A raft of corporate earnings released on Wednesday morning have weighed on the FTSE 100 as investors digested updates from companies including Barclays, Reckitt Benckiser, Standard Chartered and WPP.
The market’s attention has shifted to corporate progress this week as Rishi Sunak’s appointment quells political turmoil.
A trend is building among the FTSE 100’s constituents that is indicating higher revenue figures – and even profits – are not enough to cause a positive reaction in companies’ share prices.
Barclays is a perfect examples. Revenue has increased, profits beat expectations, but share are down, weaker by 1.5% at the time of writing.
It was a similar story for HSBC yesterday. Standard Chartered was down 4.5% at the time of wiring after operating income rose 15% in the third quarter.
There is a clear theme in the banks reporting so far. The benefits of higher interest rates are largely priced in and investors are choosing to focus on the outlook. Potential provisions for bad debts in the coming quarters is a concern for investors as banks prepare for defaults during an economic downturn.
Lloyds’ quarterly updated will be closely watched tomorrow.
Margin pressure
Reckitt Benckiser was the FTSE 100’s top faller, down 5.4% as the consumer company reported higher revenues but falling volumes. Inflation was driving prices higher, but consumers were buying less and squeezing Reckitt’s margins.
Margin pressure is also a problem at WPP. Revenue grew 10.3% on a like-for-like basis but the advertising giant reduced operating margin guidance to 30 to 50 bps, down from 50 bps previously.
WPP shares fell 2.4% to 750p.
Fresnillo was the FTSE 100’s top riser after the precious metals miners improved their guidance as production volumes increased. Fresnillo shares were 2.4% higher at the time of writing.