Proactive Investors -
- FTSE 100 falls 18 points to 8,274
- BP (LON:BP) and Standard Chartered (LON:STAN) profits and returns impress
- Diageo (LON:DGE) and Sage Group (LON:SGE) results disappoint
US mixed start seen
The FTSE 100 index has cut its losses down to just over 10, a deficit of around 0.1%, while the FTSE 250 is up 208 points or 1% at 21,461.
US futures are pointing to another mixed session in New York.
Dow futures are just below flat, but S&P 500 futures are up 0.22% and Nasdaq 100 futures are indicating a 0.35% rise.
Yesterday saw a relatively flat start from US stock indices to what is seen as a big week for markets.
"There’s certainly going to be stacks of fresh information to assimilate, starting with Microsoft’s earnings after tonight’s close. Then we have results from Meta tomorrow, followed by Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) on Thursday," says market analyst David Morrison at Trade Nation.
Aside from earnings, the Federal Reserve begins its monetary policy meeting today, with the verdict coming tomorrow.
No interest rate cut is expected, but some groundwork for what in September is predicted to see the first cut in over four years.
Stan Chart views
StanChart (LON:STAN) shares are up 6% at 770p, but different analysts are seeing different things.
Shore Capital, for instance, has reiterated its 'buy' rating with a 955 fair value, while Keefe, Bruyette & Woods (KBW) has repeated its 'underperform' stance and 750p target.
"Standard Chartered’s shares have been left behind by the large domestic UK banks this year, but its underlying operating performance is nonetheless improving, while share buybacks will help it to capitalise on the considerable undervaluation in the stock," says Shore Cap.
KBW, meanwhile, acknowledged a "solid set" of result and that the shares "are not expensive" on a consensus p/e ratio of 5.7, "which is clearly positive from a buyback perspective".
But the analysts are cautious, seeing "every chance that regional political tensions will increase in H2, we see little reason to chase".
Motor finance uncertainty to last for months say analysts
Shares in Lloyds Banking Group PLC (LON:LLOY) are down over 2% this morning, on a UBS downgrade and an update from the FCA on its motor finance review.
The financial watchdog has delayed the publishing of its 'next steps' from end-September to March next year.
The FCA also says that a consumer redress scheme "is more likely than when we started the review".
Analysts at Peel Hunt (LON:PEEL) reckon Close Brothers has an "outsize exposure" to the issue and "is the most impacted in our view".
They see Lloyds and Barclays (LON:BARC) as "exposed, but with a significantly lower level of materiality".
UBS, which issued its downgrade before the FCA announcement, says Lloyds share price is "up with events" and downgraded to 'neutral'.
Germany v rest of Europe
European markets are still in the green, apart from the FTSE, after the disappointing German GDP print.
Market analyst Kathleen Brooks at XTB points out that Germany’s economy has registered a negative growth rate for five quarters since the start of 2022.
"Germany is once again the sick man of Europe," she says.
"Inevitably there is a comparison between the UK and Germany, while we won’t know the UK’s Q2 GDP data until 15th August, the UK’s Q1 GDP figure was 0.7%, a rate of growth Germany has not surpassed since Q1 2022."
These are preliminary GDP figures, but Brooks adds that Q3 growth seems to have also got off on a weak note too, with IFO business confidence falling sharply in July, and the July flash PMI reports showed the composite PMI report falling into contraction territory.
In contrast to Germany, she notes that French and Spanish growth rates are more in line with the UK, suggesting that Germany is an outlier, with France expanding at a 0.3% quarterly rate and a 1.1% annual rate, while Spain expanded at a 0.8% rate.
"The euro is higher today, even with Germany’s economy contracting last quarter. The euro has been subdued for most of the summer, however, it seems to be making gains ahead of key central bank meetings this week," she adds.
German economy shrinks
Peeking through the deluge of UK corporate news, I spy a bunch of European data that came out a short while ago, including German and Eurozone gross domestic product figures.
The Eurozone economy grew 0.3% in the second quarter, which is better than the 0.2% expected, after GDP growth of 0.3% seen in the first quarter.
This is despite the German economy shrank 0.1% in the second compared to the first, which was worse than expectations, with economists having forecast growth of 0.1%.
Markets 'nervy' due to rates, say analysts
It is a "catastrophic" share price performance from Diageo and a "weak" production update from Glencore (LON:GLEN) that is the main problem for the FTSE 100, says Russ Mould at AJ Bell.
London is the only main European market in the red this morning, with the Frankfurt, Paris and Milan benchmarks all up around 0.3%, while Madrid's is up 0.2%.
The Euro Stoxx 600 index up 0.23%, with UK names at the top and bottom, St James Place up 22% and Diageo down 7%.
"BP’s strategy of pre-releasing bad news seems to have worked as that lowered expectations in the run-up to its results," Mould adds.
"The shares bounced back after second quarter profit beat forecasts, helping to make up for weak refining margins."
Victoria Scholar, head of investment at Interactive Investor says yesterday's small gain was "fuelled by rate cut hopes" but the UK blue-chip index is giving back some of those gains.
"It is a big week for UK investors as markets brace for the Bank of England’s rate decision on Thursday which is going to be a close call – the Monetary Policy Committee might cut rates for the first time since 2020 or it might make traders and investors wait another month so that it is more closely aligned with the Federal Reserve stateside," she adds.
Completing the trio of comments from the UK's largest investment platforms, Steve Clayton, head of equity funds at Hargreaves Lansdown (LON:HRGV), calls the general market mood "nervy [...] with interest rates decisions from the US Federal Reserve, the ECB and the Bank of England all expected this week, along with euro area GDP data.
"With markets still pricing in rate cuts before year end, each month raises the pressure to see them actually delivered."
He notes that crude oil sinking to a new two-month low overnight was behind some weakness, though Brent futures have climbed back up to $79 this morning.
"Traders are struggling to see anything other than a fully supplied market for crude in the months ahead, suggesting that major producers are going to need to show supply restraint if prices are to make any sort of meaningful recovery."