Wall Street and the FTSE were down on Wednesday. Money markets expect the US central bank to hold rates steady today and are pricing in just one rate cuts this year, down from around six at the start of 2024. (Jose Luis Magana, Associated Press)
Wall Street stocks followed the FTSE 100 (^FTSE) lower on Wednesday ahead of the latest Federal Reserve meeting this evening.
Money markets expect the US central bank to hold rates steady today and are pricing in just one rate cuts this year, down from around six at the start of 2024, according to LSEG data.
Russ Mould, investment director at AJ Bell, said: "It's decision day on interest rates in the US and while the Federal Reserve is almost certain to stick with the status quo, there will be considerable interest in the accompanying commentary. Will markets have to get used to the idea of zero cuts in 2024, having started the year with hopes for rates to be materially lowered?"
It came as UK house prices fell by 0.4% in April, as rising borrowing costs took their toll. This was after a 0.2% month-on-month drop in March.
According to Nationwide, prices on an annual basis, were 0.6% higher compared to 1.6% in March. Economists had expected a small monthly rise of 0.2%.
Robert Gardner, Nationwide’s chief economist, said: “The slowdown likely reflects ongoing affordability pressures, with longer term interest rates rising in recent months, reversing the steep fall seen around the turn of the year.
"House prices are now around 4% below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects."
London’s benchmark index was 0.3% down by the end of the session
Germany's DAX (^GDAXI) and the CAC (^FCHI) in Paris were both closed for a holiday
Wall Street opened lower as US job openings hold steady in March
The pound was (GBPUSD=X) flat against the dollar at 1.2491
Follow along for live updates throughout the day:
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LaToya Harding
Blog close
Well, that's all from us today, be sure to join us again tomorrow when we pickup all the early morning reactions from the Federal Reserve's interest rate decision.
As a reminder, financial markets expect the US central bank to hold rates steady today and are pricing in just one rate cuts this year, down from around six at the start of 2024, according to LSEG data.
It will be the sixth straight time rates are left on hold to curb stubborn inflation.
Have a good evening all
LaToya Harding
Starbucks slumps as customers cut back on coffee
Starbucks stock plummeted on Wednesday after it revealed sales fell for the first time since the beginning of the pandemic.
Shares slipped plunged 15% after the opening bell as customers cut back on costly coffee
Net revenues fell2% to $8.6bn (£6.9bn) in the first three months of 2023, as it cut its full-year revenue growth forecast to the low single digits.
Laxman Narasimhan, chief executive, said:
"In a highly challenged environment, this quarter’s results do not reflect the power of our brand, our capabilities or the opportunities ahead.
"It did not meet our expectations, but we understand the specific challenges and opportunities immediately in front of us.
"We have a clear plan to execute and the entire organization is mobilised around it. We are very confident in our long-term and know that our Triple Shot Reinvention with Two Pumps strategy will deliver on the limitless potential of this brand."
LaToya Harding
Virgin Money offers 10% bonus rate for current account switchers
Virgin Money has launched a new current account switching offer, at a time when several cash sweeteners for people to move their bank have vanished.
The new current account offer gives switchers to Virgin Money’s current accounts – the Virgin Money M Account, M Plus Account and Club M Account – a bonus interest rate of 10% gross fixed on current account balances up to £1,000 for a year from July 1 2024 to June 30 2025.
Both the Virgin Money M Plus Account and Club M Account already offer an interest rate of 2.00% gross (variable) on current account balances up to £1,000.
New customers switching to either one of these accounts will have an additional 10% rate gross (fixed) on balances up to £1,000 for a year, equating to 12% when the existing rate is added to the bonus.
Read more here
LaToya Harding
Flutter shareholders vote to move from London to New York
Flutter’s shareholders have approved the company's plans to move its primary stock market listing from London to New York, in another blow to the City.
Around 98% of investors voted in favour of the Paddy Power owner’s move to the US. It comes as the company seeks to cash in on rising demand for sports betting in America.
Flutter announced in January that it would be letting shareholders vote on making New York its primary listing.
It is now the latest in a growing list of public companies moving away from London, weakening the capital’s standing as an international financial centre.
LaToya Harding
US job openings remain steady in March
US job openings held steady in March, suggesting demand for workers is stabilising at an elevated level.
According to the US Bureau of Labour Statistics, there were 8.5 million job openings on the last business day of the month — slightly lower than the previous month of 8.8 million vacancies.
The number of hires “changed little”, according to the latest JOLTS report, at 5.5 million while the number of total separations decreased to 5.2 million.
Around 3.3 million workers quit their jobs, the report found, down from 3.5 million in February, meanwhile 1.5 million were laid off or discharged, down from 1.68 million a month earlier.
