Stocks fall ahead of busy week for central banks

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(Alliance News) – Stock prices in London fell around midday on Monday, as investors looked forward to three key interest rate decisions. interest to be announced later this week.

The Federal Reserve of the United States will decide interest rates on Wednesday, while the European Central Bank and the Bank of England will have their turn on Thursday.

“For the most part 2023 has been smooth sailing for stocks but two icebergs are in the waters this week in the form of interest rate decisions by the Federal Reserve and the Bank of England. How far the rate hikes can go and the ideas about the future trajectory of their policy decisions are the two things that will be keeping investors up at night,” said AJ Bell investment director Russ Mould.

The FTSE 100 index fell 11.09 points, 0.1%, to 7,754.06. The FTSE 250 fell 231.86 points, or 1.2%, to 19,803.53, and the AIM All-Share fell 3.56 points, or 0.4%, to 865.68.

The Cboe UK 100 was down 0.1% at 775.37, the Cboe UK 250 was down 0.9% at 17,274.39, and the Cboe Small Companies was down 0.5% at 14,082.02.

Traders at TreasuryOne in South Africa said the central bank’s announcements this week “will shake markets out of their current lethargy”, providing “some fresh direction and movement”.

Federal Reserve policymakers are expected to slow the pace of US interest rate hikes to 25 basis points. The Fed hiked by 50 points – half a percentage point – in December, but had enacted four successive 75 basis point hikes at previous meetings.

The BoE is expected to be more aggressive than the ECB, according to RMB Markets, with Bloomberg predicting a 50bps hike for the BoE, while the ECB is expected to announce a 25bps hike.

However, ING analysts expect an increase of 50 points from the ECB.

In European shares on Monday, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 0.8%.

Economic sentiment in the euro zone saw a broad improvement in January, according to a report on Monday.

Eurostat data showed an increase in euro zone economic sentiment for the third consecutive month in January. The economic sentiment indicator improved to 99.9, from an upwardly revised figure of 97.1 in December. December was initially reported as 95.8. The reading for January was ahead of the market consensus quoted by FXStreet of 97.

In Germany the mood was less optimistic, as preliminary figures showed that the economy contracted in the last quarter of 2022 from the third quarter.

According to Destatis, Germany’s gross domestic product decreased by 0.2% in the fourth quarter of 2022 from the third. The market consensus, according to FXStreet, had expected GDP to remain the same.

In the third quarter, GDP grew 0.4% from the second quarter. The German economy grew 0.1% in the second quarter and 0.8% in the first quarter.

On an annual basis, the German economy grew 1.1% in the fourth quarter, down from 1.3% annual growth seen in the third quarter. This was also lower than the market consensus of 1.3%.

The pound was quoted at USD1.2391 at midday Monday in London, up from USD1.2383 at Friday’s close. The euro was at USD1.0897, against USD1.0857. Against the yen, the dollar was trading at JPY130.11, up from JPY129.87.

In London, board changes dominated Monday’s headlines, with Unilever appointing a new boss, the head of Legal & General stepping down after ten years, and the CEO of 888 stepping down immediately.

In the FTSE 100, Unilever gained 0.5%.

The London-based consumer goods company said it has appointed Royal FrieslandCampina boss Hein Schumacher as its new chief executive.

Schumacher has been CEO of the dairy cooperative based in Amersfoort, the Netherlands since 2018. He joined the Unilever board as a non-executive director in October last year.

He will start as CEO of Unilever on July 1, after a one-month transition period. Schumacher will replace Alan Jope, who in September 2022 announced his intention to retire from the London-based consumer goods company.

President Nils Andersen said: “Hein is a dynamic, values-driven business leader with a diverse background of experiences and an outstanding record of delivery in the global consumer goods industry. He has exceptional strategic capabilities, proven operational effectiveness, and strong experience in both developed and developing markets.”

FTSE 100 constituent Legal & General lost 2.9%. L&G said that CEO Nigel Wilson plans to step down after more than ten years in office.

