After a chaotic start to the week, with Boris Johnson and Donald Trump taking lumps out of the market, things paused on Wednesday, as investors prepared for a much-anticipated Federal Reserve statement.
Though a rate cut appears to be a given at this point – the CME Group’s FedWatch tool has a 76% chance of a 25bps decrease vs a 24% chance for a 50bps cut – the way the central bank frames its decision could come to dictate trading in the latter half of the week.
With that in mind, the European indices were pretty muted. The DAX, which plunged 300 points on Tuesday as it dealt with a 70% drop in Lufthansa’s profits and the market-spooking China-attacking Twitter rant from Trump, was unchanged at 12150, while the CAC lurked a smidge above 5000.
The FTSE dropped 0.4% on a busy, busy morning for high profile updates. Lloyds (LON:LLOY) tumbled 5.3%, its half year pre-tax profit missing estimates by more than half a billion pounds as it set aside another chunk of money for PPI claims.
Joining Lloyds in the doghouse was Taylor Wimpey (LON:TW). Despite promising that its full year performance would be in line with expectations, the homebuilder was sent 4% lower thanks to a 9.4% slide in interim operating profit. Not even a special 2020 dividend – amounting to 11p per share – was enough, investors turning their noses up at the offering.
Seemingly back in fashion following a better-than-forecast Q2 performance, Next (LON:NXT) surged 7%, causing the high street retailer to strike its best price in almost exactly 12 months. Crucially, the company raised its annual profit guidance by £10 million to £725 million, alongside upgrading its sales and EPS estimates, the firm now expecting growth of 3.6% and 5.2% respectively.
Sterling entered Wednesday with a cooler head than seen in the first half of the week. Against both the dollar and euro it rose 0.1%; hardly a robust recovery after the multi-year-low-hitting panic of the last couple of sessions, but better than the alternative. Not that there weren’t negative headlines for the pound to glom onto – members of Congress have warned that any future US-UK trade deal would be blocked if it endangered peace in Northern Ireland.
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