London close: Stocks make gains ahead of crunch Fed decision

London stocks closed in positive territory on Wednesday, helped along by well-received updates from the likes of Smurfit and Reckitt, as investors pored over fresh data from across the pond ahead of the latest policy announcement from the Federal Reserve later.

The FTSE 100 ended the session up 0.57% at 7,348.23, and the FTSE 250 was ahead 0.36% at 19,639.09.

Sterling was also firmer, last trading up 0.07% on the dollar at $1.2036, and strengthening 0.19% against the euro to change hands at €1.1910.

“Stock markets are pushing higher ahead of the Federal Reserve meeting, even though it is widely believed the bank will reveal a large interest rate hike,” said Equiti Capital market analyst David Madden.

“According to interest rate futures, an increase of 75-basis points is tipped to be the most likely outcome, but at the same time, an increase of 100-basis points cannot be ruled out.

“In the past two weeks we have seen a couple of surprises from central banks, as the Bank of Canada and the European Central Bank lifted rates by larger amounts than anticipated.”

Madden said that, given Canada’s policymakers “upped the ante”, the Fed could use that as cover to press ahead with a 1% lift.

“The US consumer price index rate is at a 40-year high of 9.1%, and the central bank is determined to bring that down, but at the same time, the latest services purchasing managers’ index showed a reading of 47, which is in contraction territory.

“As a result, Jerome Powell and his colleagues might go with a 0.75% rise but leave the door open for another large hike in September.”

In economic news, shop prices rose even higher in the UK in July according to fresh industry data, as rampant inflation caused the cost-of-living crisis to bite harder.

The BRC-Nielsen monthly shop price index showed shop price annual inflation accelerated to 4.4% in July, up from 3.1% in June - above both the 12- and six-month average price increases of 1.5% and 2.8%, respectively.

It marked the highest rate of shop price inflation since the index first started in 2005, the British Retail Consortium said.

“Consumers’ household budgets are coming under increasing strain and shelf price increases in both food and non-food have accelerated in recent weeks as more cost price increases come through the supply chains,” said Mike Watkins, head of retail and business insight at NielsenIQ.

“The grocery industry in particular is under intense pressure as retailers try to shield customers from the full impact of inflation.

“At the same time there has been an increase in competitive intensity so customer retention over the summer holiday season will be key to help stem any further fall in volumes.”

On the continent, Goldman Sachs said a eurozone recession was almost certainly on the way in a research note.

The bank said it now expected a 0.1% contraction in the third quarter and a 0.2% contraction in the fourth, before growth resumed in the first quarter of next year.

It cited a deteriorating growth outlook, with the post-Omicron bounce in services largely over, reduced supply of Russian gas and high prices, and political instability in Italy, among other things.

"While the softening in industrial activity has been in train for some time, the marked slowing in services growth was a surprise, suggesting that the post-Omicron bounce in services is now mostly behind us," Goldman noted.

"Moreover, global growth momentum has continued to weaken - reinforcing our below-consensus forecasts for the US and China - consistent with a further sharp drop in euro area PMI new export orders."

Across the pond, America's shortfall on trade in goods with the rest of the world shrank more quickly than expected last month, as imports slipped.

According to the Department of Commerce, in seasonally adjusted terms the international trade deficit in goods narrowed in June at a month-on-month pace of 5.6%, from roughly -$104.0m to -$98.2bn.

Economists had pencilled in a decline to -$102.9bn.

US orders for goods made to last more than three years, meanwhile, posted a sharp and unexpected rise last month, albeit mainly on the back of a near doubling in orders for defence aircraft.

The Department of Commerce said total durable goods orders jumped at a month-on-month pace of 1.9% in June to reach approximately $272.6bn.

Economists had been expecting a 0.5% drop in total orders.

Finally in US data, pending home sales fell in June following a slight increase the month before, as mortgage rates rose, according to the National Association of Realtors.

Pending home sales declined by 8.6% on the month, taking the index to 91.0, while year-over-year, sales were down 20%, marking the slowest pace since September 2011.

On London’s equity markets, corrugated packaging company Smurfit Kappa was up 5.48% after it reported a rise in first-half profit and revenue despite increasing input costs and supply chain issues.

Industry peers Mondi and DS Smith also gained, rising by a respective 4.69% and 4.02%.

Consumer goods giant Reckitt Benckiser rallied 2.76% after it lifted its full-year sales outlook following a "strong" first half.

The group said second-quarter like-for-like revenue grew 11.9% at constant currency as it hiked prices by 9.7%.

It said it now expected like-for-like net revenue growth of 5% to 8%, up from previous guidance that it would be at the upper end of a range of 1% to 4%, while it also flagged growth in adjusted operating margins.

