LONDON MARKET CLOSE: FTSE 100 falls as tech earnings weigh on New York

(Alliance News) - London's FTSE 100 nursed modest losses at the close on Wednesday, despite heavy falls in US markets, as figures showed UK business activity remained strong in July.

Underwhelming earnings from tech heavyweights Tesla and Alphabet knocked Wall Street, while lacklustre results from the likes of LVMH and Deutsche Bank sent European indices into the red.

The FTSE 100 index closed down 13.68 points, 0.2%, at 8,153.69. The FTSE 250 ended down 140.65 points, 0.7%, at 20,950.84, and the AIM All-Share closed down 3.53 points, 0.5%, at 776.64.

The Cboe UK 100 ended down 0.1% at 813.58, the Cboe UK 250 closed down 0.2% at 18,353.32, and the Cboe Small Companies ended down 0.1% at 17,225.05.

Kathleen Brooks, research director at XTB said the "slip in corporate earnings from the likes of Tesla and Google, which failed to set the market alight with its AI investments, suggests that the fundamental basis for a rally is slipping away as we reach the peak summer months."

On Wednesday, Google owner Alphabet fell 4.6%, while electric carmaker Tesla slid 11%.

Tesla missed Wall Street profit estimates in the second quarter as it repeated guidance that vehicle growth in 2024 would be "notably lower" than 2023. Alphabet highlighted "ongoing strength" in its Search segment, as well as "momentum" in Cloud, after seeing both revenue and net income climb in the second quarter.

However, the YouTube division's advertising revenue fell short of estimates.

Steve Clayton at Hargreaves Lansdown explained: "AI has been such a driver of expectations and has led to an extraordinary surge in revenues for Nvidia as the hyperscalers like Google, Amazon and Microsoft’s cloud units race to build capacity. But at some point, that scale has to start delivering returns on capital and, so far, the jury is out. Tesla, for its part, is simply struggling to turn rising output into earnings."

Stocks in New York were down sharply at the time of the London equities close, with the DJIA down 0.9%, the S&P 500 index down 1.6%, and the Nasdaq Composite down 2.6%.

There was better news on economic activity in the US which hit a 27-month high figures from S&P Global on Wednesday showed.

The headline S&P Global flash US purchasing managers' index composite output index rose to 55.0 points in July from 54.8 in June, its highest since April 2022. Output has now risen continually over the past one-and-a-half-years, with the pace of expansion having improved markedly in recent months after slowing in April.

The service sector outperformed manufacturing for a fourth straight month, with the sectoral divergence widening to the greatest since June of last year.

In Europe, the CAC 40 in Paris ended down 1.1%, while the DAX 40 in Frankfurt ended down 1.0%.

Shares in French luxury conglomerate LVMH, which owns Christian Dior and Tiffany, fell 4.7% after it disclosed a slowing in comparable sales growth. The uninspiring update dragged Burberry down by 2.1% in London.

Weighing on the Dax, Deutsche Bank fell 8.3% after it swung to a loss on litigation costs amid a Postbank lawsuit provision.

Adding to pressure on European stock markets, figures showed the eurozone private sector fell perilously close to a standstill this month, with the manufacturing economy sinking deeper into decline.

The Hamburg Commercial Bank composite purchasing managers' index fell to 50.1 points in July, fractionally above the 50-point neutral mark, from 50.9 in June.

The data "signalled a near-stagnation of the eurozone private sector", survey publisher S&P Global said.

Abbas Khan at Barclays said the data paints a "weak growth picture" at the beginning of the third quarter.

"Activity indicators point to a clear slowdown in the recovery momentum, particularly in Germany," he added.

The figures were in marked contrast to the UK, where the private sector picked up speed this month, as new business growth surged to a 15-month-high.

The latest S&P Global flash UK composite purchasing managers' index rose to 52.7 points in July, from June's final tally of 52.3, a two-month-high.

S&P Global said the expansion was aided by the "sharpest upturn in new business for 15 months".

The flash services PMI expanded to 52.4 points in July, from 52.1 in June. The manufacturing PMI climbed to 51.8 points, from 50.9.

The services reading was a two-month-high, while the manufacturing PMI spiked to its best level in two years.

