FTSE 100 continues record run, Darktrace rallies on buyout deal 26 Apr 2024, 4:19 pm

FTSE 100 continues record run, Darktrace rallies on buyout deal

By Pranav Kashyap and Sruthi Shankar

(Reuters) -Britain’s FTSE 100 rose to another record high on Friday as strong earnings from U.S. tech giants buoyed investor sentiment, while cybersecurity firm Darktrace rallied following a buyout deal by private equity firm Thoma Bravo.

The blue-chip FTSE 100 was up 0.4%, hitting a record for a fourth consecutive session. The index is set for its biggest weekly gain in more than seven months.

“The combination of recovering earnings and reasonable prices continue to make things look quite attractive for the UK market,” said Chris Beauchamp, chief market analyst at IG Group.

“Yesterday’s earnings just reassure everybody. If you had a nasty miss from either or both of them, you would have been looking at a fairly different marketplace this morning,” he said, referring to Alphabet and Microsoft.

Sentiment in Asian and broader European markets was optimistic after upbeat earnings from Wall Street tech titans Alphabet and Microsoft. [.N]

NatWest jumped 3.5% to touch a more than one-year-high after the British bank’s first-quarter profit fell by a less-than-expected 27%.

Anglo American slipped 0.8% after it rejected BHP Group’s 31.1 billion pound ($38.88 billion) takeover proposal, saying the bid significantly undervalued the London-listed miner and its future prospects. The stock had rallied 16% following BHP’s offer on Thursday.

BHP’s UK-listed stock fell 1.5%. The mip-cap FTSE 250 gained 1%, with Darktrace rallying 19.3% after Thoma Bravo agreed to buy the Mike Lynch-backed cybersecurity company for about $5.32 billion.

“It’s a whopping 40% premium and what people are seeing is a chance to exit the business at a very reasonable price. It’s a sign of the strength of the firm,” IG Group’s Beauchamp said.

Meanwhile, British consumer sentiment returned to a two-year high this month as households took a more positive view of the economy and their own finances, a long-running survey showed.

Investors will keep a close eye on the U.S. inflation data later in the day for clues on when the Federal Reserve will start easing monetary policy.

Convatec Group plc fell 6.4% after Peel Hunt downgraded the stock to “reduce” from “add”.

(Reporting by Pranav Kashyap and Sruthi Shankar in Bengaluru; Editing by Sonia Cheema and Mrigank Dhaniwala)

Global stocks gain on Big Tech lift; yen swings to fresh 34-yr low 26 Apr 2024, 2:01 pm

Global stocks gain on Big Tech lift; yen swings to fresh 34-yr low

By Chris Prentice and Naomi Rovnick

NEW YORK/LONDON (Reuters) -Global stocks were higher on Friday as Big Tech gains lifted Wall Street shares, while Japan’s yen hit a fresh 34-year low after the Bank of Japan (BOJ) opted to keep monetary policy loose at its latest meeting.

MSCI’s broad index of global stocks reversed earlier losses, rose 0.94% by 10:43 a.m. ET (1443 GMT) after U.S. shares opened to tech sector optimism following robust results from Alphabet and Microsoft.

U.S. data also boosted sentiment, with the consumption expenditures(PCE) price index up 0.3% in March, in line with estimates by economists polled by Reuters. In the 12 months through March, PCE inflation advanced 2.7% against expectations of 2.6%.

The Dow Jones Industrial Average rose 137.46 points, or 0.36%, to 38,223.26, the S&P 500 gained 53.21 points, or 1.05%, to 5,101.63 and the Nasdaq Composite gained 310.27 points, or 1.99%, to 15,922.03.

Japan’s yen was volatile, hitting a fresh 34-year low after the Bank of Japan (BOJ) kept monetary policy loose at its latest policy meeting, spiking briefly as traders speculated that Japanese authorities may intervene, then sliding again.

The STOXX 600 index rose 1.2%, and the FTSE 100 index climbed to a fresh record high.

