FTSE 100: London closes higher and Wall Street climbs as Fed rate-hike fears fade

Fed holds interest rates at 23-year high, as chair Jerome Powell cites 'lack of further progress' on inflation. (ASSOCIATED PRESS)

The FTSE 100 (^FTSE) and European stocks finished mostly higher after the US Federal Reserve held interest rates steady on Wednesday and chair Jerome Powell signalled the central bank is still leaning towards eventual cuts in borrowing costs.

• London’s benchmark index closed 0.7% higher at 8,177 points

• Germany's DAX (^GDAXI) closed flat after a mostly positive session but the CAC (^FCHI) in Paris slipped 0.7% into the red

• The pan-European STOXX 600 (^STOXX) finished in the red after being flat for most of the session

• Shell (SHEL.L) surpassed market expectations with a $7.7bn (£6.1bn) profit in the first three months of the year and announced fresh returns to shareholders.

• Across the pond, the S&P 500 (^GSPC) rose roughly 0.4%, while the Dow Jones Industrial Average (^DJI) gained 0.5%. The tech-heavy Nasdaq Composite (^IXIC) led the gains, up 0.7%.

• The pound (GBPUSD=X) was lower against the dollar at 1.2500

Follow along for live updates throughout the day:

LIVE COVERAGE IS OVER19 updates

Thu, 2 May 2024 at 11:30 am GMT-4, Pedro Goncalves

That is all we have time for today but do follow our US blog for the latest moving markets across the pond.

Hope you'll join us again tomorrow as we bring you the latest stock news.

Thanks,

PHG

Peloton to cut 400 jobs as boss steps down

Thu, 2 May 2024 at 10:44 am GMT-4, Pedro Goncalves

Peloton’s market capitalisation has fallen to about $1.2bn from a late-2020 peak of almost $50bn (REUTERS / Reuters)

Peloton chief executive Barry McCarthy is stepping down from his role as the exercise-bike maker launches a restructuring plan that will cut 15% of its workforce.

Shares tanked more than 14% as it announced the reductions, which amount to about 400 jobs worldwide.

The job cuts are just the latest round for the company, which announced in October 2022 that it was cutting about 500 jobs on top of the nearly 800 layoffs it made in August of that year.

McCarthy, who is also stepping down from his president and board member posts, will remain with Peloton as a strategic adviser until the end of the year.

The former Netflix and Spotify executive had succeeded former CEO and founder John Foley in 2022.

McCarthy said: “Hard as the decision has been to make additional headcount cuts, Peloton simply had no other way to bring its spending in line with its revenue.”

Peloton’s market capitalisation has fallen to about $1.2bn from a late-2020 peak of almost $50bn.

US jobless claims hold steady

Thu, 2 May 2024 at 10:07 am GMT-4, Pedro Goncalves

US jobless benefit claims flat (Hoptocopter via Getty Images)

The number of new claimants of jobless benefits in the US remained flat at 208,000 last week, official figures show.

Initial claims was slightly below analyst estimates of 211,000 for the week to April 27.

The four-week moving average of claims fell by 3,750 to 1,788,750, while the previous week’s average was revised down by 1,500 from 1,794,000 to 1,792,500.

Weekly unemployment claims are considered a proxy for the number of US layoffs in a given week and a sign of where the job market is headed. They have remained at historically low levels since the pandemic purge of millions of jobs in the spring of 2020.

Goldman Sachs abolishes EU cap on bonuses for UK staff

Thu, 2 May 2024 at 9:51 am GMT-4, Pedro Goncalves

Goldman Sachs has told staff that it will abolish the EU cap on bonuses for hundreds of its top UK-based employees, Sky News reports

This will allow it to make multimillion pound payouts to its best-performing traders and dealmakers.

EXCLUSIVE: Goldman Sachs is to abolish the EU cap on bonuses for hundreds of its top UK-based staff, paving the way for it to resume multimillion pound payouts to its best-performing traders and dealmakers. Staff have just been briefed by GS International CEO Richard Gnodde.

— Mark Kleinman (@MarkKleinmanSky) May 2, 2024

The old bonus rules capped banker bonuses at two times their annual salary, and were brought in after the financial crisis

Wall Street opens higher after interest rate reassurance

Thu, 2 May 2024 at 9:40 am GMT-4, Pedro Goncalves

Wall Street’s main indexes opened higher after the Federal Reserve left interest rates unchanged and quashed worries around potential rate rises.