LaToya Harding
KFC owner reports fall in profits
A brightly illuminated red KFC logo on a store facade, highlighting the iconic brand during the evening. The image focuses on visual branding and corp (Marcus Photobank)
Yum Brands, the company behind Pizza Hut, KFC and Taco Bell, has reported a fall in profits and like-for-like sales. Sales fell for the first time since the pandemic in 2020.
It missed expectations by reporting a 3% drop in same-store sales in the first quarter of this year, with GAAP operating profit declining by 1%.
Revenue declined 2.9% in the first three months of the year, with same store sales at KFC down 2pc amid a slowdown in the US.
David Gibbs, CEO, said:
“Despite a difficult operating environment, we delivered 6% Core Operating Profit growth demonstrating the resilience of our business model.
"As expected, same-store sales were pressured this quarter, but we are encouraged by strong 2-year same-store sales growth and positive momentum exiting the quarter.”
LaToya Harding
AMD slips after lighter-than-anticipated guidance
AMD (AMD) reported first-quarter sales on Tuesday that were slightly ahead of Wall Street expectations, and provided an in-line forecast for the current quarter.
However, lighter-than-anticipated guidance for the current quarter sent the stock lower. Shares in the chipmaker were down about 6% in pre-market trading on Wednesday.
AMD said it expects about $5.7bn in sales in the current quarter, in line with Wall Street estimates of the same approximate total. That would represent about 6% annual growth.
The chipmaker reported adjusted earnings per share (EPS) of $0.62 on revenue of $5.5bn. Wall Street was looking for adjusted EPS of $0.61 on revenue of $5.45bn.
Net income came in at $123m, or 7 cents per share, versus a net loss of $139m, or 9 cents per share, during the year-earlier period. Revenue was up about 2% from a year earlier.
The company projected that its MI300 lineup – a family of so-called AI accelerators – will generate about $4bn in revenue this year. Though that’s up from an earlier prediction of $3.5bn, some investors were hoping for as much as $8bn, according to analysts.
02 February 2024, Hesse, Frankfurt/Main: A stock trader watches his monitors on the floor of the Frankfurt Stock Exchange. Supported by price gains on Wall Street and strong figures from two US technology giants, the German stock market started the morning with clear gains. Photo: Arne Dedert/dpa (dpa, dpa picture alliance)
Wall Street is set to open lower today as traders look ahead to the latest decision on interest rates from the Federal Reserve.
Money markets expect the US central bank to hold rates steady today and are pricing in just one rate cuts this year, down from around six at the start of 2024, according to LSEG data.
LaToya Harding
Scottish economy shrinks
Scotland’s economy is estimated to have contracted 0.3% in February, according to figures from the Scottish Government.
The latest report showed that onshore gross domestic product (GDP) had contracted during the month, despite growing 0.6% in January.
The Scottish government said:
“Although monthly GDP has fluctuated recently, the trend in underlying quarterly GDP has been broadly flat since the end of 2021.”
The latest figures show that GDP only grew by 0.1% in 2023, with this revised down from an initial estimate of 0.2% growth over the year.
However, in the three months to February, GDP was estimated to have grown by 0.4% when compared with the previous three-month period. This was an improvement from the 0.5% decline in the final quarter of last year.
LaToya Harding
Aston Martin shares skid
Shares in Aston Martin were lower on Wednesday after it reported a pre-tax loss of £138.8m in the first quarter. This was 87% more than the £74.2m it lost in the first three months of 2023.
Sales fell by a quarter, to just 945 vehicles, it said.
Boss Lawrence Stroll said:
“2024 is a year of immense product transformation at Aston Martin, with the introduction of four new models to the market before the end of the year.
"Our first quarter performance reflects this expected period of transition, as we ceased production and delivery of our outgoing core models ahead of the ramp up in production of the new Vantage, upgraded DBX707 and our upcoming V12 flagship sports car which we’ve confirmed today.
"As part of our ongoing programme of ultra-exclusive models, we will deliver a new Special in the fourth quarter of the year.
It comes after the luxury carmaker revealed last month that it has hired Adrian Hallmark to become its next chief executive from October.
LaToya Harding
Who is the breadwinner in your family and does it matter for your finances?
Breadwinners seem like an old-fashioned concept, but they’re quietly thriving in homes around the country. On average in a couple, one of you will earn around three quarters of the income, and in three quarters of relationships, this person is a man.
Women earn as much as, or more than, their partner in one in four households, and while this is up from one in five 20 years ago, it demonstrates how slowly society is changing, and how common it still is to have a main breadwinner.
We know from gender pay gap data that women and men earn very similarly while they’re starting out. However, over time this gradually shifts, and at the age of 40 – when often there’s one child or more on the scene, or one parent has spent years juggling work and care – a gap opens up between men’s earnings and women’s. This is often when the man becomes the main breadwinner, and the older a couple are, the more likely the man is to carry most of the earning responsibility.
