17.00 (close): Reassuring figures from two of Wall Street’s biggest banks helped London investors overcome worries about slowing Chinese consumer demand.
Guinness and Smirnoff drink giant Diageo fuelled jitters earlier in the session by reporting a 19 per cent slide in quarterly revenues in Asia Pacific, reflecting weakness in China and low confidence in a number of other emerging markets.
But the FTSE 100 Index staged a late rally to finish the shortened week up 41.1 points to 6625.2 after Goldman Sachs and Morgan Stanley both reported earnings that were ahead of expectations.
Uncertain markets: The Footsie managed to hold a rally ahead of the long Easter weekend, but US markets were in reverse early on
The pound consolidated gains seen yesterday on heightened speculation that the Bank of England will increase interest rates as early as November.
City economists think the Bank may act sooner now that unemployment is below the seven per cent rate originally set by policymakers as their benchmark for higher rates, while rising earnings have meant an end to the cost of living crisis.
Sterling was unchanged at 1.68 against the US dollar and 1.21 versus the euro, keeping up the pressure on London-listed firms such as Diageo who generate large sales overseas.
Shares in Diageo were four per cent lower – off 71p to 1829p – while elsewhere in the consumer goods sector Unilever dropped 5p to 2617p having been around two per cent lower at one stage.
One of the biggest gains in the top flight came from RSA Insurance, which rose 2.1p to 94.7p after chief executive Stephen Hester took a step in his turnaround programme by selling operations in the Baltics and Poland for £300million.
The Wall Street updates provided a boost to banking giant Barclays, which rose 8.95p to 246.5p after chief executive Antony Jenkins also hinted at more wide-scale job cuts in a memo to staff.
His note also appeared to rule out a full-scale retreat from investment banking when the bank publishes a review of its business next month.
Other top flight risers included ITV amid relief that US cable network owner Discovery had reportedly dropped out of the bidding to buy rival Channel 5. Shares were 6.2p higher at 186.2p.
Outside the top flight, shares in Mulberry were broadly flat despite another profits warning. The stock, which has lost more than half of its value since the start of 2013, vowed to win back loyal customers by reversing the price hikes of previous boss Bruno Guillon.
This will result in a short-term ‘material’ impact on profits, but shares recovered from an initial sharp fall to finish just 9.5p lower at 700p.
FTSE 100 rival Burberry, which rose yesterday in the wake of another strong sales update, fell 26p to 1440p on fears caused by Diageo’s warning over weak Chinese markets.
The biggest FTSE 100 risers were ARM Holdings up 44.5p at 976.5p, Schroders ahead 104p at 2559p, Whitbread up 155p at 4055p, Barclays ahead 8.95p at 246.5p.
The biggest fallers were Diageo down 71p at 1829p, Antofagasta off 17.5p at 828.5p, Sainsbury’s down 6.6p at 314p and Fresnillo off 16p at 868p.
14.55: The Footsie pushed higher in late afternoon trade as investors found some optimism ahead of the long Easter holiday weekend although US stocks made a cautious start after a big batch of mixed US earnings reports.
With just over an hour and a half of trading to go, the FTSE 100 index was 23.3 points higher at 6,607.5, just below the session peak of 6,614.54 having bounced back from morning weakness.
However on Wall Street, in early trade, the Dow Jones Industrial Average was down 51.6 points at 16,373.3, easing back after yesterday’s triple-digit advance made after more dovish comments from Federal Reserve chairwoman Janet Yellen.
The Fed boss noted that the central bankers and many economists see a return to full employment and stable prices by the end of 2016, which would be the strongest economy in a decade.
Today’s US jobless data illustrated that optimism, with the number of people claiming benefits up by just 2,000 to 304,000 in the week that ended April 12, a slight increase from the lowest level since 2007.
And manufacturing in the Philadelphia region showed signs of strengthening in April, with the Philly Fed index rising to 16.6 in April from 9.0 in March.
Thursday had one of the busiest earnings schedules in the US results season. Above forecast reports from banking giants Goldman Sachs and Morgan Stanley, together with conglomerate General Electric and soft drinks giant PepsiCo provided some underlying support.
But the good news was offset by the bad, particularly after-hour earnings disappointments yesterday from tech giants Google and IBM, with concerns over sector valuation having precipitated a hefty market sell-off in recent weeks.
In London, drinks giant Diageo remained the biggest blue chip faller, down nearly 4 per cent, or 72.0p at 1,828.0p after the Smirnoff to Guinness firm reported a 1.3 per cent fall in revenues for in the three months to March 31, with Asia Pacific sales particularly weak.
