FTSE 100 Live: JP Morgan earnings fall short, big US rates rise expected

Financial results from JP Morgan Chase and Morgan Stanley fell short of expectations as inflation and interest rate pressures hit the US economy.

Both reported lower profits due to loan loss provisions, but the main focus is on their guidance for the rest of the year.

The updates come a day after US inflation hit 9.1%, fuelling speculation of one percentage point hike in US interest rates.

FTSE 100 Live Thursday

• Rates rise pressure hits markets

• Barratt Developments ups guidance

• Car insurer warns over cost inflation

US stocks enter fifth day of falls amid investor recession fears

15:06 , Simon Hunt

The S&P 500 entered its fifth consecutive day of losses in New York as investors weighed the prospects of a full basis point rise in interest rates by the Federal Reserve amid persistent inflationary pressure.

The falls were led by meagre earnings from top investment banks JPMorgan and Morgan Stanley, which fell short of analyst expectations. JPMorgan shares dropped 3.90%.

JPMorgan boss Jamie Dimon warned of serious consequences for the global economy for the foreseeable future as a result of “geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices.”

The gap in US treasury yields between the two-year and ten-year benchmarks signal growing investor sentiment that a recession is on its way.

Morgan Stanley investment revenue sinks

13:55 , Simon Hunt

Investment banking revenue at Morgan Stanley sunk 55% to $1.07 billion, worse than analyst expectations as the inflation and interest rate pressures take their toll on the banking sector.

The New York-based bank also saw advisory revenue fall 9.9% to £598 million while debt underwriting revenue dropped 49% to $326 million.

The revenue falls were partially offset by stronger performance in its fixed income arm, which saw sales up 49% to $2.5 billion.

JPMorgan shares tank after earnings miss

12:17 , Simon Hunt

Shares in US invesment bank JPMorgan dropped 5.2% in premarket trading after the company posted results that fell short of analyst expectations.

The firm reported investment banking revenue of $1.35 billion, over $500 million lower than market expectations, while equities trading revenue of $3.08 billion surpassed predictions.

JPMorgan’s peers Citigroup and Bank of America each fell 2% on the news.

FTSE 100 off 1%, Sabre shares slide

10:33 , Graeme Evans

Sabre Insurance shares slid 35% today after it warned over the price impact of current “extraordinary” levels of inflation.

The company, which sells policies through brokers as well as directly via its brands Go Girl and Insure 2 Drive, has been forced into a significant repricing of new business in an effort to offset rapidly rising claims costs.

Despite price increases of about 19% year to date, it said the inflationary pressures will continue to have an impact.

Chief executive Geoff Carter added: “The strong recent progress in the business will be impacted in 2022 by the need to reflect the current extraordinary inflationary pressures.”

Sabre’s shares slumped by 67.6p to 121p today, while FTSE 100-listed Admiral dropped 7% and Direct Line Insurance by 5%.

Analysts at Peel Hunt cut their 2022 earnings forecast on Sabre by 65% today. They added: “We have seen this play out during the pandemic, but this time the margin impact is more acute as inflation is accelerating faster than Sabre can keep up with its pricing assumptions.”

The slide for the insurance sector came during another down day for the wider market, with the FTSE 100 index off 1% or 67.68 to 7088.69.

Centrica was one of the best performing top flight stocks after analysts at JP Morgan raised their price target on the British Gas owner to 120p. Shares lifted 1.36p to 85.72p.

The UK-focused FTSE 250 fell by 0.3% or 63.59 points to 18,647.77. Gaming technology business Playtech slumped 12% after TTB Partners blamed current market conditions for its decision to pull the plug on long-running takeover talks.

Upper Crust and Camden Food travel food business SSP also fell 3%, despite forecasting full-year sales and earnings towards the upper end of expectations.

Busier airports, including “longer dwell times” for passengers, mean revenues are running 13% lower than in 2019, compared with 36% down in the first half. Rail commuter travel continues to recover at a slower pace, however.

Consumer reviews business Trustpilot was another stock under pressure, with shares off 12% or 11p to 82.95p. This came despite sticking to revenues guidance for this year and reiterating its hopes to break even in the 2024 financial year.

FTSE 100 lower, Playtech falls 12%

08:40 , Graeme Evans

The FTSE 100 index and FTSE 250 are down by about 0.2%, at 7136.23 and 18,680.85 respectively.

Centrica was the biggest riser in the top flight after analysts at JP Morgan raised their price target on the British Gas owner to 120p. Shares were 1.36p higher at 85.72p.

Car insurers came under pressure after FTSE All-Share listed Sabre Insurance said its 2022 performance will be impacted by the need to reflect “extraordinary inflationary pressures” across its current policies and prior-year claims reserves.

Its shares fell by a third, while FTSE 100-listed Admiral fell 4% and Direct Line Insurance by a similar level in the FTSE 250 index.

Gaming technology business Playtech was also under pressure, falling 12% as it emerged that potential bidder TTB Partners had pulled its interest in a takeover due to current market conditions.

Barratt ups profits guidance, shares fall

08:18 , Graeme Evans

Barratt Developments today forecast adjusted pre-tax profits of at least £1.05 billion for the year to 30 June, a performance slightly ahead of current market expectations. Its forward sales are also in a healthy position, the housebuilder added.

Chief executive David Thomas said: "We have delivered an excellent performance this year, reflecting the strong customer demand for our homes and the productivity of our sites.”

He described the housing market as robust, adding that his company had the flexibility to react to changes in the operating environment.

Barratt shares opened 4% lower today, despite the improved profits guidance. They are down by a third over the last year and almost 50% compared to the most recent peak achieved just prior to the pandemic in February 2020.

Richard Hunter, head of markets at Interactive Investor, said: “Barratt has provided further proof, if it were needed, of the growing chasm between the actual trading performances and the depressed share price performances within the sector.”

Wall Street eyes 1% rates rise

08:03 , Graeme Evans

Wall Street closed lower last night after a bigger-than-expected June inflation reading of 9.1% raised the prospect of a full percentage point rise in US interest rates.

Expectations for the Federal Reserve funds rate, which currently stands at 1.75%, had previously been for it to go up by 0.75% later this month for a second meeting in a row.

But the inflation figure was much stronger than the 8.8% forecast, with little in the way of underlying trends to suggest that price pressures are near their peak.

Atlanta’s Federal Reserve president Raphael Bostic expressed concern at the strength of the June number and said that “everything is in play” for July’s meeting.

Canada’s central bank later fuelled America’s rate rise jitters when its members voted to increase the country’s base rate by 1% rather than the 0.75% expected.

With policymakers poised to take an even more aggressive stance, the US dollar index today remained at parity against the euro and $1.185 versus the pound.

At a time when the US economy is showing signs of slowing, the prospect of increasingly tight monetary policy meant the S&P 500 opened 1.5% lower yesterday. It steadied to close the session 0.5% down, but US futures markets are pointing to a weak start later.

The focus now turns to second quarter earnings from J P Morgan Chase, which is America’s biggest bank and seen as an economic bellwether. The figures are due before Wall Street’s opening bell.