And it is a responsibility. Studies have shown that being a breadwinner comes with emotional baggage for men. One US study showed that over a 15-year period, men’s health and happiness fell when they became the breadwinner.
UK manufacturing slipped back into contraction last month new orders declined and cost pressures rose.
According to the latest figures from S&P Global’s manufacturing, UK PMI dropped to 49.1 in April, down from March’s 20-month high of 50.3.
Any reading below 50 shows a contraction.
New orders fell and manufacturers reported weaker demand from both domestic and overseas customers.
New export orders have now fallen for the last 27 successive months, with reports of weaker intakes from Germany, Ireland, Asia and the US.
Rob Dobson, director at S&P Global Market Intelligence, said:
"The sector is still besieged by weak market confidence, client destocking and disruptions caused by the ongoing Red Sea crisis, all of which are contributing to reduced inflows of new work from domestic and overseas customers, with specific reports of difficulty securing new contract wins from Europe, the US and Asia."
LaToya Harding
What to expect from the Fed this evening
Federal Reserve Chair Jerome Powell arrives for the plenary session of the International Monetary and Financial Committee (IMFC) meeting, during the World Bank/IMF Spring Meetings at the International Monetary Fund (IMF) headquarters in Washington, Friday, April 19, 2024. (AP Photo/Jose Luis Magana) (Jose Luis Magana, Associated Press)
It will be a wait-and-see meeting later today with no change expected from the US Federal Reserve.
There is a line in their statement to watch out for which has for the last three months stated that “inflation has eased over the past year but remains elevated”.
If they revert to “inflation remains elevated” or some other comment about disinflation stalling, then we know where they are, said Neil Wilson of FinalTo.
He added:
"A big question for the market is whether the Fed sticks to its belief that inflation is coming down, or whether it throws in the towel and says ‘yeah we got it wrong again, we are going to have to stay higher for longer’.
"Which takes to the all-important data, which could be about to surprise again. Morgan Stanley expects inflation data “to reverse to downside surprises in April.
"We don’t have a fresh Summary of Economic Projections this time so the focus is on Powell. A couple of weeks ago, after three hot CPI prints on the bounce, Powell warned that recent inflation data indicated that “it’s likely to take longer than expected" for the FOMC have confidence inflation is returning to 2%,"
LaToya Harding
Oil falls for third day on Middle East ceasefire optimism
Oil prices slipped more than 1% on Wednesday, losing ground for a third consecutive day amid hopes of a ceasefire agreement in the Middle East. It also comes amid rising crude inventories and production in the United States.
Expectations that a ceasefire agreement between Israel and Hamas could be in sight have grown following a renewed push led by Egypt, even as Israeli Prime Minister Benjamin Netanyahu pledged to go ahead with an assault on Rafah.
Brent crude futures (BZ=F) for July fell 95 cents to $85.38 a barrel, before paring back losses, while US West Texas Intermediate crude futures for June dropped $1.16 to $80.77 this morning. Both benchmarks were down more than 1%.
Ole Hansen of Saxo Bank said:
"The crude market is weighed down by continued hopes for a ceasefire. In addition, stubborn U.S. inflation has further reduced rate cut expectations."
LaToya Harding
GSK boosts profit outlook amid vaccine demand
GSK shares have popped this morning, up as much as 2% after it raised its full-year profit forecast and said sales would be higher in the first six months of the year.
The company predicted higher sales from drugs to treat HIV, infectious diseases and respiratory conditions, expecting core earnings per share to rise to between 8% to 10%, having previously estimated 6% to 9%.
It revealed a 16% increase in vaccine sale in the first three months of the year, led by its shingles vaccine Shingrix, which was up 18% to £900m.
Emma Walmsley, chief executive, said:
"We have made a strong start to 2024, with another quarter of excellent performance and continued pipeline progress, including positive data read outs for 4 phase III medicines.
"These, together with other R&D achievements, mean we have strengthened prospects for growth in all of our key therapeutic areas this quarter: infectious diseases, HIV, respiratory/immunology and oncology.
"We expect this strong momentum to continue, and look forward to delivering another year of meaningful growth in sales and earnings in 2024.
LaToya Harding
Next issues summer sales warning
Slough, UK. 3rd February, 2024. The Next Store at the Bath Road Shopping Park in Slough, Berkshire is relocating to new premises at the Shopping Park. Credit: Maureen McLean/Alamy (Maureen McLean)
Next reported better-than-expected first quarter sales but warned that it expects early summer trading to slip.
It said: “We expect the sales performance in the second quarter to be weaker than the first quarter because last year benefited from particularly warm weather from late May through to the end of June.”