World equities were still poised to finish the month lower, as hopes of rapid Federal Reserve rate cuts drained from the market following a series of U.S. inflation readings.

In a volatile session, the Japanese currency weakened as low as 157 against the dollar, a fresh 34-year low.

The Bank of Japan kept interest rates around zero at its policy meeting that concluded Friday, despite forecasting inflation of around 2% for three years.

Markets are on high alert for Tokyo authorities to prop up the currency, in what would be an unconventional and politically tough decision. BOJ Governor Kazuo Ueda said on Friday that exchange-rate volatility could significantly impact the economy.

U.S. Treasury Secretary Janet Yellen told Reuters on Thursday that currency intervention was acceptable only in “rare” circumstances and that market forces should determine exchange rates.

Yellen also said U.S. economic growth was likely stronger than suggested by weaker-than-expected data on first-quarter output.

“The stall-out of inflation’s return to 2% in the first quarter is still a disappointment,” Bill Adams, Chief Economist for Comerica Bank in Dallas, said in a market note.

“When the Fed meets next week, they are almost certain to say that the first quarter’s economic data don’t hit their high bar to begin cutting interest rates.”

The yen was trading about 40% below its fair value, Pictet Asset Management chief strategist Luca Paolini said.

“We underestimate the potential for something to go very wrong when you have a currency that is totally misaligned with (economic) fundamentals,” he said.

“The sooner they hike rates, the better.”

FED HOPES FADE

The yield on benchmark U.S. 10-year notes fell 4.5 basis points to 4.661%, from 4.706% late Thursday. Bond yields rise as prices fall.

The 2-year note yield, which typically moves in step with interest rate expectations, fell 1.1 basis points to 4.9871%, from 4.998%.

Traders now expect the Fed to lower its main funds rate, currently at a 23-year high of 5.25% to 5.5%, by just 36 basis points this year, with some fearing a further hike.

Euro zone bond yields slightly extended their fall after the U.S. data. They touched five month highs on Thursday. [GVD/EUR]

The ECB is expected to cut its deposit rate from a record 4% in June but analysts have queried how far it can diverge from U.S. monetary policy without weakening the euro significantly.

MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.75% higher at 535.58, while Japan’s Nikkei rose 306.28 points, or 0.81%, to 37,934.76.

Spot gold added 0.02% to $2,332.27 an ounce. U.S. crude lost 0.16% to $83.44 a barrel and Brent fell to $88.87 per barrel, down 0.16% on the day.

(Editing by Gareth Jones, Mark Potter and David Evans)

Global equity funds face fourth week of outflows amid dampened Fed rate cut hopes 26 Apr 2024, 1:45 pm

Global equity funds face fourth week of outflows amid dampened Fed rate cut hopes

(Reuters) – Global equity funds recorded outflows for the fourth consecutive week as of April 24, affected by diminishing hopes of rapid Federal Reserve rate cuts this year amid a series of higher-than-expected U.S. inflation readings.

Investors pulled out $2.7 billion worth of global equity funds during the week, which was much less than the outflow of $23 billion in the previous week.

U.S. equity funds experienced outflows of $1.2 billion, while European equity funds saw $6.3 billion leave during the week. Conversely, Asian markets, primarily driven by Japanese equity funds, recorded inflows of $5.1 billion.

Recent inflation reports surpassed forecasts and tempered market expectations for Federal Reserve rate cuts. The markets now see a 70% likelihood of a cut in September — down from earlier projections of six cuts this year.

Global stocks were heading towards their worst month since September on Friday, with investors cautious ahead of the release of March’s core PCE price index data later in the day for further clues on the U.S. rate outlook.

Among equity sector funds, tech sector funds experienced outflows of approximately $770 million during the week, while consumer staples and healthcare funds saw outflows of $339 million and $275 million, respectively. Conversely, energy and industrial sector funds recorded inflows of about $544 million and $588 million, respectively.

Meanwhile, global bond funds secured inflows of $2.17 billion, significantly higher than the $820 million recorded in the previous week.

