial guidance for 2021 and said the spin-off of its consumer arm is on track for 2022. In the first quarter, sales totalled GBP7.4 billion, up 18% or up 15% at constant exchange rates.

Glaxo shares were up 1.3% following the announcement.

In the FTSE 250, Grafton Group jumped 9.7%. The Dublin-based building materials distributor and DIY retailer said its first quarter revenue rose by a third.

Grafton recorded revenue of GBP846.8 million between January 1 and April 18, an increase of 33% on the same period last year and an 8.3% rise compared to 2019. The revenue gains were driven by the Retailing segment, with revenue more than doubling from a year prior and up 70% from 2019.

Travis Perkins fell 8.3% after the builders' merchant completed the demerger of its DIY retailing business, with Wickes Group making its London Main Market debut. Wickes was trading at 270.70 pence per share, giving it a value just over GBP680 million.

The Northampton-based firm added it will implement a share consolidation to keep its stock price close to pre-demerger levels. The ratio for the share consolidation will depend on its stock price at the close of trading on Wednesday.

By Lucy Heming; lucyheming@alliancenews.com

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