he US Federal Reserve has increased benchmark borrowing costs by 0.75% for the second time in a row, in the latest sign of the stronger measures being taken by central banks to try and tame runaway inflation.
Lloyds Banking Group and drugs giant GSK have raised their 2022 guidance after publishing robust half-year results today.
The UK’s biggest lender reported “continued business momentum” and said asset quality was strong despite the cost of living pressures. Profits were lower at £2.8 billion due to comparisons with last year’s release of pandemic impairment provisions.
GSK’s first set of results since the demerger of its consumer healthcare business revealed that it now expects sales growth of between 6% and 8%, compared with 5% and 7% previously.
Shares in Virgin Wines fell 7.6% this morning after it posted a downturn in sales, signalling an end to the compan’s pandemic growth surge.
The company reported a £4.6 million drop in sales, while an 8% growth in membership of the firm’s ‘WineBank’ subscription scheme was partially offset by an increase in subscription cancellations. WineBank subscribers now represent 81% of consumer sales.
The Norwich-based company increased its market share from 6.1% to 8.4% over the past year, according to data from IBISWorld.
The results mark the company’s first full year of trading following its £110 million IPO on the AIM market in March 2021. Its share price has dropped 67% over the past year.
Wall Street retail stocks were stronger after the Fed hike, with some relief that policymakers did not opt for an even larger increase.
Before the 0.75% rise, there had been talk of a 1% move. Consumer stocks including retailers made gains, recovering from a hit taken by the sector after a profit warning this week from Walmart, one of its biggest names, which warned of faltering spending power amid soaring inflation.
The S&P index tracking consumer discretionary stocks was up 2.8%, compared with a 1.5% gain for the broader S%P 500.
Marcus Brookes, chief investment officer at Quilter Investors, said: “We are seeing clear evidence of a consumer slowdown with Walmart yesterday warning on Q2 and full year earnings due to pressure on general merchandise sales as consumers adjust to the squeeze on disposable incomes. A large part of the US economy is consumption and there is still a feeling that the US may be raising into a slowdown.
“That said the US may end up as the ‘least dirty shirt’ compared to the rest of the global economy as the Fed has a reputation for reversing course quickly if needed.”
The US Federal Reserve has increased benchmark borrowing costs by 0.75% for the second time in a row, in the latest sign of the stronger measures being taken by central banks to try and tame runaway inflation.
The move takes the Fed funds benchmark rate to a range of 2.25% to 2.50%, in line with City and Wall Street forecasts. The Federal Open Markets Committee has been increasing rates since March. It voted for a 0.50% rise in May and the first 0.75% raise came last month, the first of its size since 1994. The FOMC voted unanimously for tonight’s move.
Tech stocks led the gains in the opening minutes of trading in New York after upbeat results from Google owner Alphabet, Spotify and Microsoft which surpassed analyst expectations. The Nasdaq-100 technology sector index climbed 2.5%.
All eyes will now turn to the US Federal Reserve as it makes a decision on how high interest rates will rise to tackle soaring inflation. A 75 basis point rise forecast by analysts would represent the fastest two-month rate rise since the 1980s.
Investors will also be keeping an eye out for earnings from social media firm Meta to see if advertising revenue slows after lacklustre earnings from rivals Twitter and Snap last week.
Spotify shares shot up 11.9% in opening trading in New York after the music streaming service reported a 14% jump in paying subscribers.
The company posted revenues of 2.98 billion euros, up 23% on the previous year and surpassing analyst expectations.
The strong results were damped by a second-quarter loss of 194 million euros.
The streaming service now has a total of 433 million monthly users, the majority of whom are not paying subscribers. Non-paying subscriber numbers grew faster than paid subscribers as consumers make tricky choices about which subscriptions to hold on to amid mounting cost of living pressures.
Student accommodation provider Unite is eyeing the London market as it ramps up expansion plans.
The business posted a more than doubling of pre-tax profits to £334 million after students returned to campuses following the lifting of coronavirus restrictions. The company announced a dividend of 11p per share.
Unite boss Richard Smith told the Standard: “London is a really important market for us – it’s probably the most under-supplied market in the UK.
“A large part of our development pipeline is for London.”
Smith said debt had been the biggest cost increase to the firm amid rising interest rates. 25% of the company’s debt is not set at fixed rates.
Unite’s shares fell 5.7% after market is opened this morning.
Reckitt Benckiser, the global consumer goods business that is home to brands such as Dettol, Cillit Bang and Durex, has posted a leap in first-half revenue as people shop to reflect that Covid has become part of everyday life.
The business said it had introduced cost-cutting measures of £370 million that had helped it become a “stronger, more resilient business” during the first half of the year and said that its brands that were “less sensitive to the impact” of the coronavirus pandemic had also delivered double-digit growth in “extremely challenging circumstances”.
Reckitt said it had driven revenue growth and market share momentum across its product range in extraordinary conditions including inflationary pressures and supply chain failures.
“We have built a stronger, more resilient business around our portfolio of trusted brands in growth categories. Despite challenging conditions, we are confident about the rest of the year, we are already delivering sustainable mid-single digit net revenue growth,” said Reckitt. boss Laxman Narasimhan.
It made a profit of £1.7 billion compared with a £1.9 billion loss a year ago. The divi is held at 73p. Revenue was up 8.6%
Reckitt shares climbed 3% this morning to 6,570p.
A sunny outlook for summer sales at UK theme parks and holiday resorts means the maker of Vimto is optimistic that it can build on improved sales, which were lifted by return of thirsty commuters.
“If people stay in the country and the sun shines, that’s good news for soft drinks producers,” said Andrew Milne, CEO of Vimto’s parent Nichols. “The weather we have seen in the last few weeks is very welcome.”
The end of Covid restrictions helped its first-half profit before tax reach just above over £10 million, up 17%. It hopes for a boost from the football World Cup in November and December.
Nichols share price dropped 2.6% after markets opened this morning.
Wizz Air today became the latest airline to reveal turbulent losses due to disruption at airports.
The low-cost easyJet rival plunged to an €285 million (£240 million) deficit for the last three months alone. Across the industry, carriers have lost billions as they fight soaring fuel costs, cancelled flights and increasingly irate customers.
Chief executive József Váradi noted: “Fuel prices for the quarter were double pre-pandemic levels. Lingering restrictions from Covid-19 remained, particularly during April and May, while the war in Ukraine and supply chain disruptions affecting air traffic control, security and ground operation resources have impacted our utilisation.”
Wizz Air is likely to cut its summer flying schedule further due to a staff squeeze that seems to have affected all airlines apart from Ryanair.
The shares have halved this year but rose 109p to 2073p today, valuing the business at £2.1 billion.
A blend of falling commodity prices and rising costs squeezed profits at iron ore producer Rio Tinto, where earnings fell by almost $4 billion in the first half.
The Anglo-American mining giant relies on global economic growth to create demand for the metals it produces. It has previously warned of the impact of Russia’s invasion of Ukraine and the subsequent global tightening of monetary policy to control the wave of inflation as war began.
Underlying earnings of $8.6 billion for the six months to the end of June were lower than the $12.2 billion the previous year. Rio announced plans to pay out $4.3 billion in interim dividends, in what it called its “second highest” such payout ever.
The mining industry has also been struggling with labour shortages. Rio said its production in the period was “largely flat”. In the run-up to today’s results, Rio warned of “supply bottlenecks” in the eurozone, with “energy security” key for the area.
CEO Jakob Stausholm, said the “market environment has become more challenging” toward the end of the first half of the year.
Shares fell almost 4% to 4646p.