Government bond funds drew $781 million, high-yield bond funds received $647 million, and corporate bond funds attracted $2.3 billion.

Among commodities, precious metal funds attracted an inflow of $205 million, reversing outflows from the previous two weeks, while energy funds experienced a modest outflow of $35 million.

Data covering 29,598 emerging market funds (EM) showed a net

outflow of $782 million from bond funds, which was their second consecutive weekly outflow. EM equity funds saw an outflow of $1.6 billion during the week.

(Reporting By Patturaja Murugaboopathy; Editing by Tasim Zahid)

Global economy set to stay on a roll for the rest of the year – Reuters poll 26 Apr 2024, 12:55 pm

Global economy set to stay on a roll for the rest of the year – Reuters poll

By Hari Kishan

BENGALURU (Reuters) – The global economy is likely to carry its solid momentum for the rest of the year and into 2025, defying earlier expectations of a slowdown, according to a Reuters poll of economists who said stronger growth than forecast was more likely than weakness.

That shift in the growth outlook brings its own set of challenges for central banks, which raised rates in quick succession to try and drive inflation down to target but now may have to wait even longer before considering rate reductions.

Among bigger economies, the United States and India were expected to contribute the most to the pickup in growth. There was no deterioration in the consensus view for the euro zone or No. 2 economy China either, according to a March 27-April 25 Reuters poll of 500 economists covering 48 economies.

Global growth was forecast at 2.9% this year, faster than 2.6% in a January poll, followed by 3.0% in 2025. More than 90% of common contributors upgraded their views and still said there was a significant chance growth could be even stronger.

A 60% majority of economists, 98 of 162, said the global economy this year was more likely to grow faster than they expected than undercut their predictions.

“We are continuing to be surprised by the resilience of the global economy. Now, part of that is we entered the year with subdued expectations, we thought that there would be a deceleration this year,” said Nathan Sheets, global chief economist at Citi.

“So far we’ve been marking up growth for the global economy in a number of places including major economies like the U.S. and China, Europe to some extent as well. So it’s feeling solid.”

On the flip-side, strong growth was expected to keep inflation and interest rates higher for longer.

More than three-quarters of the central banks covered, 16 of 21, were expected to still be dealing with above-target inflation by year-end, up from 10 in the January quarterly poll.

Economists still expect major central banks to cut rates either this quarter or next, broadly in line with financial market pricing. But most now forecast fewer cuts by year-end as inflation remains sticky.

The U.S. Federal Reserve is expected to start cutting in September and once more in Q4, according to the poll, much later than a March start and a total of six cuts financial markets had priced in at the beginning of the year.

In January, the Reuters consensus had a more modest outlook, with four cuts starting in June.

Despite lackluster Q1 GDP growth reported on Thursday, risks were still for the Fed to go for fewer rate cuts this year as underlying inflation data that accompanied the report suggested pressures were building, not easing.

The European Central Bank was still forecast to cut rates by 25 basis points in June, followed by two more in the second half of the year to support growth in the currency bloc which was expected to only grow an average 0.5% in 2024.

That widening gap is already priced into the strong dollar, up over 4% this year against a basket of currencies.

“A question we’ve been getting quite a lot is ‘can Europe start cutting before the Fed?’,” said James Rossiter, head of global macro strategy at TD Securities.

“And I would say…when we look back in history, whether the ECB starts in June and the Fed starts in September, it will all look like it’s part of the same cutting cycle.”

The Bank of England, which was the first among major central banks to raise borrowing costs in December 2021, will also wait until next quarter to lower them, the survey showed.

(For other stories from the Reuters global economic poll:)

(Additional reporting by Sarupya Ganguly; Polling, analysis and reporting by the Reuters Polls team in Bengaluru and bureaus in Buenos Aires, Cairo, Istanbul, Johannesburg, London, Shanghai, and Tokyo; Editing by Ross Finley and Chizu Nomiyama)

Sterling steadies against dollar, jumps to 16-year high vs yen 26 Apr 2024, 8:44 am

Sterling steadies against dollar, jumps to 16-year high vs yen

By Joice Alves

LONDON (Reuters) – Sterling steadied on Friday after rising to a two-week high against the dollar as markets awaited for key U.S. inflation data for clues on the Federal Reserve’s next moves.

