Proactive Investors -
- FTSE 100 drops 77 points to 8,077
- Results out from AstraZeneca (NASDAQ:AZN), Unilever (LON:ULVR), BAT, Lloyds
Four banks given slapped wrists by CMA
Lloyds Banking Group PLC (LON:LLOY) and HSBC Holdings PLC (:LON:HSBA) are among four banks to have been sent letters by the Competition and Markets Authority after breaching retail banking rules.
Lloyds failed to publish the location of hundreds of ATMs through open banking APIs.
HSBC published incorrect values for its monthly maximum charge on some of its "multi-function devices" that are replacing ATM machines.
"Providers cannot charge customers more in un-arranged overdraft charges than the MMC in any given month," the CMA said, with over 300 HSBC devices displaying the charge as £35 instead of the actual value of £20.
Existential crisis for stock markets, UK bonds in demand
Stock markets are "going through an existential crisis", says market analyst Kathleen Brooks at XTB.
"What if the big AI trade does not pay off? Are earnings faltering in Europe? How long will Chinese demand remain weak? What are the risk factors associated with the US election now that Joe Biden has pulled out of the race? And when will the German manufacturing sector come out of its malaise?"
Indeed, there are many uncertainties for traders, with earnings across multiple sectors on both sides of the Atlantic showing threatening the stock market rally we've seen so far this year.
Brooks says there's a growing list of big companies that have missed earnings estimates: LVMH (EPA:LVMH), Kerring, Total Energie, ST Micro, BE Semiconductor, Google (NASDAQ:GOOGL) and Tesla included.
Looking at the FTSE's top dog, AstraZeneca, results were a case of "when good just isn’t good enough", she says, with stronger earnigs than expected and full-year guidance raised on the back of strong demand for its cancer drugs that meant revenues were also stronger than forecast for Q2.
"This is usually exactly the kind of earnings report that the market likes: a strong beat on estimates with better-than-expected forward guidance, they also raised their dividend.
"However, in the current environment, earnings beats are not enough to boost the share price, and Astra Zeneca is falling this morning."
The flight to safety is seeing investors buying up US Treasury yields, with the 2-year US Treasury yield at its lowest level since February.
Bond yields across Europe are falling as investors "rush to the ‘safety’ of government debt", says Brooks.
"Interestingly, in Europe, investors are favouring UK bonds over other European bonds, which is a sign that the Labour government’s message of fiscal credibility and fiscal prudence is resonating with investors."
More weak data from Germany
More bad economic news out of Germany, with the IFO business climate index in Germany falling to 87.0 in July, from 88.6 in June, below the consensus, 88.6 and lower than all forecasts.
The headline number was dragged down by declines in both the expectations and current assessment indices.
Carsten Brzeski at ING says: "It's all being driven by a worsening of the current assessment component and an even worse plunge in expectations. A weaker global economic outlook, policy uncertainty in both France and Germany as well as the potential implications of the US presidential elections for Europe seem to be weighing on business sentiment."
He adds that there is still hope: "Still, despite a weak start to the second half of the year, don't rule out potential positive surprises. In fact, extremely weak May data could have been exaggerated due to many public holidays and long weekends. Plus, it only needs a small improvement in industrial order books to get industrial production growing again, admittedly from low levels. The highest increase in real wages in more than a decade should also eventually loosen even German consumers' traditionally very tight wallets."
Claus Vistesen at Pantheon Macroeconomics says: "As in France, these numbers cast doubt on our forecasts for relatively resilient growth in the second half of the year, though in the case of Germany, we always looked for relatively slow growth overall."
Anglo American (JO:AGLJ) out of the red
Shares in Anglo American PLC have climbed out of the red and are now in marginally positive territory.
Some investors may have initially been reeling from the mining giant taking a US$1.6 billion write-down of the Woodsmith fertiliser development in Yorkshire.
The miner had already said it would slow down the development of the polyhalite mine pending a final investment decision as part of a restructuring of its businesses after a failed bid from BHP.
Half year revenues dropped 8% and underlying profits by 23%, with CEO Duncan Wanblad saying "our focus on operational performance is delivering results", pointing to strong margins in copper and iron ore businesses.
BAT hits out
Another FTSE top 10 name with shares in positive territory after results this morning is British American Tobacco PLC (LON:BATS), which has criticised US authorities for a lack of enforcement against "illicit" single-use vapour products.
The comments came in BAT’s half-year trading update, which shows that smokeless products now comprise 17.9% of the company’s total revenues, up from 16.5% in the first half of 2023.
Single-use vapes, primarily cheaply imported from China, have become a hot-button issue in the industry, with the US FDA not having approved brands such as Elf Bar and Esco Bar which remain widely available at retail outlets.
BAT's interims were broadly in line with expectations, with adjusted EPS of 169p versus consensus forecasts of 166p.
Big guns misfiring?
The FTSE 100 is heading lower as investors seem to be unimpressed by results from some of the index's big guns, now down over 1% to 8,070.
Shares in the Footsie's largest company, AstraZeneca PLC (LON:AZN), are down 2.9% despite raising its guidance for revenue and earnings this year after first-half sales jumped by 18%.
CEO Pascal Soriot said: "Building on our strong growth in the first half of the year and continued underlying demand for our medicines we are upgrading our FY 2024 guidance for both total revenue and core EPS."
There's also results out from the index's fourth-largest company, Unilever PLC (LON:ULVR), where its shares have rallied 6% this morning to their highest since 2020.
Investors shrugged off missed quarterly guidance and turned their attention to the prospect of greater profitability later in the year.
Elsewhere, BT Group (LON:BT) is down 3.3% after reporting a record pace in rolling out fibre broadband in the last quarter, but with revenues failing to keep pace as its broadband customer base declined by 0.3%.
BT's revenue fell 2% and profits by 3%, with CEO Allison Kirkby calling it a "solid start to the year".
Revolut gets UK banking licence
UK-based fintech Revolut has finally ended its long wait for a UK banking licence from the Prudential Regulation Authority (PRA).
The company said it will now enter the 'mobilisation' stage, having received authorisation with restrictions from the PRA, which is designed for new banks to fully build out their banking operations.
Revolut has for several years offered its nine million UK customers an e-money app with many of the same services as a bank, but customer's deposits had to be held in a third-party licenced bank.
Group chief executive and co-founder Nikolay Storonsky said: "We are incredibly proud to reach this important milestone in the journey of the company and we will ensure we deliver on making Revolut the bank of choice for UK customers."