After a couple of soggy sessions following a series of fresh record highs, the FTSE 100 was helped higher by strong corporate earnings and a reasonably positive response to the Federal Reserve’s interest rate decision.
The FTSE 100 bounced back on Thursday and traded close to intraday highs before easing back to 8,153, up 0.4% on the day.
The significant macro consideration for traders was the Federal Reserve’s interest rate decision and accompanying commentary, which proved to be a non-event.
“The move was widely expected after recent economic data showed the US struggling still to get the inflation genie back inside the lamp,” said Steve Clayton, head of equity funds, Hargreaves Lansdown.
Clayton continued to explain that markets learned nothing new from the Federal Reserve yesterday, given Fed speakers have consistently hinted at a longer wait for interest rate cuts. The muted market reaction can be attributed to the absence of any major scares about inflation heating up, which had the potential to unnerve markets.
“Speaking to reporters after the meeting, Fed Chair, Jay Powell said he did not know how long it would be before the Fed was confident enough to begin cutting rates. Modest gains in US Treasuries suggest this was all that markets were expecting to hear. Rates are still going to come down, but we’ve a way to go first,” Clayton said.
Given that we’re amid earnings season in the US and UK, the lack of any real catalyst for stocks from the Federal Reserve meant corporate earnings drove trade on Thursday.
Standard Chartered and Smurfit Kappa announced very good results, while Shell announced mediocre results that didn’t shift the dial in either direction.
Standard Chartered
Standard Chartered was among the top risers after announcing bumper Q1 results that smashed analyst expectations. Profit and income exceeded estimates, and provisions for bad debts were lower than predicted despite ongoing concerns about the Chinese property market.
“Standard Chartered has made a statement,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
“This was as close to a clean sweep of first-quarter results as you can get. Pretty much every major line item was better than markets had expected, even after stripping out some of the one-off items that inflated results. Performance was driven by non-interest income, which accounts for over half of all revenue. This includes areas like wealth management, investment banking, and trading. Traditional banking operations performed more or less as expected.”
Standard Chartered shares were 5% higher at the time of writing.
Shell
Shell shares gained 1% after the company announced that Adjusted EBITDA rose 15% in Q1 2024 compared to Q4 2023 in a telegraphed announcement that provided very few new developments for investors. Shell issues earnings previews so the market has a reasonably good insight into earnings before they are released. That said, Shell’s earnings were better than expected, but shares were held back by a declining oil price that would impact future earnings updates.
“The relatively muted market reaction to Shell’s better-than-expected earnings and unveiling of a $3.5 billion share buyback may fuel the argument it would be better served by listing in the US,” said AJ Bell investment director Russ Mould.
“However, this would be something of a red herring with enthusiasm for Shell likely tempered thanks to pressure on oil prices from strong US inventories.
“It is notable the company, a leader in the natural gas market, achieved its stronger-than-anticipated quarterly showing despite facing an obvious impact from lower gas prices.”