Against the closely watched declining yen, sterling rose to its highest level in almost 16 years.

It was flat at $1.2510 after rising earlier in the day to its highest against the dollar since April 12, adding to Thursday’s rally after U.S. data showed economic growth unexpected slowed, while inflation accelerated, which reinforced expectations the Fed would not cut interest rates before September.

The inflation surprise put an even greater-than-usual focus on the release of U.S. personal consumption expenditures (PCE) price index data for March due at 1230 GMT.

Against the euro, sterling was also about flat, 0.1% on the day at 85.64 pence, both currencies having risen against the dollar after Thursday’s U.S. economic data.

“The pound and the euro reacted perfectly in tandem to U.S. GDP yesterday,” said Francesco Pesole, FX strategists at ING.

He added that with U.S. data having a neutral impact, only another round of repricing in Bank of England rates expectations can really stir the pair.

The main focus on Friday was the weakening yen, which fell to a 34-year low against the dollar with markets on edge about possible intervention after the Bank of Japan kept interest rates on hold.

Against the Japanese currency, sterling jumped 1.3% to 196.11, having touched its highest level since September 2008.

“Anyone who was looking for more dramatic actions from the BoJ will have been disappointed by this meeting. However, the economic data supported the BoJ’s cautious move,” said Kathleen Brooks, research director at XTB.

She noted that one month sterling/yen volatility has been retreating.

Sterling/yen implied one month volatility is up for a third day, but still below last week’s highs.

“We may see it fall further, as the risks of official intervention to support the yen begins to recede. This does not mean that the yen will recover, but it does mean that the decline could be in a more orderly fashion, with less big swings in the coming weeks,” she said.

(Reporting by Joice Alves; Editing by Toby Chopra)

TotalEnergies earnings fall in first quarter on lower gas prices 26 Apr 2024, 8:36 am

TotalEnergies earnings fall in first quarter on lower gas prices

By America Hernandez

PARIS (Reuters) -French energy giant TotalEnergies posted a 22% decline in first-quarter earnings due to a steep decline in profits from natural gas, while warning that rising crude oil prices could weigh on refining margins in coming months.

Adjusted net income for the three months to end-March came to $5.1 billion, the company said on Friday, slightly above the $5 billion in a consensus estimate of analysts forecasts compiled by LSEG.

Profits at oil and gas firms are still retreating from record levels in 2022, when prices spiked after Russia invaded Ukraine. Natural gas prices in Europe have tumbled 45% in the last year due to mild winter weather and easing worries over supplies.

Less volatility in the market also eroded trading opportunities, though Total managed to partially offset those lower earnings with better margins in refining.

Cash flow from operating activities came to $2.2 billion versus $5.1 billion a year earlier, the company said. Net debt jumped to $14.2 billion from $6.3 billion at the end of 2023.

The higher gearing is a “modest headwind”, said analysts at JPMorgan, adding the results were “fundamentally sound”.

The shares were up 0.6% as of 1001 GMT.

Hydrocarbon production was roughly stable versus the prior quarter at 2.46 million barrels of oil equivalent per day (mboed), but is forecast to drop to 2.40-2.45 mboed in the second quarter of the year due to planned maintenance.

Total expects natural gas profits to rise again over winter 2024-2025 as demand recovers in Asia and as little new LNG capacity comes online.

It forecast a winter gas price above $11/Mbtu, versus a current European price between $8-10/Mbtu.

But refining margins are set to fall, as higher oil prices currently around $90 per barrel are making refining less profitable going into the second quarter, with the trend likely to continue due to geopolitical tensions and decisions by OPEC+ countries to limit production via quotas.