Wilson joined the company in 2009 as chief financial officer and was named CEO in 2012. L&G shares have more than doubled since the start of 2012, when they were around 112p, compared to 253.30p on Monday.

Legal & General said it has started the process to appoint a successor, considering both internal and external candidates. She added that Wilson has agreed to continue as CEO until his successor takes over. The process will take about a year, L&G said.

In the FTSE 250 index, the worst performer was 888 Holdings, down 27% at midday, after the online gaming operator said CEO Itai Pazner had left the company with immediate effect.

Pazner’s departure as CEO comes just over two weeks after 888 announced that Yariv Dafna would step down as chief financial officer. Dafna was expected to leave 888 at the end of March. However, 888 on Monday said that he will remain in office until the end of 2023.

Non-Executive Chairman Jonathan Mendelsohn will take over as executive chairman on an interim basis while the gambling firm searches for a new CEO. 888 did not give a reason for Pazner’s immediate departure.

888 also reported that it has suspended some activities in the Middle East amid a probe into customer compliance. After an initial review, 888 said some of its units in the Middle East region fell short in terms of know-your-customer and anti-money laundering compliance measures. 888 said it currently believes the issues are “isolated to this region only”.

“While further internal investigations are underway, the board has taken the decision to suspend VIP customer accounts in the region, with immediate effect. The board currently estimates the impact to be less than 3% of revenue of the group, if the suspensions remain in force, ” 888 said.

AJ Bell’s Mold said: “Gambling stocks are under enough regulatory scrutiny as it is without inviting reasons for more attention and yet this is exactly what 888 has done. News is suspending VIP accounts in the East Middle ground due to money laundering best practices not being followed. is incredibly damaging. Combine this with the announcement of CEO Itai Pazner’s immediate departure and the market is likely to draw its own conclusions .”

IT services firm Computacenter gained 8.7%, after it said it ended 2022 with a “record” fourth quarter.

The Hatfield, Hertfordshire-based firm said it expects full-year results to be slightly ahead of its guidance.

Computacenter said total revenue, on a gross invoiced revenue basis, grew by more than 30%, including the effects of acquisitions made in mid-2022, and by more than 27% in currency constant. He said that the adjusted profit before tax in the first half of the year compared to the first half of 2021 decreased by 6%; however throughout the year profit before tax grew. In 2021, Computacenter brought in GBP248.0 million of pre-tax profit on GBP6.73 billion in revenue.

“We saw strong demand in all countries from sales of Technology Sourcing products which remained very good until the end of the year. Our Services revenue performance was strong, while the performance of “Our Services margin was impacted by the reduction in Covid-related benefits during the year, and inflationary pressures that we expect to continue into 2023,” Computacenter said.

Looking ahead, the company said it is “bullish” about the target market and competitive positioning.

On AIM, Monday’s worst performer at midday was Rosslyn Data Technologies, down 24%.

The Portsmouth, England-based data management and analytics service provider posted revenue of GBP1.4 million for the six months ended October 31, down slightly from GBP1. 5 million years earlier.

However, the pre-tax loss narrowed to GBP1.8 million from GBP2.2 million, as administrative expenses were reduced to GBP2.2 million from GBP2.4 million a year earlier.

Looking ahead, Rosslyn said it entered the new financial year with “increasing revenue momentum”. It expects annual results to be in line with market expectations, with a 14% increase in revenue year-on-year for continuing operations.

Stocks in New York were called higher. The Dow Jones Industrial Average was down 0.1%, the S&P 500 index was up 0.3%, and the Nasdaq Composite was up 1.0%.

Brent oil was quoted at USD86.32 a barrel at midday in London on Monday, down slightly from USD86.78 late on Friday. Gold was quoted at USD1,942.71 an ounce, against USD1,930.80.

The week picks up pace with the euro zone gross domestic product reading on Tuesday and inflation data from the single currency area on Wednesday, in addition to the decisions of the central bank.

There are also a number of services PMIs, including from the UK, the eurozone, the US and China, due on Friday. The US non-farm payrolls report for January will also be released on Friday.

By Sophie Rose, Alliance News reporter

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