The S&P 500 (^GSPC) rose roughly 0.6%, while the Dow Jones Industrial Average (^DJI) gained 0.5%. The tech-heavy Nasdaq Composite (^IXIC) led the gains, up 0.8%.

Stocks are recovering from Wednesday's volatile session dominated by the wait for the Federal Reserve's policy decision. Chair Jerome Powell played down the likelihood of an interest-rate hike, bringing relief to investors worried that recent signs of "sticky" inflation might prompt that move.

Virgin Media O2 loses 75,000 mobile customers

Thu, 2 May 2024 at 9:32 am GMT-4, Pedro Goncalves

Virgin Media O2 has reported lower customer activity over the first three months of 2024 before an increase in prices.

The UK telecoms giant said overall revenues dropped as it also witnessed lower demand for mobile handsets.

The group, which was formed in a £31bn deal in 2021, reported that total revenues were down 0.5% for the quarter to £2.59bn compared with the previous year.

It added that revenues were 4.3% lower year-on-year excluding its next-generation high-speed fibre operation Nexfibre.

The decrease was primarily driven by low-margin handset revenues, which dropped by 24.6%.

It meant that total mobile revenues were down 4.7% to £1.36bn despite an increase in mobile service revenues.

Virgin Media O2 said it saw “low customer activity” over the quarter with its fixed-line customer base – which covers broadband and landline – reducing by 2,000 to 5.8 million at the end of the quarter.

Its contract mobile base of customers also dipped, falling by 74,500 to 16 million at the end of the quarter.

It came ahead of an 8.8% price increase for its customers in April.

Bitcoin dips below $58,000 after record daily ETF sell-off

Thu, 2 May 2024 at 7:03 am GMT-4, Pedro Goncalves

Bitcoin (BTC-USD) has dipped below $58,000 (£46,339) after Wednesday saw a record $563m spot bitcoin ETF sell-off. This followed on from a trend developing throughout April, which marked the first month of net outflows from spot Bitcoin ETFs since their launch on 11 January.

Fidelity Wise Origin Bitcoin Fund (FBTC) led the way with outflows of over $191m, according to data sourced from Farside Investors. This was followed by Grayscale's Bitcoin Trust ETF (GBTC), with more than $167m; ARK 21Shares Bitcoin ETF (ARKB) with more than $98m; and BlackRock's iShares Bitcoin Trust (IBIT) nearly $40m.

Read the full story here

Trending tickers: Shell, Apple, Novo Nordisk and Standard Chartered

Thu, 2 May 2024 at 6:57 am GMT-4, Pedro Goncalves

Apple will report later today (REUTERS / Reuters)

Shell (SHEL.L) - The oil major reported stronger-than-expected first-quarter profit, boosted by higher refining margins and robust oil trading. The company also announced $3.5bn (£2.8bn) of share buybacks.

Apple (AAPL) - Apple will announce its second quarter earnings after the US market closes later this Thursday. Investors will be watching for key metrics that shape its stock trajectory.

Novo Nordisk (NOVO-B.CO) - Europe’s most-valuable company revealed better-than-expected profits for the first three months of the year as it races to boost output of its miracle Wegovy weight-loss drug.

Standard Chartered (STAN.L) - Standard Chartered posted higher-than-expected profits after a boost to income from higher interest rates and a strong performance in its trading business.

Read the full story here

Coutts to shift £2bn out of UK

Thu, 2 May 2024 at 6:35 am GMT-4, Pedro Goncalves

Coutts Bank in London (REUTERS / Reuters)

Private bank Coutts has revealed plans to shift an estimated £2bn of clients’ funds out of the London stock market into foreign company shares in another blow for the City.

The bank, founded in 1692 and still almost 30% owned by the taxpayer, told clients earlier this week that its “home bias” towards British company shares was an “anachronism” that needed “fundamental change”, in a story first reported by the Evening Standard.

The bank’s chief investment officer, Fahad Kamal, said the Coutts team was making a fundamental change in the coming months, moving towards global equities and away from its UK ‘home bias’.

“Currently, about 20% of a standard balanced portfolio here is UK stocks, which is something of an anachronism,” he said. “It would be closer to 3% or 4% if it were more commensurate with the proportion of UK stocks in global stock markets. So this is a recalibration. We are adjusting our compass accordingly.”

Shell fuels up shareholder rewards thanks to bumper gas profits, says Quilter

Thu, 2 May 2024 at 6:24 am GMT-4, Pedro Goncalves

Jamie Maddock, energy analyst at Quilter Cheviot, said Shell is winning from higher oil prices and rewarding investors nicely.

