Stock prices in Europe and Asia were lower on Wednesday, as markets prepared for the largest US interest hike in over two decades, but Wall Street itself was more upbeat, pointed to open higher, having closed up on Tuesday.
In the meantime, attention in London was on a batch of company updates, with Flutter Entertainment leading large-cap shares after hailing the success of its betting business in the US, while car maker Aston Martin also was in favour after changing drivers.
The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1900 BST. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 BST.
Following a quarter-point increase in the benchmark lending rate in March, Powell and other US central bankers have said a half-point increase could be announced. It would be the first time since 2000 that the Fed has raised rates by 50 basis points at one meeting.
The FTSE 100 index was down 42.08 points, or 0.6%, at 7,519.25. The mid-cap FTSE 250 index was down 253.43 points, or 1.2%, at 20,267.62. The AIM All-Share index was down 7.33 points, or 0.7%, at 1,006.19.
The Cboe UK 100 index was down 0.4% at 748.55. The Cboe 250 was down 1.4% at 17,897.41. The Cboe Small Companies was up 0.1% at 15,125.24.
In mainland Europe, the CAC 40 in Paris was down 0.5% and the DAX 40 in Frankfurt was down 0.2%.
A half-point interest rate hike by the Fed is widely expected, AJ Bell's Russ Mould noted. ‘Given the quantum of the raise is almost an open secret at this stage, all the attention will focus on any guidance around the pace of future increases and whether the recent surprise dip in US GDP has any impact on the Fed's thinking.’
In the FTSE 100, Flutter Entertainment was the best performer, up 6.5%, after the gambling operator reported a positive start to 2022 with its US business particularly strong.
For the three months that ended March 31, revenue rose 5.4% to £1.57 billion from £1.49 billion in the first quarter last year. Average monthly player numbers increased 15% to 8.9 million from 7.7 million.
In the US, the FanDuel business delivered another ‘excellent performance’, Flutter said, with 2.4 million customers and revenue of $574 million during the quarter. FanDuel remained the number one US sportsbook with a 37% online sports betting share, Flutter said.
Flutter said it launched its FanDuel sportsbook in New York and Louisiana in January and expanded into Ontario in April. FanDuel set new records in the quarter, with Super Bowl Sunday the single biggest day ever for new customers with 1.5 million active customers on the day.
Ladbrokes betting chain owner Entain was the second-best blue-chip performer in London, up 2.4%, in a positive read-across.
In the FTSE 250, Aston Martin Lagonda was the best performer, up 10%. The luxury carmaker said its first-quarter performance was in line with expectations as it confirmed the appointment of a new chief executive.
For the three months ended March 31, revenue was £232.7 million, up 3.7% from £224.4 million the year before. However, its pretax loss was £111.6 million, widened from £42.2 million in the first quarter last year.
The carmaker said the revenue increase was driven by ‘strong pricing dynamics’ throughout its core portfolio and Valkyrie programme deliveries of 14 vehicles.
Looking ahead for 2022, Aston Martin still expects an 8% rise in core volumes and a 50% improvement in adjusted core earnings before interest, tax, depreciation, and amortisation. Promisingly, retail sales outpaced wholesales in the first quarter, the company said.
Aston Martin also confirmed a report by the Financial Times that Chief Executive Officer Tobias Moers will leave the board immediately and the company at the end of July.
The Gaydon, Warwickshire-based firm confirmed the appointment of ex-Ferrari boss Amedeo Felisa as its new CEO, with Executive Chair Lawrence Stroll saying the company needs to ‘enter a new phase of growth and development’.
Moers's dual role of CEO and chief technology officer will be split, with another former Ferrari executive, Roberto Fedeli, brought in to be CTO.
Fedeli was at Ferrari for 26 years. Aston Martin said he is considered the creator of Ferrari LaFerrari, the Modena, Italy-based company's first hybrid supercar.
Chair Lawrence Stroll said ‘there is a need for the business to enter a new phase of growth with a new leadership team and structure’.
At the other end of the mid-caps, Direct Line was the worst performer, down 6.9%, after the insurer said gross written premiums for the first quarter fell.