The Diageo disappointment knocked other consumer goods groups, especially those with big emerging markets exposure such as Unilever, down 32.0p to 2,590.0p.
Food retailers were also under pressure today, with Tesco dropping 5.7p to 288.2p as any enthusiasm after yesterday’s as expected annual results reversed, dragging Sainbury’s down 7.3p to 313.1p and William Morrison back 1.2p to 200.8p.
Among the stock market minnows, shares in blue Group lost over a third of their value, dropping 36 per cent, or 164.6p lower to 287.9p after the self-styled ‘Amazon for services’ web platform shocked investors by slashing its 2013 revenue estimates.
Blur said that the bigger projects it was facilitating meant revenues previously slated for last year would instead be spread out across 2014 ‘and beyond’.
Blur now forecasts that its 2013 revenues would be in the range of $ 5.3million-$ 5.6million, Analysts had been estimating revenues of $ 9.4million for last year.
12.50: Banks led a midsession rally by the Footsie, with the index ticking into positive territory as the sector took heart from better than expected earnings from US peer Morgan Stanley.
At lunchtime, the FTSE 100 index was up 3.9 points at 6.588.1, its high points for the session after recovering from an early morning low of 6,559.35, with Barclays the top blue chip riser, up 4 per cent or 9.6p to 247.0p.
Barclays also gained after Sky News reported that its chief executive Antony Jenkins had hinted at more wide-scale job cuts in a memo to staff. His note also appears to rule out a full-scale retreat from investment banking when the bank publishes a review of its business next month. Barclays holds its annual general meeting next Thursday, April 24.
Welcome relief: Better than expected earnings from US bank Morgan Stanley helped inspire a lunchtime turnaround in London
In New York, Morgan Stanley shares were indicated higher after the US lender reported a jump in first quarter adjusted earnings to 68 cents, compared with a consensus estimate of 60 cents a share.
The slice of good news in the sector helped offset disappointing numbers yesterday from Bank of America and Credit Suisse which seemed to reaffirm the continuing deterioration in fixed income and trading divisions for heavyweight global investment banking giants.
But with a welter of other mixed US corporate earnings to digest today the mood in the markets remained cautious ahead of the long Easter holiday weekend.
Disappointing earnings from US tech heavyweights Google and IBM released last night dampened the previous session’s upbeat tone on Wall Street.
Internet giant Google saw its shares fall in after-hours trading after first-quarter revenue fell short of estimates as its margins narrowed with advertising prices continuing to decline.
IBM, the world’s largest technology services company also saw its shares drop after it reported its lowest quarterly revenue for five years.
US stocks closed higher yesterday with investors cheered by the Federal Reserve’s Beige Book business activity data which showed activity picked up in recent weeks as weather-related drag eased.
Fed Chair Janet Yellen was less upbeat in a speech on Wednesday, saying it might take two years to return to full employment and there was more risk of inflation staying too low than going too high, but that should mean US interest rates stay low for longer.
Investors will keep an eye on initial US weekly jobless claim numbers and the Philidelphia Fed April manufacturing report later today for further clues to the strength of the economy.
On currency markets, the dollar was lower while the pound consolidated gains seen yesterday on heightened speculation that the Bank of England may increase interest rates as early as November.
City economists think the Bank may act sooner now that unemployment is below the 7 per cent rate originally set by policymakers as their benchmark for higher rates, while rising earnings have meant an end to the cost of living crisis.
Sterling edged above 1.68 against the US dollar, increasing pressure on firms who generate large sales overseas, such as drinks firm Diageo.
The Guinness and Smirnoff drinks giant was a top blue chip faller, with Diageo shares off 74.25p to 1,825.75p after a disappointing trading update.
Diageo said revenues were down 1.3 per cent in the three months to March 31, with Asia Pacific particularly weak as a decline of 19 per cent reflected weakness in China and low confidence in a number of other emerging markets.
The update put pressure on shares across the consumer goods sector today, with Unilever dropping 36.5p to 2,585.5p. Unilever reports its first quarter results next Thursday.
And luxury goods firm Burberry, which rose yesterday in the wake of a strong sales update, fell 27.5p to 1,438.5p on fears caused by Diageo’s warning over weak Chinese markets, and another profit warning from small cap rival Mulberry.
10.00: Consumer goods firms led the Footsie lower as the morning session progressed after drinks giant Diageo delivered a weaker than expected quarterly sales update.
By midmorning, the FTSE 100 index was down 11.9 points at 6,572.2, giving back some of the previous session’s gains.