“Shell handsomely beat profit expectations, driven by its Integrated Gas division that benefited from strong trading and optimisation, as well as well as the fact that its gas field in Australia was operational for a longer period during the quarter. While hard to distinguish just how much Integrated Gas benefited from trading and increased production, if disproportionately, the latter it could lead to improved earnings expectations helping Shell shield itself from the volatile swings in commodity prices.

“The improved earnings translated into similarly improved cash flow that also beat expectations. With cash flow from operations standing at $16.1bn, this more than adequately covers capital spend needs, the large ongoing share buy back and the dividend all while swiftly reducing debt.

“Shell is winning from higher oil prices and has taken the decision to hold back on any increased capital spend, which is anticipated to remain flat through to 2025, irrespective of price. As such, this results in significant excess cash being generated from its operations, and this can amply fund the growing dividend while buying back 6-8% of outstanding shares per year. Shareholders are being well rewarded as Shell takes advantage of higher commodity prices and enhanced operational discipline, in recent years.”

OECD’s forecast not a surprise, says Hunt

Thu, 2 May 2024 at 5:17 am GMT-4, Pedro Goncalves

Chancellor Jeremy Hunt has said the OECD’s forecast isn’t a surprise.

"This forecast is not particularly surprising given our priority for the last year has been to tackle inflation with higher interest rates. But now we are winning that war, growth matters which is why it is significant that last month the IMF predicted the UK will grow faster over the next 6 years than any European G7 country or Japan. To sustain that we need to stick to our plan - competitive taxes, a flexible labour market and far-reaching welfare reform."

Revolution Bars confirms takeover talks

Thu, 2 May 2024 at 5:12 am GMT-4, Pedro Goncalves

Troubled bar chain Revolution has confirmed it held talks with rival operator Nightcap over a potential takeover deal.

Revolution Bars Group said on Thursday it held “an exploratory meeting” with Nightcap, which runs 46 bars including the Cocktail Club and Dirty Martini chains.

The firms held discussions around “a range of possible transactions”, including a possible offer for the entirety of Revolution, which also owns Peach Pubs and Revolucion de Cuba venues.

The confirmation followed a report by Sky News that Nightcap and nightclub owner Rekom both expressed an interest in buying all or part of Revolution.

It comes weeks after Revolution announced a major restructuring plan which could see 18 of its bars shut down.

The firm said it had been hammered by cost-of-living pressures and regular train strikes affecting its younger customer base.

Revolution also raised £12.5m through a fundraise to help support the plan, with backing from investors such as former Pizza Express chairman Luke Johnson.

The group also said it would assess a potential sale last month as it sought to secure its future.

US rates are in 'goldilocks territory', says GAM Investments

Thu, 2 May 2024 at 4:13 am GMT-4, Pedro Goncalves

Charles Hepworth, Investment director at GAM Investments says US rates are in 'goldilocks territory'.

“The US Federal Reserve concluded that the market gets what the market expects. No one really was expecting any move today, which is different to views at the start of the year. Given the current inflation dynamics, inflation’s last mile towards 2% has proven to be the longest one. Even if some are speculating no cuts at all this year, which would be a bold prediction, the majority are now expecting the Fed to make two 0.25% cuts by year end. It was welcome to hear in Powell’s press conference that any further hikes are most likely off the table which with the persistence in higher inflation prints would always be a possibility.

Therefore, tacit acknowledgement from Powell that rates have peaked was music to the markets’ ears. It seems that where they currently sit, rates are in goldilocks territory in their assessment – not too hot to damage growth and not too cold to lose a grip on inflation but enough to be restrictive enough where they need them to be. A dovish message from the Fed, or at least more dovish than expected and even if it did nothing, it is enough for risk assets to rally and start May off with a bit of a bang.”

Oil prices rebound

Thu, 2 May 2024 at 4:00 am GMT-4, Pedro Goncalves

Oil prices rose, rebounding from three days of losses on a big jump in US crude inventories that added to concerns about weakening demand.

Brent (BZ=F) was trading below $84 a barrel after slumping to the lowest since mid-March in the prior session, while West Texas Intermediate (CL=F) was near $79.

US crude stockpiles jumped 7.3 million barrels last week, the most since early February, according to data from the Energy Information Administration.