The high street bellwether said full-price sales rose by 5.7% in the 13 weeks to 27 April, ahead of its guidance for 5% growth.
It reiterated its sales and profit guidance, with profit before tax to rise 4.6% to £960m.
Neil Shah, director of research at Edison Group, said
"The expectation of rising wages in the UK freeing up consumer spending on fashion bodes well for NEXT, whose performance is a closely watched indicator of consumer demand in the UK.
"The reaffirmation of profit guidance underscores management’s confidence in sustaining momentum throughout the fiscal year."
LaToya Harding
Amazon stock pops after earnings beat
Amazon (AMZN) reported first quarter earnings that topped Wall Street estimates on the top and bottom lines, sending shares of the retail giant up around 2% in pre-market trading on Wednesday.
Powered by a strong showing from its cloud computing segment, Amazon continued a wave of Big Tech results that have mostly wowed Wall Street even as investors turn their focus to the conclusion of the Fed's May policy meeting on Wednesday.
Net sales rose 13% from the same period last year to $143.3 billion, Amazon reported late Tuesday, topping analyst expectations of $142.6 billion, per Bloomberg data.
The beat was driven by a 16% jump in Amazon Web Services (AWS) revenue, which Amazon said is on course to generate $100 billion annually.
The company reported adjusted earnings per share of $0.98 versus consensus estimates of $0.83.
LaToya Harding
Just two BoE interest rate cuts expected this year
Financial markets are expecting just two Bank of England (BoE) cuts in 2024, as several lenders have recently raised rates – adding to pressure on homebuyers and those looking to remortgage.
According to the latest data from the financial information service Moneyfacts, the average two-year fixed residential mortgage rate is still creeping back up towards the 6% mark last seen since December.
Halifax is the latest lender to announce higher rates, with a plan to put up the cost of much of its mortgage range by 0.2 percentage points on Thursday.
Michelle Lawson, director at mortgage broker Lawson Financial, warned the market would not recover until the Bank of England cuts its base rate.
She said:
“Rising mortgage rates have injected uncertainty into the market over the past month or so. Though there is still demand, we need a base rate cut and a Stamp Duty incentive to kickstart the market and get things moving again.
"Also, a General Election needs to be called sooner rather than later. The absence of a date for the General Election is adding to the mood of caution.”
Buyers have become cautious amid rising mortgage rates, which has led to the slump in house prices.
LaToya Harding
UK house prices dip in April
UK house prices fell unexpectedly for the second month in a row in April, as prospective homeowners continue to be hit with higher mortgage rates.
Property prices dropped by 0.4% between March and April, according to the Nationwide house price index. Economists had expected a small monthly rise of 0.2%.
The average UK home was worth £261,962, which was 0.6% higher than the same month last year, a slowdown from the 1.6% annual increase recorded in March.
“The slowdown likely reflects ongoing affordability pressures, with longer term interest rates rising in recent months, reversing the steep fall seen around the turn of the year,” said Robert Gardner, Nationwide’s chief economist.
LaToya Harding
Asia and US stocks
Stocks in Asia fell overnight with most of the markets in the region closed for a holiday.
The Nikkei (^N225) lost 0.3% on the day in Japan after the country’s factory activity experienced a milder shrink in April. The manufacturing purchasing managers’ index from au Jibun Bank rose to 49.6 during the month from 48.2 in March.
A PMI reading under 50 represents a contraction, and a reading of 50 indicates no change.
Meanwhile the Hang Seng (^HSI) was closed in Hong Kong. The Shanghai Composite (000001.SS) was 0.3% down by the end of the session.
Across the pond on Wall Street, US stocks closed out their worst month since September.
The S&P 500 (^GSPC) dipped 1.6% to cement its first losing month in the last half a year. Its momentum slammed into reverse in April, falling as much as 5.5% at one point, after setting a record at the end of March.
The Dow Jones Industrial Average (^DJI) dropped 1.5%, and the tech-heavy Nasdaq (^IXIC) index lost 2% last night.
The yield on benchmark 10-year US Treasury bonds rose to 4.68% from 4.61% just before yesterday’s release of data on employee wages and benefits.
LaToya Harding
Coming up...
Good morning and welcome back to our markets live blog, it's US interest rate decision day.
Follow along to see the lead up to the Fed's announcement at 7pm this evening, and stay tuned for what else is moving markets and happening across the global economy.
Here's a quick look at what's on the agenda for today:
7am: Nationwide house price index for April
7am: Trading update: Next, Haleon, Domino's Pizza
9am: Eurozone manufacturing PMI for April
9.30am: UK manufacturing PMI for April
3pm: US JOLTS survey of job vacancies
7pm: US Federal Reserve sets interest rates
8.30pm: US Auto Sales
Watch: Why interest rates matter to bonds, stocks and cash
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