FTSE 100 closes higher on final session of July as Wall Street extends post-earnings run
- FTSE 100 closes 1.1% higher
- US stocks extend winning run
- NatWest special dividend pleases investors
4.50pm: Strong close out for July
The FTSE 100 index ended higher on Friday, closing out the final week of a seesaw month in positive fashion on the back of further gains on Wall Street as robust earnings offset fears over a recession and the recent Federal Reserve interest rate hike.
At the close, the UK blue-chip index was up 78.18 points, or 1.1% at 7,423.23, just below the morning peak of 7,441.20 and well above the opening low of 7,345.25.
In New York, around London’s close, the Dow Jones Industrial Average was 87 points, or 0.3% higher at 32,617, while the broader S&P 500 index gained 0.7% and the tech-laden Nasdaq Composite added 0.8%.
Joshua Mahony, senior market analyst at online trading platform IG commented: « In the US, tech leads the way in the wake of a welcome outperformance from both Amazon and Apple last night. Despite failing to maintain the kind of momentum traders have grown accustomed to, outperformance on both profits and revenues for these two tech giants highlight that market pessimism has been largely overblown this earnings season.”
Mahoney also noted that oil & gas stocks continued to outperform as ExxonMobil and Chevron revenues soared: “At a time where green ethical investing has become a cornerstone of many portfolios, the oil & gas industry has brought huge profits for those willing to remain bullish for this supposedly doomed sector. »
He added: « With recent events in Russia helping drive crude oil back above $120 in the second quarter, the huge cost-cutting efforts made throughout the dark days of 2020 appear to finally be paying dividends for energy stocks. Record earnings from both Chevron and Exxon Mobil highlight how markets had underestimated just how good things have been for the sector. With 58% of the S&P 500 energy stocks having reported, 80% of the sector have now managed to outperform on earnings, and another 80% beat on revenues.”
3.45pm: Upbeat ahead of weekend
FTSE 100 headed into the weekend in upbeat mood supported by further gains in the US.
At 3.45pm the blue chip index was up 85.50 points at 7,430.75 with the FTSE 250 328.89 points to the good at 20,184.08.
Banking stocks were in favour with NatWest Group PLC (LSE:NWG) top of the FTSE 100 risers following its better-than-expected results and special dividend to shareholders.
Michael Hewson Chief Market Analyst at CMC Markets UK commented: « It’s been another positive week for markets in Europe, with investors taking comfort from earnings numbers that have by and large been better than expected, despite concerns about the growth outlook. »
« The gains seen this month have offered a welcome respite, while the belief that central banks may have to pare back the number of rate hikes they can deliver is also helping, pushing yields sharply lower, and improving the attractiveness of stocks in general. »
Focus in London will shift to the MPC meeting next week with the EY ITEM Club commenting: “The outcome of the August Monetary Policy Committee (MPC) meeting looks finely balanced between a 25bps or 50bps increase.
« With high inflation due mainly to factors outside the MPC’s control, and recent evidence of sagging activity and a retreat in cost pressures, the case for a 50bps rise in Bank Rate in August’s meeting doesn’t seem convincing.Still, the EY ITEM Club wouldn’t be surprised if the MPC voted for a larger-than-usual rise.”
Martin Beck, chief economic advisor to the EY ITEM Club, said: “The EY ITEM Club thinks it’s 50-50 whether the MPC will go for an unusually large raise, or if it will stick with the standard 25bps.”
2.45pm: FTSE pushes to session highs as US opens higher
FTSE 100 advanced to session highs, and above 7,400, as US markets headed north once more.
At 2,45pm the blue chip index was trading 63.68 points higher at 7,408.93 with the broader FTSE 250 up 293.17 points at 20,146.36.
In the US stocks opened higher spurred by a slew of corporate earnings beats and misses, along with the Fed’s latest interest rate hike coming in at 75 basis points per the market expectation.
Just after the open, the Dow Jones Industrial had added 24 points at 32,554 points, while the S&P 500 was up 19 points at 4,091 points, and the Nasdaq Composite was up 79 points at 12,242 points.