The company also confirmed it plans $2 billion in share buybacks in the second quarter, and retained net investment guidance of $17-$18 billion this year, with $5 billion going to its growing Integrated Power business.

Total is investing in renewables alongside growing output of oil and gas, a strategy that has come under criticism in Europe.

CEO Patrick Pouyanne has said that more interest in the firm from U.S. investors could make “a case” for listing the company in New York, according to a Bloomberg report on Friday.

The company declined to comment on the report.

(Reporting by America Hernandez and Benjamin Mallet. Writing by Dominique Patton; editing by Jason Neely, Elaine Hardcastle)

Safran posts higher Q1 revenue, keeps financial targets 26 Apr 2024, 8:19 am

Safran posts higher Q1 revenue, keeps financial targets

PARIS (Reuters) -French jet engine maker Safran posted an 18.1% jump in first-quarter revenue and reaffirmed financial targets for the year while joining U.S. partner GE Aerospace in lowering a target for engine deliveries.

The Paris-based company posted quarterly revenues of 6.22 billion euros ($6.67 billion), up 19.1% on an underlying basis.

The widely-watched civil aftermarket business grew 27.3% in dollar terms. But deliveries of the LEAP jet engine were flat after a slow start to the year in plane production, notably at Boeing.

Safran co-produces engines for Boeing and Airbus narrow-body jets with GE Aerospace through their CFM joint venture, which is the sole supplier to Boeing’s 737 MAX family of jets and competes with Pratt & Whitney on the Airbus A320neo series.

Echoing GE earlier this week, Safran is now projecting LEAP engine deliveries will be up 10%-15% this year, a down from its previous estimate of 20%-25% growth.

The drop in deliveries is slightly positive for Safran’s profits in the near term because engines are typically sold at a loss with all the profit made in maintenance work. But it is expected to push up inventories and weigh on cash.

Earlier this month, Reuters first reported that Boeing’s MAX output had plunged into single figures per month.

Safran CEO Olivier Andries said CFM would temper its engine production plans to fit the lower delivery goal.

“We have lowered our target for the year and clearly we are adapting our purchasing plans to a realistic delivery plan,” he told reporters.

The Boeing slowdown comes at a time when jet demand is high and Airbus is pushing production higher.

Although CFM supplies both planemakers, the two versions of LEAP engine are not inter-changeable and there is no change in delivery plans to Airbus for 2024, while 2025 is still at the planning stage, Andries said.

Supply chains, meanwhile, remain under pressure across all business, Andries said.

Overall propulsion revenues, up 15.4% on a like-for-like basis, lagged other divisions including aircraft interiors whose 23.8% growth was driven mainly by service revenues that are linked to rises in air traffic.

However, business-class seat deliveries fell 25%. Andries this was mainly due to some shipments slipping into the second quarter.

Andries said Safran had won an exemption from Canada allowing it to use Russian titanium, echoing similar moves disclosed by Airbus and Bombardier.

Canada in February became the first Western country to add the strategic metal to packages of economic measures taken against Moscow over the war in Ukraine. Russia is a key supplier of the metal used in jet engines and landing gear.

(Reporting by Tim Hepher; Editing by Tassilo Hummel and Mark Potter)

Denso to sell off cross-shareholdings and use proceeds on M&A 26 Apr 2024, 7:48 am

Denso to sell off cross-shareholdings and use proceeds on M&A

TOKYO (Reuters) – Toyota Motor supplier Denso plans to eventually sell all of its cross-shareholdings, its president said on Friday, as the company looks to fund acquisitions and other investments.

WHY IT’S IMPORTANT

Investors have long pressured Japanese companies to sell-off cross-shareholdings and put their capital to better use. Firms have been gradually selling down their stakes, thanks in part to a governance push by the Tokyo Stock Exchange and the government.

Toyota and some other of its group companies last year sold around 8% of Denso, a move that was seen as a critical first step by the sprawling Toyota Group and heightening expectation of more sales to come.