UK on track to be slowest-growing country in G7, warns OECD

Thu, 2 May 2024 at 3:47 am GMT-4, Pedro Goncalves

The UK economy is set for “sluggish” growth over the next two years and is likely to miss previous forecasts, according to economists.

The Organisation for Economic Co-operation and Development (OECD) has downgraded its UK growth projections for 2024 and 2025, indicating it will witness the weakest growth across the G7 group of major economies next year.

The organisation said in its latest economic outlook report that there are “some signs that the global outlook has started to brighten” amid easing inflation.

Global gross domestic product (GDP) is expected to grow by 3.1% this year, unchanged from 2023.

However, the UK’s economy is expected to grow at a much slower rate after interest rate rises in order to bring down inflation.

The economic organisation said “GDP growth is projected to remain sluggish” in the face of a “waning drag from past monetary tightening”.

The economy grew by 0.1% last year and is expected to see growth improve to 0.4% this year, the OECD said.

However, it represents a downgrade to forecasts after previously predicting 0.7% growth for 2024.

Co-operative Bank turnaround ‘materially complete,’ says boss

Thu, 2 May 2024 at 3:41 am GMT-4, Pedro Goncalves

The Co-operative Bank has said its transformation plan is “materially complete” ahead of its agreed merger with Coventry Building Society.

The banking firm said discussions over the deal, which will see the building society acquire Co-op Bank for up to £780m, are “well advanced” after completing significant due diligence.

It came as Nick Slape, the boss of the high street bank, said he is “very pleased” with its performance over the first quarter of 2024.

Co-op Bank said its financial performance is in line with expectations and held firm its guidance for the year.

On Thursday, the company also told shareholders its “multi-year transformation programme (is) materially complete”, after significant cost-cutting which included proposals to axe around 400 jobs earlier this year.

In March, it said it planned to reduce its roughly 3,000-strong workforce by around 12%, in a move affecting staff across the business, including at its branches.

The transformation plan has also included a £100m IT simplification programme.

The bank said it has made “significant progress” with IT changes, which are now close to completion.

Shell announces $3.5bn of share buybacks

Thu, 2 May 2024 at 3:39 am GMT-4, Pedro Goncalves

Shell (SHEL.L) reported stronger-than-expected first-quarter profit, boosted by higher refining margins and robust oil trading. The oil major also announced $3.5bn of share buybacks.

The group reported underlying earnings of $7.7bn (£6.1bn) for the first three months of 2024, down from $9.7bn (£7.7bn) a year earlier.

But the result was 6% higher than earnings in the previous quarter and well ahead of analyst estimates of $6.3bn (£5bn).

Shell CEO Wael Sawan described the results as “another quarter of strong operational and financial performance.”

The oil major announced a $3.5bn (£2.8bn) share buyback program, which it expects to complete over the next three months. Its dividend remains unchanged.

The company, which handed its shareholders $23bn in payouts last year, had one of its most profitable years on record in 2023 when it reported better than expected profits of more than $28bn for the year.

Asia overnight

Thu, 2 May 2024 at 3:32 am GMT-4, Pedro Goncalves

Stocks in Asia wobbled after a mixed finish on Wall Street with the Federal Reserve delaying cuts to interest rates.

The Nikkei (^N225) lost 0.1% to 38,236.07 with the Japanese yen under the spotlight, amid suspected government intervention to prop up the currency on Monday.

Hong Kong’s Hang Seng index (^HSI) added 2.4% to 18,191.43. The Hang Seng Tech index surged 4.3% after Chinese EV makers rose following April vehicle delivery updates.

Other markets in China remained closed for the Labor Day holiday.

Wall Street closed mixed after Fed decision

Thu, 2 May 2024 at 3:26 am GMT-4, Pedro Goncalves

Across the pond on Wall Street, US stocks were a mixed bag on Wednesday as investors digested commentary from the Federal Reserve chair Jerome Powell after the central bank held interest rates steady at its latest policy meeting.

The S&P 500 (^GSPC) and the Nasdaq Composite (^IXIC) fell more than 0.3%, while the Dow Jones Industrial Average (^DJI) rose 0.2%. All three indexes flipped from significant gains late in the volatile session.

“The committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” the Fed said in a statement that was largely unchanged from its statement after its previous meeting in March, when it also kept rates steady. “The committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”

Though some had hoped the Fed would soon cut interest rates, which are at their highest level since 2007, the annual rate of inflation has stubbornly remained above 3%. The Fed’s target rate is 2%.

You can read the full story here

Watch: Powell says interest rates will remain unchanged

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