OANDA senior market analyst Craig Erlam noted that the way equity markets had responded this week to the Fed’s decisions, corporate earnings, and an unexpected recession that wasn’t a real recession was a bit strange.
“The non-recession in the US has seemingly fallen into the bad news is good news category – always a good sign when this narrative re-emerges – and investors are overenthusiastically celebrating earnings that are either not as terrible as feared or offer glimmers of hope on the outlook while missing on the top and bottom line,” Erlam said.
“It doesn’t exactly scream sustainable recovery and yet something tells me we could be in the midst of a late summer surge in stock markets.”
1.35pm: FTSE 100 upbeat with Wall Street seen extending gains
FTSE 100 held in positive territory in early afternoon trading supported by upbeat results in the banking sector and with Wall Street expected to extend yesterday’s gains.
At 1.35pm the lead index was 40.16 points higher at 7,385.41 while the broader FTSE 250 stormed ahead 285.27 points to 20,140.46.
IMI shares attracted plenty of positive broker comment today after reporting 9% growth in first half operating profit to £160mln with broker JP Morgan (JPM) pointing out this was above its expectations.
Shares in the engineering group advanced 2.8% to 1,328p.
JPM said “Organic sales growth has continued to be solid and the strategic progress is increasingly visible in the numbers.”
“The print is about as good as could be hoped in what will remain an uncertain macro.”
Sales and EBITDA were both ahead of JPM’s forecasts with all three divisions seeing margins up year on year.
Forecasts going forward are likely to be held as management reiterating EPS guidance of 100p, JPM said.
JPM maintained it 2,000p December 2023 price target, and maintained an outperform rating.
Investec was also upbeat after the release commenting that “positive changes continue to progress, driven by management actions.”
“The strategy, involving sharpening commerciality and even divesting businesses, is bearing fruit in shareholder returns.”
“ Underlying demand is improving, and there is now greater visibility in the medium-term margin targets, which provide a positive future returns profile.”
“Overall, IMI is competitive in its markets, management continues to drive improvement initiatives, and this should result in a higher quality business.”
Bank of America and Peel Hunt also reiterated buy ratings on IMI.
11.45am: FTSE 100 positive, US markets expected to open higher
FTSE 100 remained upbeat late morning, although off earlier highs, with US stocks seen extending yesterday’s gains on Friday ahead of earnings from the likes of oil majors Chevron and Exxon Mobil.
At 11.45am the blue chip index was 26.68 points higher at 7,371.93 while the broader FTSE 250 impressed gaining 272.11 points (1.37%) to 20,127.22.
Share prices in the US have enjoyed a decent run despite news of a surprise drop in US second quarter GDP and a widely expected 75-basis point rate increase this week, with investors seeking out bargains after the tumultuous year for equities so far.
Futures for the Dow Jones Industrial Average were trading 0.2% higher pre-market on Wednesday, while those for the broader S&P 500 index were up 0.7%, and futures for the tech-laden Nasdaq-100 added 1.1%.
“This week has been mainly about the Fed, the US GDP data and US corporate earnings. Investors had a lot of information to digest and overall sentiment has been positive,” said Naeem Aslam chief market analyst at avatrade.com.
While the US economy shrank unexpectedly in the second quarter, any disappointment did not show in price action.
“Speaking from a monetary policy perspective, we are in a scenario where bad news is good news as this means that the Fed will not take aggressive measures towards its monetary policy,” said Aslam. “For instance, yesterday’s GDP number for the US economy were as dire as they could have been but if you look at the stock market, we saw a decent rally.”
Investors are starting to bet that while the US Federal Reserve will continue its path of rate hikes, it will also be mindful of the threat to economic growth.
In data released yesterday, US 2Q gross domestic product (GDP) contracted at an annual rate of 0.9% in 2Q, narrower than the1.6% GDP drop in 1Q but significantly below market expectations for 0.5% growth.
While US rate-setters are expected to raise interest rates further, the pace of hikes is seen slowing amid the threat of a prolonged recession.
