Proactive Investors -
- FTSE 100 dropped from session peak of 7,898.69
- Wall Street cautious as Fed rate decision eyed
- HSBC (LON:HSBA) higher as profit triples, but BP (LON:BP) weak on cautious outlook
A flock of buybacks
Following announcements from HSBC and BP today, FTSE 100 firms have now announced plans to return £26.9 billion via buyback schemes so far this year, following 2022's record FTSE 100 buybacks of £55.8 billion, on top of an aggregate dividend pay-out of £83.6 billion forecast for 2023.
AJ Bell investment director Russ Moul commented: “The debate over the rights and wrongs of the bumper profits made by HSBC and BP will run and run but from the narrow perspective of investment their announcement of fresh multi-billion dollar share buyback schemes – topped up by a fresh programme at Ashtead (LON:AHT) – means that the FTSE 100 cash return bonanza continues."
He added: “Sentiment still seems lukewarm at best toward UK equities, despite the buybacks and rash of takeover deals, but the money keeps flowing. After this trio of announcements, FTSE 100 firms have announced plans to return £26.9 billion to their shareholders via buybacks this year.
“That figure supplements a forecast aggregate dividend pay-out of £83.6 billion for 2023 and comes on top of 2022’s all-time high for FTSE 100 buybacks of £55.8 billion.
"Whether the final total for 2023’s buybacks will match or exceed that of last year remains open to question, and much may depend on the trajectory of the global economy in the second half, but we are certainly off to a fast start."
Living on the debt ceiling
Treasury Secretary, Janet Yellen has said the US government is likely to run out of cash to meet all of its obligations, possibly as soon as next month.
In a letter sent to Congress, Yellen reportedly said that could "potentially be as soon as 1 June". In January, she had warned that the so-called 'X date' might arrive around 5 June.
However, Yellen also said that tax revenues and spending were "inherently variable" so that "it is impossible to predict with certainty the exact date when Treasury will be unable to pay the government's bills."
President Joe Biden has responded by calling a meeting with the Democratic and Republican heads of the US House of Representatives and Senate for 9 May to discuss the debt situation.
A look at some of the top riser and fallers on the junior market
Longboat Energy PLC soared 121% to 21.03p after the Norwegian North Sea explorer struck a deal with Japan Petroleum Exploration Co (Japex) to form a joint venture.
Made Tech Group PLC, the technology services group focused on the public sector, saw its share price drop 26% to 20p; due to its forecast of lower-than-expected revenue for the financial year ending May 31, 2023.
Tribal Group PLC saw its shares fall 9% to 35.40p before rebounding up to 40.5p after the education software firm revealed it has received a claim for damages from Nanyang Technological University (NTU) relating to a contract that NTU last month announced it had terminated.
East Imperial PLC plummeted 30% on the AIM market following the premium drinks distributor’s latest full-year results. Though revenues ticked 14% higher, cash flows have come under considerable stress and the group is in “advanced discussions with potential debt funders to provide additional working capital to support ongoing expansion”.
US markets seen lower, FOMC decision looms
US stock indexes are expected to edge lower at the open on Tuesday as investors position themselves for the Federal Reserve’s May policy meeting to kick off, with an interest rate decision due on Wednesday.
The US central bank's two-day policy meeting is expected to conclude with the central bank announcing another 25 basis-point rate hike after recent mixed economic data, with investors, more importantly, looking for clues on whether the Fed will keep rates steady after this meeting, or if it will further tighten monetary policy to fight inflation.
TickMill Group’s Market Analyst James Harte commented: "With recession risks growing and given recent developments in the banking sector, the Fed is expected to strike a more reserved tone on rates going forward. If seen, this should help keep stocks supported near-term."
In pre-market trading on Tuesday, futures for the Dow Jones Industrial Average (DJIA) were around 0.2% lower, while those for the S&P 500 were also down 0.2%, while Nasdaq-100 futures were off 0.02%.
The moves follow modest declines on Monday, when the DJIA and Nasdaq Composite both lost about 0.1%, while the S&P 500 finished just slightly below its opening level.
Investors remain focused on the banking sector following news that JPMorgan Chase (NYSE:JPM) won the weekend auction for troubled First Republic Bank.
The corporate earnings season is also rolling on, with Ford, Starbucks (NASDAQ:SBUX), Advanced Micro Devices (NASDAQ:AMD) and Caesars Entertainment set to report after the opening bell.
On the economic front, investors will look out for data on job openings, factory orders and light vehicle sales.
Ahead of the US open, the FTSE 100 remains stuck in a tight trading range, down 5 points.