LONDON MARKET MIDDAY: Stocks down but Next and GSK bring some cheer

(Alliance News) - Stock prices in London edged into the red at midday on Wednesday, as the market awaited a key US interest rate decision, but welcomed positive business updates from GSK and Next.

The FTSE 100 index was down 19.72 points, 0.3%, at 7,166.44. The FTSE 250 was down 34.72 points, 0.2%, at 18,161.18. The AIM All-Share was up 0.3 of a point at 814.85.

The Cboe UK 100 was down 0.2% at 716.38, and the Cboe UK 250 was down 0.2% at 15,588.59, but the Cboe Small Companies was up 0.1% at 12,335.19.

"After a positive couple of days, the FTSE 100 was in consolidation mode on Wednesday," said AJ Bell investment director Russ Mould.

Stocks were treading water ahead of two key central bank announcements, with the US Federal Reserve announcing its latest interest rate decision at 1800 GMT. On Thursday at midday, the Bank of England will follow suit.

Both are widely expected to enact 75 basis point hikes, but investors will be looking out for any hints about the trajectory of monetary policy in the months ahead.

"While we have a good idea of the quantum of increase both parties will deliver, it will be all about the mood music. Investors are like thirsty travellers in the desert, hoping for even the tiniest drop of comfort to suggest the rate cycle may have run its course," AJ Bell's Mould said.

The dollar was trading lower ahead of the Fed announcement.

Sterling was quoted at USD1.1507 at midday on Wednesday, higher than USD1.1465 at the London equities close on Tuesday. The euro traded at USD0.9899 at midday, higher than USD0.9873 late Tuesday. Against the yen, the dollar was quoted at JPY146.91, down versus JPY148.07.

In European equities on Wednesday, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was down 0.1%.

Manufacturing in the eurozone slid further into contraction in October as demand plummeted, according to figures on Wednesday.

The latest S&P Global eurozone manufacturing purchasing managers' index fell to 46.4 points in October from 48.4 in September. The reading was a 29-month low, and worse than the previous 46.6 flash estimate.

Falling further below the 50.0 no-change mark, it shows the contraction in the sector has deepened.

"In October, new orders fell at a rate we've rarely seen during 25 years of data collection – only during the worst months of the pandemic and in the height of the global financial crisis between 2008 and 2009 have decreases been stronger," said S&P Global Market Intelligence senior economist Joe Hayes.

Germany's manufacturing sector performed particularly poorly, with the PMI falling to 45.1 points for October from 47.8 in September. The reading was the worst since the initial Covid-19 wave in early 2020.

Meanwhile in London, shares in clothing and homewares retailer Next added 1.5%.

In the 13 weeks to October 29, full-price sales including interest income were up 0.4% from a year prior, slightly ahead of the company's expectations. Total product full-price sales fell by 0.1%.

Looking ahead, Next said its full-year guidance remains unchanged. It expects full price sales for the rest of the year to be down 2%, and profit before tax of GBP840 million, a 2.1% increase on last year's GBP823.1 million

"Disaster has been averted. With many online fashion retailers struggling in recent months, and fears that the high street would see a massive slowdown in trade amid the cost-of-living crisis, Next's trading statement could have been horrific," said AJ Bell's Russ Mould.

GSK edged up 1.2%.

The pharmaceutical maker reported revenue of GBP7.83 billion in the third quarter, rising 18% from GBP6.63 billion a year before. Pretax profit dropped 15% to GBP1.01 billion from GBP1.19 billion.

GSK noted strong growth in Specialty Medicines, and record sales for its shingles vaccine Shingrix.

GSK now expects to deliver sales growth of between 8% and 10% at constant exchange rates in 2022, and growth in adjusted operating profit of between 15% and 17% at constant exchange rates. The guidance excludes any contribution from Covid-19 solutions.

GSK declared a dividend of 13.75p for the period. It said there is no change to its expected full-year dividend of 61.25p per share.

Separately GSK said its respiratory syncytial virus older adult vaccine candidate has been granted priority review by the US Food & Drug Administration.

"This is strong progress for GSK in the RSV race. where it's going head to head with the likes of Pfizer and J&J. GSK thinks its candidate could reach USD4 billion a year in sales, with the adult market for this currently unmet need, being the largest prize. GSK is making good progress on many levels," said Hargreaves Lansdown's Derren Nathan.

"However, investor sentiment is being held back by ongoing lawsuits relating to the safety discontinued heartburn drug Zantac, and this is likely to remain the case until more assurances are given."

Ocado returned some of Tuesday's gains, falling back 5.6%, having closed up 39% on Tuesday on news of its new partnership in South Korea. The stock was also downgraded to 'underweight' from 'neutral' by JPMorgan.

In the FTSE 250, Hiscox added 5.1%. The insurer said gross premiums written grew in the first nine months of 2022, citing well-performing platform migration amid Hurricane Ian-related losses affecting investor sentiment and a fall in London Market premiums.

The Hamilton, Bermuda-based firm said total gross premiums written rose 6.3% to USD3.68 billion from USD3.46 billion a year ago.

Aston Martin plunged 15%, as it warned on costs and trimmed its annual guidance.

The carmaker said it had incurred incremental costs trying to mitigate new supply chain and logistical disruption issues over the quarter, adding that while it has now identified resolutions to these problems, it does not expect to see cash inflows from more normal capital dynamics until next year.

Despite a 3.0% increase in total wholesale volumes to 1,384 from 1,349 for the third quarter, Aston Martin now expects full-year growth in the range of 6,200 to 6,600 units, revised from a target of over 6,600 units.

"Problems with the global supply chain post Covid-19, the global chip shortage and Russia's invasion of Ukraine that added to inflationary pressures have created major headwinds for Aston Martin, dampening its outlook for deliveries and margins. On top of the supply problems, fears of a global recession and stiff competition could weigh on demand for its luxury cars," said Victoria Scholar, head of investment at interactive investor.

On AIM, Firering Strategic Minerals leapt 33%.

The critical minerals explorer has agreed to advance the Atex Project and adjacent Alliance licence in the Ivory Coast, in a USD18.6 million deal with Ricca Resources.

Ricca to invest in the project, and partner with Firering on its plans to fast-track exploration at the project, secure funding, and deliver its maiden mineral resource estimate and feasibility studies.

"The investment by Ricca will reduce our funding risk through studies and towards production. The partnership also reduces capital costs and brings with it the support of a management team at Ricca with highly relevant recent experience developing a West African lithium asset," Chief Executive Yuval Cohen said.

Gold was quoted at USD1,655.24 an ounce on Wednesday at midday in London, higher than USD1,644.63 late Tuesday. Brent oil was trading at USD94.44 a barrel, hardly changed from USD94.48.

Stocks in New York were called to open mixed, with the DJIA down 0.1%, the S&P 500 index up 0.1%, and the Nasdaq Composite up 0.2%.

After the New York market close, there will be quarterly results from online auction website eBay, travel platform Booking Holdings and semiconductor firm Qualcomm.

By Elizabeth Winter; elizabethwinter@alliancenews.com

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