Diageo was the top blue chip faller, down over 4 per cent, or 81.75p to 1,818.25p. The Guinness and Smirnoff maker said revenues were down 1.3 per cent in the three months to March 31, with Asia Pacific particularly weak after a decline of 19 per cent reflecting weakness in China and low confidence in a number of other markets.
Diageo disappoints: The world’s biggest spirits company posted a surprise drop in third quarter sales
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers said: ‘There is clear disappointment with the update, as testified by the share price reaction.
‘Apart from adverse currency movements, a lack of consumer confidence in Emerging Markets was cited as a reason for the drop in sales, particularly in China. This is not new news for the company, with the shadow likely to overhang the share price until such time as there is a revival in policy.
‘Nonetheless, the company remains a well diversified, cash generative operation with a progressive dividend policy, and the prior announcement of a further foray into India is a clear signal of intent to capitalise on the emergence of a new middle class in such regions,’ Hunter added.
Earlier this week Diageo has launched a £1.1billion bid to take control of India’s largest spirits company.
Other fallers in the consumer goods sector included brewer SABMiller, which lost 33.75p to 3,008.25p and Unilever with a drop of 38.5p to 2,583.5p.
The biggest rise in the top flight came from RSA Insurance, which rallied 2.5p to 95.1p after new chief executive Stephen Hester took a step in his turnaround programme by selling operations in the Baltics and Poland for £300million.
Outside the top flight, shares in Mulberry were 4 per cent lower after another profits warning. The stock, which has lost more than half of its value since the start of 2013, vowed to win back loyal customers by reversing the price hikes of previous boss Bruno Guillon.
This will result in a short-term ‘material’ impact on profits, the firm said, causing Mulberry shares to fall by 33.25p to 676.25p.
Blue chip luxury goods rival Burberry, which rose yesterday in the wake of another strong sales update, fell 28.5p to 1,437.5p, mainly on the fears caused by Diageo’s warning over weak Chinese markets.
08.30: The FTSE 100 has opened 13.7 points lower at 6,570.5 on weaker than anticipated results from US tech giants Google and IBM and rising tensions in Ukraine.
Shares in Google lost around 4 per cent after hours in New York as first-quarter revenue figures released following the closing bell missed estimates. IBM shares also lost 4 per cent after the firm reported its lowest quarterly revenue in five years.
Investors are unlikely to chase stocks higher today as a long Easter weekend looms and the situation on the ground in Ukraine remains unpredictable.
Disappointment: Google shares lost around 4 per cent after hours in New York as first-quarter revenue figures released following the closing bell missed estimates
Ahead of a meeting of foreign ministers from Russia and the West in Geneva, separatists flew the Russian flag on armoured vehicles taken from the Ukrainian army yesterday.
The incident humiliated forces sent by the Kiev government operation to recapture eastern towns controlled by pro-Moscow partisans.
‘With no one quite clear what is going on the ground in the Ukraine following numerous reports of gun battles, mass defections, building occupations, and tank thefts, it’s unlikely that traders will want to put on large positions going into a long weekend when the expectations for the talks are so low,’ said Jonathan Sudaria of Capital Spreads.
Meanwhile, US Federal Reserve boss Janet Yellen reaffirmed the central bank’s commitment to keep interest rates low, even after its bond-buying stimulus programme ends, as long as inflation remains below target and unemployment elevated.
The FTSE 100 closed up 42.56 points at 6,584.17 yesterday.
Stocks to watch today include:
DIAGEO: The drinks group reported a 1.3 per cent decline in third-quarter organic net sales, hurt by weakness in China and political instability in Thailand.
LLOYDS: The bank said private retail investors who held bonds issued to rescue it during the 2008/9 financial crisis had agreed to swap them for £58.5million in cash.
ROYAL DUTCH SHELL: The oil giant announced an exploration discovery offshore in Malaysia.
MULBERRY: The firm warned that underlying profit for the year would be marginally below current expectations, the fourth time in two years the luxury goods maker has lowered its forecasts.
TAYLOR WIMPEY: The housebuilder said strong sales had continued into the first quarter.
RSA: Insurance group PZU said it had bought Lithuania’s Lietuvos Draudimas and Latvian AAS Balta from RSA.
STANDARD CHARTERED: Private equity firms Bain Capital and Carlyle Group are among first-round bidders for Standard Chartered’s Hong Kong consumer finance unit, a business valued at up to $ 70million, people familiar with the matter said.
BP: The firm said the US Coast Guard had ended patrols and operations on the final three shoreline miles in Louisiana, bringing to a close the four-year clean-up of the Gulf Coast following the Deepwater Horizon oil spill.