The Bromley, London-based firm said total gross written premium & service fees fell 2.4% in the first quarter to £734.3 million from £752.3 million the year before. Drops in Motor, Home, and Rescue of 5.4%, 9.9% and 2.2% respectively, were slightly offset by a 12% gain in Commercial premiums.
In Home, the insurer said UK Financial Conduct Authority's price reforms hit its trading performance, as customer retention was offset by lower new business volumes.
JD Wetherspoon was down 2.4% after the pub chain said virus woes have been replaced by ‘considerable pressure on costs’ as a new source of concern.
Wetherspoon reported a 4.0% decrease in sales on a like-for-like basis in its financial third quarter, the 13 weeks that ended April 24. In its financial year to date, like-for-like sales were down 6.2%.
On AIM, boohoo Group was down 13% after the online fashion retailer said profit slumped and costs soared as it struggled to get to grips with difficulties caused by the pandemic.
Pretax profit for the 12 months to the end of February plunged to £7.8 million from £124.7 million the year before, as distribution costs rose and customer demand fell.
Boohoo expects high costs to persist throughout the rest of this year but said it has a series of cost-cutting initiatives in place to manage the business.
Despite the cost-cutting, prices for products could also rise, with the company only committing to ‘mitigate where possible before passing prices on to consumers’.
Sales were up 14% on the year to £1.98 billion and remain well above pre-pandemic levels, as high streets closed and shoppers turned to online.
Rival fashion retailers Superdry, ASOS and Quiz were down 6.3%, 5.3% and 1.4% respectively in a negative read-across.
The dollar was mostly subdued ahead of the Fed decision. The pound was quoted at $1.2510 at midday on Wednesday, unmoved from $1.2511 at the London equities close Tuesday.
The euro was priced at $1.0522, lower against $1.0535. Against the yen, the dollar was trading at JP¥130.01, little changed from JP¥129.97.
Meanwhile, European Commission President Ursula von der Leyen unveiled a plan for the EU to stop Russian oil imports by the end of the year, as part of the bloc's latest round of sanctions against Moscow.
Brent oil was trading at $108.65 a barrel Wednesday at midday, higher against $106.12 late Tuesday.
The ban is to ‘maximize pressure on Russia,’ von der Leyen told a debate in the European Parliament on Wednesday in Strasbourg, France, adding the move ‘will not be easy’.
The proposal to deprive Russia of a significant revenue stream comes after weeks of negotiations as EU member states wrestled with the economic fallout of an oil embargo. The plan gained momentum after Germany, a huge importer of Russian energy, announced it would support a ban.
The ban is to be managed in a phased approach to preserve the bloc's economic stability and global oil market prices, von der Leyen said, with the aim to minimize ‘collateral damage to us and our partners’.
Crude oil imports are to be phased out first within six months and the bloc is to remove ‘refined products by the end of the year,’ von der Leyen said.
The OPEC+ group, led by Saudi Arabia and Russia, meets on Thursday to consider its production targets.
‘The expectation is that global crude flows will re-work around the EU ban, with more Russian oil heading to China and India while more crude from the US and the Middle East making its way to Europe,’ commented Stephen Innes, managing partner at SPI Asset Management.
‘Still, the likelihood is that there will be a downswing in Russian production that will tighten the global market, keeping a floor on prices at least for 2022.’
Gold stood at $1,870.05 an ounce, down slightly from $1,873.30 late Tuesday.
New York was pointed to a higher open ahead of the expected Fed rate hike.
The Dow Jones Industrial Average was called up 0.3%, the S&P 500 up 0.4%, and the Nasdaq Composite up 0.3%, based on futures trading. The stock indices had closed up 0.2%, 0.5% and 0.2% respectively on Tuesday.
Coffee house chain Starbucks late Tuesday reported second-quarter earnings growth despite margins coming under pressure.
Revenue for the second quarter ended April 3 rose 11% to $7.64 billion from $6.67 billion year-on-year, with global comparable store sales up 7%. Diluted earnings per share rose 3.6% to $0.58 from $0.56. Starbucks grew earnings despite its operating margin contracting to 17.1% from 19.3%.
The stock was up 6.0% in pre-market trade in New York.
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