The pound was quoted at USD1.2926 at the London equities close Wednesday, higher compared to USD1.2915 at the close on Tuesday. The euro stood at USD1.0857 at the European equities close Wednesday, up slightly against USD1.0855 at the same time on Tuesday. Against the yen, the dollar was trading at JPY153.44, lower compared to JPY155.98 late Tuesday.

In the FTSE 100, easyJet, up 3.0%, and Informa, up 2.2%, were two of the best performers.

Budget airline easyJet bucked a trend set by budget airline peer Ryanair Holdings and reported decent trading, helped by an impressive performance from its holidays arm.

The Luton, England-based budget airline said pretax profit increased by 16% to GBP236 million in the quarter that ended June 30 from GBP203 million a year before.

It also expects easyJet holidays to deliver profit growth of 48% to over GBP180 million for the year. Broker, Davy noted easyJet had previously predicted profit above GBP170 million for the unit.

RBC Brewin Dolphin analyst John Moore commented: "Ryanair's results earlier in the week cast a shadow over airlines, but easyJet's performance should provide a level of assurance that conditions aren't necessarily gloomy across the entire sector."

Informa climbed after announcing the GBP1.2 billion acquisition of Ascential and raising full-year sales guidance.

Informa, the London-based business information publisher and events organiser, expects significant revenue opportunities to arise from the combination, alongside cost savings and efficiency improvements.

Ascential, which revealed the approach from Informa after Tuesday's close in London, jumped 26%.

Reporting half-year numbers, Informa said it now expects revenue for 2024 to be above its previously stated guidance range of GBP3.45 billion to GBP3.50 billion. Revenue in 2023 totalled GBP3.19 billion

Reckitt Benckiser rose 1.9% as a strategic overhaul offset an earnings guidance cut.

The firm plans to focus on a portfolio of 'powerbrands', such as Strepsils, Gaviscon, Nurofen, Lysol, Dettol, which it defined as high-growth, high-margin businesses that it thinks have the potential for long-term growth.

It plans to sell non-core home care brands including Air Wick, Mortein, Calgon and Cillit Bang, and consider "all options" for Mead Johnson Nutrition, the business behind Enfamil infant nutrition.

Reckitt also unveiled half-year numbers and said short-term disruption to its Nutrition business, due to the tornado that hit its Mount Vernon, Indiana distribution centre last week, has led to a reduction in its net revenue growth outlook for the year to 1% to 3% from 2% to 4% before.

Analysts at Barclays commented: "Put together, Reckitt is reviewing GBP4 billion of revenue, or just over a quarter of the company. We think this strategic review is likely to be well received, and offset any disappointment over a modest guidance downgrade."

On the FTSE 250, Aston Martin motored 6.5% to the good, after predicting a "strong second half performance", despite a widened first half loss.

It also confirmed Adrian Hallmark will take over as chief executive officer from September 1, with Amedeo Felisa stepping down on the same date.

The firm expects its third-quarter volume performance to "materially improve sequentially" compared with the second.

Among London's small caps, Centaur Media fell 15%.

The provider of business information, training and specialist consultancy services reported weaker half-year earnings.

Revenue declined 7.7% to GBP16.5 million in the first half of 2024, from GBP17.9 million a year prior. Pretax profit fell 6.3% to GBP1.5 million from GBP1.6 million.

On AIM, LBG Media, climbed 8.2%, hitting a one-year high. The Lad Bible entertainment website operator expects revenue growth of 55% to GBP42.3 million in the first half of 2024. Adjusted earnings before interest, tax, depreciation and amortisation are expected to jump to GBP10.2 million from GBP3.0 million.

"The UEFA Euro 2024 [football] tournament has given the group a number of opportunities to work with brands seeking to access our young adult audience, with notable campaigns including Euros-themed editions of the hugely popular original series of 'Snack Wars' sponsored by Uber Eats," the company said.

Brent oil was quoted at USD81.75 a barrel at the London equities close Wednesday, down from USD82.15 late Tuesday.

Gold was quoted at USD2,426.06 an ounce at the London equities close Wednesday, higher against USD2,406.10 at the close on Tuesday.

In Thursday's UK corporate calendar, there are half-year results from Anglo American, AstraZeneca, British American Tobacco, Lloyds Banking Group, Relx, Rentokil Initial and Vodafone. Trading updates are expected from BT and Vodafone.

By Jeremy Cutler, Alliance News reporter

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