London close: Stocks mixed ahead of Fed minutes, Nvidia results

London’s stock markets closed with a mixed performance on Wednesday, as investors awaited updates from the US Federal Reserve and results from AI chipmaker Nvidia.

The FTSE 100 ended the day down 0.73% at 7,662.51 points, while the FTSE 250 saw a slight uptick of 0.05%, closing at 19,118.97 points.

Shares of banking giant HSBC and mining company Glencore were among the decliners, following the release of financial results.

In currency markets, sterling was last up 0.01% on the dollar to trade at $1.2624, while it slipped 0.07% against the euro to change hands at €1.1671.

“Stock indices were little changed amid speeches by several Fed, ECB and MPC members as investors remained cautious ahead of the publication of the FOMC minutes and after the bell Nvidia earnings,” said IG senior market analyst Axel Rudolph.

“Meanwhile the UK public sector posted its largest surplus on record and CBI factory orders came in above expectations, both of which indicate that the current recession may turn out to be a shallow one.

“In the US, mortgage rates soared back above the 7% mark while Canada new home prices unexpectedly fell.”

Rudolph added that US natural gas prices had jumped by around 10% from their three-and-a-half-year lows, as gas producers looked to curtail drilling activities and lower output.

“The oil price regained initial losses on the day amid heightened Middle East tensions as the gold price remained on track for its sixth straight day of gains.”

Manufacturing sector in mixed state, UK reaches record borrowing surplus

In economic news, research from the Confederation of British Industry (CBI) revealed a mixed performance in the UK manufacturing sector.

According to the Industrial Trends Survey, output volumes declined in the three months to February, with a net balance of -19, down from January’s -10.

Among the 17 subcategories, output fell in 15, including chemicals, and motor vehicles and transport equipment.

Despite that, there were signs of improvement in order books, albeit still reported as below normal for this time of year.

The balance rose to -20 from January’s -30, slightly above consensus expectations.

Export order books also saw improvement, although still below normal, with the balance increasing to -14 from -27 in the previous month, surpassing the long-run average of -18.

However, selling price expectations saw a notable increase, rising to 17 from 9 in January, marking the highest level since July 2023.

“UK manufacturing conditions remain challenging,” said Anna Leach, deputy chief economist at the CBI.

“But there were also some hopeful signs: order books improved and manufacturers continue to expect output to improve in the months ahead.

“As we head towards the budget, it is critical that the chancellor uses this opportunity to put the country on a path to sustainable growth.”

Meanwhile, official data from the Office for National Statistics (ONS) revealed that the UK achieved a record monthly borrowing surplus in January, despite narrowly missing forecasts.

Public sector net borrowing excluding public sector banks reached a surplus of over £16.7bn last month, more than double the £7.5bn surplus recorded in January last year, and the largest since monthly records began in 1993.

Although analysts had anticipated a surplus closer to £18.5bn, the actual figure fell short.

The strong surplus was attributed to self-assessment tax returns due on 31 January, with combined self-assessed income and capital gains tax receipts totalling £33bn, down £1.8bn from the prior year.

However, borrowing for the financial year up to January was £3.1bn lower at £96.6bn, as falling inflation reduced the cost of servicing debt.

Lower-than-expected debt interest payments also contributed to total central government expenditure, which stood at £102.6bn, slightly below the Office for Budget Responsibility’s forecast of £103.9bn.

“With reductions in the RPI rate, interest payable on government gilts and without last year’s energy support scheme, overall expenditure was down on this time last year, despite increased spending on public services and benefits,” said Jessica Barnaby, ONS deputy director for the public sector.

“As a proportion of GDP, public sector debt is up on the year, and remains at levels last seen in the 1960s.”

On the continent, in response to faltering global demand and increasing geopolitical uncertainty, Germany significantly revised down its economic forecasts earlier.

A government spokesperson told reporters that output growth for 2024 was now expected to reach only 0.2%, a sharp contrast to the previous forecast of 1.3%, made in the autumn.

HSBC slides on results, BT in the green

On London’s equity markets, HSBC Holdings plunged 8.39% after announcing a record jump in annual profits and a $2bn share buyback.

The banking giant missed forecasts as it absorbed a $3bn hit from its exposure to a Chinese bank.

Despite a 78% increase in full-year pre-tax profit to $30.3bn driven by high global interest rates, HSBC fell short of the $34.1bn average estimate compiled by brokers.

“The company has been stung by a $3bn charge on its stake in a Chinese bank and write-downs associated with commercial real estate and the sale of its French business – that’s made the results a bit of a mess and led to a miss on full-year forecasts,” said AJ Bell head of financial analysis Danni Hewson.

“The outlook is also a bit of a fudge with the company expecting to hit previously guided returns in the mid-teens for 2024, but only once some one-offs are stripped out.

“Costs are moving higher and loan losses are also going in the wrong direction from the bank’s perspective.”

Elsewhere, Glencore declined 1.45% after it reported a halving of its full-year adjusted EBITDA due to lower commodity prices.

Similarly, Rio Tinto slipped 1.46% after revealing that commodity price movements resulted in a $1.5bn hit to underlying profits in 2023, albeit partly offset by a stronger dollar and lower energy prices.

BAE Systems was off 0.9% despite posting better-than-expected full-year profits and forecasting further sales growth this year.

The rise in geopolitical tensions, which typically drives increases in military spending by governments, failed to prevent the company’s decline.

Darktrace and Close Brothers Group faced significant declines of 7.35% and 8.39%, respectively.

Darktrace, a cybersecurity firm, tumbled after US peer Palo Alto Networks slashed its full-year guidance, while Close Brothers continued to be impacted by ongoing concerns about a regulatory probe into motor financing.

On the upside, BT Group saw a 1.64% increase following its announcement of the sale of the BT Tower to MCR Hotels for £275m.

MCR said it intended to preserve the landmark formerly known as the Post Office Tower as an iconic hotel.

Reporting by Josh White for Sharecast.com.

Market Movers