London open: Stocks off lows on news US-China to maintain "intense" contacts
Stocks in London are recovering from an early dip after the US central bank decided not to guide towards a long string of interest rate cuts overnight, which triggered a slump in US stocks and gains in the Greenback.
Helping sentiment, China's Ministry of Commerce has reportedly said that Washington and Beijing will hold intensive talks throughout August in order to lay the groundwork for talks in September.
As expected, the Federal Reserve lowered its target range for short-term official interest rates by 25 basis points to 2.0-2.25%, announced that it would stop reducing its balance sheet one month early, although two members of the Federal Open Market Committee voted against the cut, saying they wanted rates to stay on hold.
During his presser, Powell described the move as a mid-cycle adjustment, which traders took to mean that additional cuts were less likely, which initially saw an 11 basis point jump in two-year US Treasury note yields, but later explicitly said he had never said that it was just "one and done".
As of 0854 BST, the FTSE 100 was trading down by 0.17% to 7,573.54 although the FTSE 250 was up by 0.01% at 19,668.98.
In parallel, the Shanghai Stock Exchange's Composite Index finished the Thursday session off by 0.81% to 2,908.77, although Japan's Nikkei-225 added 0.09% to 21,540.99.
Commenting on the Fed's decision, Michael Hewson at CMC Markets UK said: "Against this sort of dissent, it would have been difficult for Fed chair Powell to argue that this was the beginning of a rate cutting cycle, and makes it unlikely that the Fed would cut again at the next meeting in September unless there is a significant deterioration in the data.
"Let’s face it if you have two dissenters to a July cut, it will be doubly difficult to argue for another one just six weeks later."
Against that backdrop, at noon, the Monetary Policy Committee will announce its policy decision, alongside the release of its meeting minutes and the August Inflation Report.
In particular, investors will be looking out for a sensitivity analysis from Bank regarding the potential impact that different outcomes for Brexit might have on the economy.
MPC members are also expected to tone down rate hike expectations, although no change in policy settings is expected at this Thursday's meeting.
Global manufacturing will also be under scrutiny, with factory sector Purchasing Managers Indices referencing the month of July due out in the UK at 0930 BST, the US and Eurozone.
Overnight, Caixin's China factory PMI surprised to the upside, recovering from 49.4 to 49.9 (consensus: 49.6).
Barclays hikes dividend, Shell results hit by weak natural gas prices
Barclays reported a large jump in interim profits thanks to the non-recurrence of litigation and conduct charges, higher capital buffers and increased its dividend - despite the risks around Brexit. On the potential impact of the UK's exit from the European Union, Barclays said: "Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown. An interim review cannot be expected to predict the unknowable factors or all possible future implications for a company and this is particularly the case in relation to Brexit."
Royal Dutch Shell reported a 50% fall in second quarter income as weaker oil and gas prices hit results along with weaker realised chemicals and refining margins as well as higher provisions, partly offset by improved production. The oil giant said net income for the period was $3bn, compared with $6bn a year ago as the company maintained 2020 guidance.
Shareholders in Refinitiv have agreed to definitive terms with the London Stock Exchange that will see the financial data and information provider acquired in an approximately $27.0bn all-share transaction. As a result, Refinitiv's shareholders, a consortia of investment funds affiliated with Blackstone, will own 37% of the LSE Group and less than 30.0% of the voting rights in the LSE.
British American Tobacco reported a 4.6% rise in first half revenue as new products helped offset the global trend in declining cigarette sales. The maker of Lucky Strike and Dunhill cigarettes maker on Thursday said its first half revenue rose to £12.17bn, with adjusted earnings per share of 146.9 pence. Pre-tax profits before tax fell to £3.8bn from £3.9bn.
Mondi delivered interim profit before tax growth of 29% despite facing increasingly challenging trading conditions, with revenue remaining flat as higher average selling prices were largely offset by the impact of planned mill maintenance shuts. The packaging and paper specialist said it was confident of continuing to deliver a strong and industry-leading performance over the full year but admitted concern over softening demand and ongoing macro-economic uncertainty.
GlaxoSmithKline has completed a transaction with Pfizer to combine their consumer healthcare businesses into a joint venture, it announced on Thursday. The FTSE 100 pharmaceuticals giant said it had a controlling equity interest of 68%, with Pfizer holding an interest of 32%. It said the joint venture was bringing together two “highly complementary” portfolios of consumer health brands, including GSK's Sensodyne, Voltaren and Panadol and Pfizer's Advil, Centrum and Caltrate.
Market Movers
FTSE 100 (UKX) 7,574.33 -0.16%
FTSE 250 (MCX) 19,658.61 -0.04%
techMARK (TASX) 3,886.47 0.41%
FTSE 100 - Risers
London Stock Exchange Group (LSE) 7,018.00p 5.92%
Standard Chartered (STAN) 702.00p 3.72%
RSA Insurance Group (RSA) 575.20p 2.60%
Next (NXT) 6,209.40p 2.40%
Barclays (BARC) 157.64p 2.31%
British American Tobacco (BATS) 3,019.50p 2.29%
BAE Systems (BA.) 559.20p 1.93%
Intertek Group (ITRK) 5,814.00p 1.86%
Royal Bank of Scotland Group (RBS) 220.55p 1.64%
Marks & Spencer Group (MKS) 211.30p 1.64%
FTSE 100 - Fallers
Mondi (MNDI) 1,719.00p -4.69%
Royal Dutch Shell 'B' (RDSB) 2,485.50p -4.50%
Royal Dutch Shell 'A' (RDSA) 2,481.00p -4.36%
Glencore (GLEN) 258.00p -3.17%
Rio Tinto (RIO) 4,569.50p -2.74%
Fresnillo (FRES) 584.77p -2.70%
Anglo American (AAL) 1,993.60p -2.23%
St James's Place (STJ) 967.00p -1.73%
Antofagasta (ANTO) 923.20p -1.70%
BHP Group (BHP) 1,951.20p -1.66%
FTSE 250 - Risers
Capita (CPI) 131.21p 12.58%
Convatec Group (CTEC) 175.55p 12.46%
Aston Martin Lagonda Global Holdings (AML) 519.60p 4.34%
Spirent Communications (SPT) 164.20p 3.92%
Bakkavor Group (BAKK) 108.44p 2.69%
Mitchells & Butlers (MAB) 311.70p 2.53%
Funding Circle Holdings (FCH) 115.74p 2.42%
Games Workshop Group (GAW) 4,638.00p 2.25%
Balfour Beatty (BBY) 210.40p 2.14%
Galliford Try (GFRD) 603.00p 1.86%
FTSE 250 - Fallers
Intu Properties (INTU) 44.89p -6.18%
Renishaw (RSW) 3,694.00p -4.15%
Hochschild Mining (HOC) 200.20p -3.75%
Centamin (DI) (CEY) 125.17p -3.64%
Acacia Mining (ACA) 218.00p -3.28%
Sanne Group (SNN) 533.19p -3.06%
Inchcape (INCH) 611.50p -2.08%
Kaz Minerals (KAZ) 566.00p -2.08%
William Hill (WMH) 149.45p -2.03%
Cairn Energy (CNE) 155.20p -2.02%