08.30: The Footsie was flat in early trading, tracking subdued overnight showings from US and Asian markets after the Federal Reserve kept US interest rates on hold, with investors in London pouring over a flood of blue chip earnings from the likes of Lloyds, Shell, Rolls-Royce, and Centrica.
In opening deals, the FTSE 100 index was up 4.7 points, or 0.1 per cent at 6,755.1, having closed 26.40 points higher yesterday after surprise news that the UK economy expanded 0.6 per cent in the spring despite uncertainty caused by last month’s European Union referendum.
US stocks ended little changed overnight following the Fed’s policy decision to leave interest rates unchanged. The US central bank did say, however, that near-term risks to the economic outlook had diminished, opening the door for a potential near-term hike in the eyes of many.
Stready: The Footsie was flat in early trading, tracking subdued overnight showings from US and Asian markets after the Fed kept US rates on hold with investors in London pouring over a flood of blue chip earnings
But the Fed also noted that inflation expectations were on balance little changed in recent months, and gave no firm indication of whether it would raise rates at its next policy meeting in September.
Michael Hewson, Chief Market Analyst at CMC Markets UK, said: ‘Last night’s Federal Reserve rate decision didn’t offer too much in the way of surprises, as the FOMC left policy unchanged.
He added: ‘There were some other minor changes in the language of the statement, but importantly there were none that suggested that the odds of a September move were any more or less likely, which is probably exactly what Fed officials wanted given the rise in the value of the US dollar over the past few weeks, and is probably why the US dollar slid back and gold rose sharply in the aftermath of the decision.’
Asian markets were mostly lower today as Chinese stocks sunk on news that regulators are planning a tough clampdown on wealth management products to curb risks to the banking system.
Japan’s Nikkei 225 also declined more than 1 per cent, undermined by a stronger yen and nerves before the Bank of Japan’s monetary policy decision tomorrow.
CMC’s Hewson said: ‘All in all last night’s meeting didn’t shed any further light on what the Fed might do at its next meeting, so in that context it now shifts the focus to tomorrow’s Bank of Japan meeting, given yesterday’s reports of a significant fiscal stimulus program that could be in the works from Japanese Prime Minister Shinzo Abe.
‘Whatever the Japanese government has in mind markets remain sceptical given previous promises that have failed to deliver.’
No important UK data will be released today but overnight a survey showed that UK house prices rose to a new record in cash terms in July, passing £205,000 on average for the first time.
But the Nationwide Building Society report also cautioned that the increased economic uncertainty following the EU referendum could lead to weaker demand for homes in the near term.
The typical UK property value was £205,715 in July, marking a 0.5 per cent increase compared with June. House prices are 5.2 per cent higher than a year earlier, accelerating from annual growth of 5.1 per cent in June.
Average house prices tipped over the £200,000 mark in March and have been moving steadily upwards since.
On currency markets, the pound dropped 0.6 per cent against the euro to €1.1877 and was down 0.1 per cent versus the dollar at $1.3197.
Stocks in focus in London include:
LLOYDS BANKING GROUP – The part-state owned lender is cutting 3,000 jobs and shutting 200 branches as its braces for a cut in interest rates following Britain’s decision to quit the EU. The moves came as Lloyds reported a first half statutory pretax profit of £2.45billion for the six months to June 30, more than double the sum achieved in the same period last year.
ROYAL DUTCH SHELL – The oil has reported a 72 per cent plunge in adjusted earnings to $1.05billion (£800million) from $3.76billion (£2.85billion) as chief executive Ben van Beurden flagged the ‘significant challenge’ lower energy costs are posing.
ROLLS-ROYCE – The engines maker has stuck to its prediction that profit would improve in the second-half of the year, as it said its turnaround plan would deliver cost-cuts at the top end of a guided range. The prediction came as Rolls reported an 80 per cent drop in underlying pretax profit to £104million pounds for the first six months of the year, which was substantially ahead of a consensus forecast for it to be £16million in the red.
BAE SYSTEMS – The world’s third-largest defence contractor by revenue reported slightly higher half year earnings and said it was on track to meet its forecast for 2016 earnings to rise by between 5 per cent and 10 per cent.
ASTRAZENECA – Generic competition to cholesterol buster Crestor in the US market pushed second quarter earnings down by nearly a third at the FTSE 100 drugmaker, which is now banking on new cancer medicines to revive its fortunes.
CENTRICA – Britain’s largest energy supplier, lost 399,000 customers in the first half of the year, contributing to a 13 per cent dip in revenue to £13.38billion in the first half of 2016, compared with the same period last year, with adjusted operating profit down 12 per cent at £853million.
SKY – The European pay-TV group reported a 12 per cent rise in full-year adjusted operating profit, just ahead of forecasts, in what it said was another excellent year for the group.
BT GROUP – Britain’s biggest telecoms group reiterated its full year outlook after strong demand for broadband helped it to report better-than-expected first quarter core earnings.
COUNTRYWIDE – The UK’s biggest lettings and estate agency company warned on full year core earnings, saying that commercial and London residential transactions had stalled after Britain voted in June to leave the European Union.
DIAGEO – The drinks maker reported higher full year sales, returning to growth after two flat years marred by issues such as an emerging market slowdown and a shift in US consumer tastes from vodka to bourbon.
UK company news scheduled today includes:
Interims: Lloyds Banking Group , Royal Dutch Shell (Q2), AstraZeneca (Q2), Centrica, Rolls-Royce, BAE Systems, Anglo American, British American Tobacco, Smith & Nephew (Q2), Schroders, RELX, Intu Properties, Weir Group, Merlin Entertainments, National Express, Countrywide, Domino’s Pizza, Just Eat, Beale, Genel Energy, Henderson Group, Informa, International Personal Finance, Spectris, Vesuvuis, Greencoat UK Wind
Finals: Diageo, Sky, Angle, Ebiquity
Trading updates: BT Group (Q1), Compass Group, Thomas Cook, Countryside Properties, Kaz Minerals, Ensco, Genel Energy, Immunodiagnostic Systems, Mortgage Advice Bureau, Pentair, Sophos, CYBG, Bonmarche Holdings
Ex-dividends trim 2.42 points off FTSE 100 (SSE)
Economic news scheduled today includes:
Nationwide house prices at 7am
eurozone consumer confidence at 10am
US weekly jobless at 1.30pm
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