Earnings reports weigh down FTSE
A slew of earnings shocked the FTSE this morning causing the index to drop nearly 0.5% before starting to recover after some of the index heavyweights like Lloyds (LON:LLOY) and Royal Dutch posted results contradicting expectations. There was little by way of market signals coming from Asia with China and Japan closed for holidays.
Lloyds managed to navigate the turbulent Brexit waters of the first quarter and maintain its income from mortgages and loans but as the increase in profit was slightly lower than expected shares were still punished with a selloff.
Paddy Power Betfair, however, fared far worse, dropping 4.4% in early trade after the online betting firm reported a decent increase in group earnings but admitted that growth in Europe was stagnant and was only sustained with the acquisition of a Georgian gaming company. In contrast medical equipment maker Smith & Nephew (LON:SN) guided on higher earnings this year, helping the stock rally 3% and Royal Dutch also nudged higher reporting a slight decline in profit but one in line with its US peers and slightly above expectations.
Dollar bounces then steadies after Fed meeting
The fallout from the Federal Reserve meeting yesterday, which concluded with the decision to keep rates steady for the foreseeable future, helped the greenback bounce higher overnight and then settle in a narrow range in the early hours in Europe.
The Fed’s chairman Jerome Powell explained the decision by saying that the US economy is being supported with solid fundamentals and that temporary factors are holding inflation down at around 1.6%.
However, the Fed remains under intense pressure from President Trump to ease rates in order to keep the economy growing and now the bond and currency markets are beginning to position themselves for rate declines rather than rate increases later this year.
The chatter on Wall Street is also becoming more positive with stock investors beginning to bet that there will be more cheap money available later this year to fuel company growth.
Pound steady as country heads to the polls
The pound is trading comfortably above $1.3 against despite an overnight dip following the Fed meeting and is up 0.15% against the greenback. The UK goes to the polls on Thursday in a local election that will be key in showing support for either Theresa May or Jeremy Corbyn and the first chance for the country to formally express its views after months of political guessing and second-guessing.
Coca-Cola (NYSE:KO) finally cracks open cash reserve
Coca-Cola HBC has finally cracked open its cash reserve, rewarding patient investors with a special dividend after soaring demand for energy drinks helped rev up sales.
The €730m payout indicates that management is now confident enough to part with a large chunk of cash, even after warning in February that slowing global growth could dent sales this year.
Volume growth in established European markets like Austria and Switzerland has slowed compared to the same period a year ago. But the slack has been taken up by strong growth in emerging markets, including Romania and Russia.
Sales of the company's energy drinks, led by the Monster brand, have jumped in all market segments, including an impressive 40% rise in Russia.
Sugar-free versions of staples like Coke and Fanta have also performed well, comfortably offsetting a decline in demand for their sugar-loaded variants.
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