CONTEXT

* Denso President Shinnosuke Hayashi told a briefing the supplier of auto components will continue selling its cross-shareholdings, with the intent to sell all of them, after holding talks with the companies involved.

* Denso, which doesn’t disclose the size of its cross-shareholdings, in March announced plans to sell all of its 9.1% stake in Toyota Industries.

* It has also cut holdings in JTEKT, another group company.

KEY QUOTES

“Basically, we are not going to hold a portion of the shares, but rather we are moving towards selling all of our shares,” Executive Vice President Yasushi Matsui told the briefing.

* Hayashi said the elimination of cross-shareholdings was important for increasing the competitiveness of the entire industry.

BY THE NUMBERS

* Denso reported a 11% decline in full-year operating profit on Friday.

* It forecast an 88% profit increase for the year to March, for 714 billion yen ($4.6 billion).

($1 = 156.6300 yen)

Airport operator ADP Q1 revenue boosted by post-pandemic travel boom 26 Apr 2024, 7:36 am

Airport operator ADP Q1 revenue boosted by post-pandemic travel boom

By Diana Mandia

(Reuters) -French airport group ADP reported on Friday a better-than-expected rise in first-quarter revenue, benefiting from the post-pandemic holiday boom and as travellers splashed more cash on food and drink at its airports.

“All segments of activities are growing, especially the contribution of international activities, driven by the strong traffic momentum at (Turkish airport operator) TAV Airports,” Chief Executive Officer Augustin de Romanet said in a statement.

The group, which runs the French capital’s Orly and Roissy Charles de Gaulle airports, posted consolidated revenue of 1.32 billion euros ($1.42 billion), up 10% and slightly better than the 1.29 billion euros expected in a company-compiled consensus.

Revenue at its Queen Alia International Airport in Amman, Jordan fell by 7.1%, which ADP’s deputy finance chief Phillippe Pascal said in a call with analysts was due to the Middle East crisis. It saw a drop in passenger traffic of 4.6%.

It was one of only two airports out of more than two dozen that ADP runs to report a drop. Global airlines have faced disruptions in the past six months due to security concerns in the Middle East.

ADP confirmed its targets for 2024 and 2025.

The retail and services segment, which includes shops, bars, restaurants as well as car rental companies, saw revenue increase by 11.1% to 426 million euros.

(Reporting by Diana Mandiá;Editing by Josephine Mason)

NatWest first-quarter profit slumps 27% as savings, mortgage competition bite 26 Apr 2024, 6:23 am

NatWest first-quarter profit slumps 27% as savings, mortgage competition bite

By Lawrence White

LONDON (Reuters) -NatWest’s first-quarter profit fell by a less than expected 27%, it said on Friday, hit by competition for savings, lending and mortgage products which has squeezed margins across the sector.

The British bank said pretax operating profit for the January-March period was 1.3 billion pounds ($1.63 billion), down from 1.8 billion pounds a year earlier and just above the average of analyst forecasts of 1.2 billion pounds.

NatWest said income was 406 million pounds lower than the same January-March period a year ago, due in part to lower deposit balances and customers shifting their savings to higher-returning products.

Rising interest rates in Britain in the last two years and political and media attention on the rates that banks pay to savers has fuelled a wave of such behaviour as customers prudently switch from low-yielding accounts to higher-paying products.

Britain’s biggest casualty of the 2008 crisis, NatWest is this year looking to end what its chairman this week called the “sorry tale” of its state ownership since that time.

The bank has been buying back its shares on the market, and the government is considering a further sale to retail investors later in the year as it looks to sell down the remainder of its sub-29% stake in the bank.

Prospects for such a sale have been helped by the bank’s robust recent performance and signs it is weathering Britain’s economic stumbles well.

Impairments, a closely-watched measure of loan losses as Britain’s economy tries to wrestle itself free from stagnation, came in at 93 million pounds for the quarter, better than the 186 million pounds forecast by analysts.

($1 = 0.7998 pounds)

(Reporting by Lawrence WhiteEditing by David Goodman and Tommy Reggiori Wilkes)