After solid earnings news after-hours from tech giants Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN), the earnings season rolls on today with quarterly reports from some key companies, including majors Chevron and Exxon Mobil. Also releasing results today are Procter & Gamble (NYSE:PG) (Procter & Gamble (NYSE:PG)) and Colgate-Palmolive. Which will give an indication of how consumer demand is faring against a backdrop of rising prices and interest rates.
10.00am: FTSE 100 extends gains, NatWest pleases investors with special dividend
FTSE 100 extended its gains mid morning supported by gains in banking stocks and a strong showing in the US on Thursday.
At 10.00am the blue chip index was 51.85 points higher at 7,397.10 with the broader FTSE 250 229.70 points to the good at 20,084.89.
“The FTSE 100 continued to grind upwards on Friday morning, putting it on course to end a pivotal week in positive territory,” said AJ Bell investment director Russ Mould.
“With many of the big US names reporting this week and the Federal Reserve delivering its latest decision on rates this always felt like a make or break week and fragile markets have just about emerged intact.”
“It says something about the looking glass nature of investing right now that seemingly bad news in the shape of the US meeting the technical conditions for a recession – even if the ultimate arbiter the National Bureau of Economic Research is still to deliver its verdict – is seen as a positive development as it might lead the Fed to ease back on rate hikes.”
“Also helping sentiment was good news from Amazon and Apple, with both managing to deliver better-than-expected sales despite rising prices and a weakening consumer outlook.”
“It suggests that, for now at least, these elite companies are sufficiently ingrained in the everyday lives of their customers to keep demand sticky, and their awesome buying power is sparing them from some of the pain felt by others on rising costs.”
“Drug maker AstraZeneca is something of a stock market rarity right now – a company trading at fresh record highs in 2022. But it appeared to fall victim to profit taking this morning as it beat expectations for the second quarter and raised its full-year guidance, yet got only raspberries in response from investors.”
9.05am: FTSE 100 lifted as banking results impress
FTSE 100 made a bright start to trading on Friday supported by gains on Wall Street overnight and advances in the banking sector following better than expected results from NatWest Group PLC (LSE:NWG) and Standard Chartered PLC (LSE:STAN).
By 9.05am the lead index was trading 22.58 points higher at 7,367.83 while the broader FTSE 250 index topped 20,000, gaining 155.71 points to 20,011.38.
NatWest topped the FTSE 100 risers after the banking group reported quarter two results well ahead of expectations.
Shares surged 7.39% to 247p after the numbers and the company also pleased investors with a special dividend of 16.8p per share, equating to some £1.8bln.
Richard Hunter, Head of Markets at interactive investor, commented “NatWest’s continued progress has left the bank awash with cash, which has resulted in a bumper return for shareholders. »
Croda International PLC (LSE:CRDA) shares pushed ahead by 1.37% to 7,236p as the chemcials group delivered strong growth across the board as it reported its half year results to June 30th.
Steve Foots, Chief Executive Officer, commented: “Croda has delivered strong growth in the first half year, with profit ahead of expectations.”
“ As a result, we expect full year adjusted profit before tax to be modestly ahead of previous expectations.”
It did caution that growth in consumer markets was likely to soften in the second half but it expected this to be offset by growth in Consumer Care, Crop Care and Health Care.
The chemicals group delivered 20.7% growth in sales to £1,127.3mln, 32.1% growth in operating profit to £288.6mln and an 8% hike to the dividend to 47p.
Engineering group, IMI, was in upbeat mood as it reported first half results with revenue growth of 7% to £972mln and a 9% increase in operating profit to £160mln.
It said it had increased the group operating margin target to 20% through the cycle and raised the interim dividend by 5%.
The market welcomed the update with shares up 2.86% to 1,329p.
8.30am: FTSE 100 opens higher, NatWest leads banks higher
FTSE 100 made a positive start to trading on Friday lifted by gains on Wall Street overnight.
By 8.30am the lead index was trading 24.18 points to the good at 7,369.43 with the broader FTSE 250 up 115.03 points to 19,970.22.