Lloyds Banking Group advanced 4.11% after it lifted its annual guidance, following a rise in net income for the half-year due to rising interest rates, and despite a fall in pre-tax profits.

Wizz Air ascended 10.38% despite reporting wider first-quarter operating losses as it was hit by higher fuel costs, while forecasting a material operating profit as revenue and pricing momentum continued to improve.

The eastern Europe-focussed low-cost carrier said levels of disruption at airports had also started to normalise, while its Luton-based peer easyJet gained 4.66% by the end of trading.

Clay bricks and concrete products manufacturer Ibstock jumped 8.69% after it lifted its full-year profit outlook, following reported a rise in first-half profit and revenue amid "robust" demand.

In the six months ended 30 June, pre-tax profit was up 32% at £51m, with revenue 28% higher at £259m.

Pub and hotel operator Marston's was up 3.57% even after it said total like-for-like sales for the 42 weeks ended 23 July were down 2% on the pre-Covid comparator in the 2019 financial year, as it warned of surging energy costs in the second half.

Like-for-like sales in the last 16 weeks to 23 July were 1% below the 2019 comparator, but in the first 12 weeks of the period sales were “slightly ahead”, the board said.

Fellow pub chains JD Wetherspoon and Mitchells & Butlers were 1.57% and 3.17% higher, respectively.

GSK eked out gains of 0.05% after it lifted its full-year outlook and posted a jump in second-quarter sales.

On the downside, student accommodation specialist Unite Group tumbled 7.71% even after it reported a jump in interim profits and said reservations were now ahead of pre-pandemic levels.

Rio Tinto lost 0.74% after the miner posted a decline in first-half profit and cut its dividend.

Provident Financial was 8.36% weaker despite the subprime lender swinging to an interim profit, following the wind down of its consumer credit division.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,348.23 0.57%
FTSE 250 (MCX) 19,639.09 0.36%
techMARK (TASX) 4,364.27 0.45%

FTSE 100 - Risers

Smurfit Kappa Group (CDI) (SKG) 2,850.00p 5.48%
International Consolidated Airlines Group SA (CDI) (IAG) 119.06p 5.21%
Mondi (MNDI) 1,483.00p 4.69%
Ocado Group (OCDO) 768.80p 4.46%
Lloyds Banking Group (LLOY) 45.32p 4.11%
Smith (DS) (SMDS) 276.90p 4.02%
Flutter Entertainment (CDI) (FLTR) 8,032.00p 3.91%
Entain (ENT) 1,181.50p 3.23%
InterContinental Hotels Group (IHG) 4,907.00p 3.21%
Rightmove (RMV) 623.60p 2.87%

FTSE 100 - Fallers

Unite Group (UTG) 1,089.00p -7.71%
Avast (AVST) 487.00p -1.91%
Dechra Pharmaceuticals (DPH) 3,580.00p -1.86%
SEGRO (SGRO) 1,035.00p -1.48%
Land Securities Group (LAND) 719.40p -1.43%
United Utilities Group (UU.) 1,058.50p -1.40%
British Land Company (BLND) 475.40p -1.35%
JD Sports Fashion (JD.) 126.10p -1.29%
Severn Trent (SVT) 2,873.00p -1.24%
Vodafone Group (VOD) 121.02p -1.10%

FTSE 250 - Risers

Wizz Air Holdings (WIZZ) 2,169.00p 10.38%
Ibstock (IBST) 195.10p 8.69%
Aston Martin Lagonda Global Holdings (AML) 453.80p 5.46%
easyJet (EZJ) 391.30p 4.66%
Jupiter Fund Management (JUP) 128.90p 4.46%
Liontrust Asset Management (LIO) 960.00p 4.12%
Network International Holdings (NETW) 195.80p 3.71%
TUI AG Reg Shs (DI) (TUI) 129.25p 3.44%
Mitchells & Butlers (MAB) 175.80p 3.17%
Allianz Technology Trust (ATT) 231.00p 3.12%

FTSE 250 - Fallers

Provident Financial (PFG) 191.00p -8.36%
JTC (JTC) 714.00p -4.42%
Hill & Smith Holdings (HILS) 1,250.00p -4.29%
Moneysupermarket.com Group (MONY) 208.20p -3.16%
Tritax Eurobox (GBP) (EBOX) 91.10p -2.77%
Helios Towers (HTWS) 135.60p -2.73%
Elementis (ELM) 104.10p -2.71%
LondonMetric Property (LMP) 239.00p -2.69%
Safestore Holdings (SAFE) 1,088.00p -2.68%
Grainger (GRI) 284.80p -2.47%