NatWest Group PLC (LSE:NWG) topped the FTSE 100 risers after the banking group reported quarter two results well ahead of expectations.
Shares surged 7.39% to 247p after the numbers.
Shore Capital analyst Gary Greenwood noted that reported pre-tax profit for the Go-Forward Group rose 20% in the quarter to £1,546mln against a consensus of £1,051mln reflecting better than expected showings in income (+£218mln), costs (+£168mln) and impairments (+£154mln),
He expected material increases to his own and consensus forecasts as a result.
In a good day for the banking sector Standard Chartered PLC (LSE:STAN) also benefited from better than expected results with reported pre-tax profit of US$1,280mln ahead of the market consensus of US$989mln in the second quarter.
Analysts noted the main areas for the outperformance were lower than expected impairments, better than forecast income and improved cost control and forecasts going forward are expected to be lifted.
The upbeat numbers helped pull shares in Barclays PLC (LSE:BARC), which posted results yesterday, higher as well with shares up 3.39%.
Online real estate seller, Rightmove PLC (LSE:RMV), was another early riser after posting a 9% increase in revenue to £162.7mlm and 6% growth in operating profit to £121.3mln as it reported half year numbers to June 30th.
Average revenue per advertiser (ARPA) grew 12% to £132 and going forward the group expected ARPA to mirror pre-pandemic growth levels in the second half, meaning they are still likely to exceed previous guidance for the full year.
Shares rose 1.33% to 653.40p.
AstraZeneca shares fell back in early trading despite the pharmaceuticals giant raising its FY 2022 total revenue guidance reflecting an updated outlook for COVID-19 medicines and continued strong performance of the overall business.
For the first half the group posted a 48% increase in total revenue to US$22.161m with growth coming from all disease areas and from the addition of Alexion.
Shares fell 2% to 10,652p.
7.30am: FTSE 100 expected to make bright start to trading
FTSE 100 is expected to make a strong start on Friday after another positive, if volatile, session in the US yesterday.
Spread betting companies are calling the lead index 35 points higher to around 7,370.
The Dow closed Thursday up 332 points, 1%, at 32,530, the Nasdaq Composite added 130 points, 1.1%, to end at 12,163 and the S&P 500 improved 49 points, 1.2%, to 4,072.
“The attitude is basically that the Fed is saying we’re near the end, and that the GDP number is telling people there is no compelling reason for the Fed to hit us with another 0.75 or 1 percentage point,” Max Wasserman, senior portfolio manager and founder of Miramar Capital, said, according to CNBC. “The Fed may be still raising interest rates a little bit, but we know they’re not going to keep raising at the same level.”
Sentiment in the US was further boosted by results from Amazon and Apple after the bell with shares in both in after market trading.
AstraZeneca raised its FY 2022 total revenue guidance, as it reported half year numbers, due to an updated outlook for COVID-19 medicines and continued strong performance in the overall business.
Other operating income in the second half of 2022 will be similar to the first half and EPS guidance remained unchanged.
For the first half the pharmaceuticals giant posted a 48% increase in total revenue to US$22.161m with growth coming from all disease areas and from the addition of Alexion.
NatWest Bank Group reported an attributable profit for the period of £1,892mln compared to an attributable profit of £1,699mln in the first half of 2021.
Growth was seen in all key areas underpinned by a robust loan book and balance sheet.
Taking an £18mln impairment charge (£438mln in the first half of 2021) the banking group said default levels remained low although it recognised the continued uncertainty in the economic outlook.
6.50am: Early Markets – Asia / Australia
Asian shares were mixed on Friday after Chinese leaders signalled Beijing is unlikely to try to boost the economy.
According to a state media report, authorities said they will focus on stabilising employment and prices.
The Shanghai Composite in China fell 0.94% while Hong Kong’s Hang Seng index tumbled 2.45%.
Japan’s Nikkei 225 was trading 0.05% lower but South Korea’s Kospi gained 0.67%.
Australia’s S&P/ASX200 climbed 0.8% to its highest level since early June, helped by a growing belief that central banks will have to taper monetary tightening if economies slow too quickly.