Fed raises rates | equities up on China support | oil dips
9pm: Fed raises rates
The US Federal Reserve has raised interest rates by a quarter of a percentage point to 0.5%.
In a statement the Fed said that ongoing increases in the target range will be appropriate, taken to mean that there will be a series of interest rate increases of 25 basis points.
The Fed noted that indicators of economic activity and employment have continued to strengthen in the US.
““The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the US economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity,” it said in a statement.
It expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.
5pm: Markets lifted by China support
The FTSE 100 closed up 115.98 points, or 1.6%, at 7,291.68 after Chinese authorities pledged to provide much-needed support to the markets and hopes were raised over a breakthrough in Ukraine. The CAC 40 in Paris jumped 3.7% and the DAX 40 in Frankfurt surged 3.8%.
In London, Scottish Mortgage Investment Trust closed up 7.8%. The trust holds investments in Chinese technology firms including WeChat owner Tencent and e-commerce titan Alibaba.
Restaurant Group, owner of Wagamama and Frankie & Benny’s, rose 6.9% after saying current trading has continued to be strong, outperforming the market for the first two months of the year, and cutting its losses.
Total sales for the 53 weeks ended 2 January came in at £636.6m (2020: £459.8m). There was a reduced statutory loss before tax of £32.9m on an IFRS 16 basis (2020: loss of £132.9m).
Chief executive Andy Hornby said: “2021 was a year of substantial progress at TRG. The recapitalisation of the balance sheet and strong trading performance have allowed us to deliver a robust set of financial results despite the various restrictions that have impacted the sector.”
Gym Group fell 8.6% despite revenue climbing 32% last year to £106 million and posting lower pretax losses of £44.2m from £47.2m (see report below).
Wall Street stocks were higher on hopes of an end to the Russia-Ukraine conflict. Under the terms of the 15-point plan, Kyiv would renounce joining the North Atlantic Treaty Organisation, but in exchange for security guarantees, according to the Financial Times.
Those guarantees will be provided by the likes of the US, UK and Turkey. Kyiv will also promise not to host foreign military bases or weaponry.
The other key focus is the Federal Reserve’s expected decision to raise interest rates by 0.25% for the first hike since 2018 and also offer a new quarterly forecast that could point towards five or six more hikes this year.
As of 1530 GMT, the Dow Jones Industrial Average was up 1.19%, while the S&P 500 was 1.68% firmer and the Nasdaq Composite surged 2.72%.
Brent Crude fell 0.69% to $99.22 per barrel, while WTI Crude was treading water at $96.69 with a 0.25% increase over the course of the session.
Gym Group plans more openings
Revenues at the Gym Group for the period were up 31.7% and group adjusted EBITDA less normalised rent was £5.7m, up from a loss of £10.2m in 2020.
The statutory loss for the year was £35.4m against £36.4m in 2020.
“This is a business that has quickly returned to generating free cash flow when open,” said the company, “and with a well-supported £30m equity raise to strengthen the balance sheet, we are now accelerating our growth ambitions with fast organic site rollout, targeting 28 openings in 2022.”
The rollout target is increased to 25-30 openings for 2023 and 2024.
The company saw a significant increase in membership numbers following re-opening in April last year, with total members at 31 December 2021 of 718,000, up from 547,000 at the end of February 2021 (Dec 2020: 578,000).
Membership grew 14.9% in the first two months despite impact of Omicron on early January trading. The company had 825,000 members at 28 February 2022 (50% growth since Feb 2021).
Richard Darwin, CEO of The Gym Group, commented: “The Gym Group has had an encouraging start to the year, building on the momentum of our excellent recovery in 2021. We have now grown our membership by 50% in the 12 months to February 2022.”
C&C sees positive trading
Tennent’s owner C&C Group said it expects to report a FY2022 operating profit in the range of €45-47m.
In January, restrictions in the UK and Ireland were eased and the Dublin-based company said it is pleased to see positive trading in the on-trade.
“We were back trading with 81% of direct delivered outlets in February 2022 versus February 2020, with corresponding volumes at 68% and momentum building as outlets continue to re-open.”
Full year results to the end of February will be issued on 17 May.
European markets are expected to follow Wall Street’s rally against a number of powerful headwinds, including today’s US interest rate meeting.
The FTSE 100 index was forecast to open 78 points higher after the Dow Jones Industrial Average closed 1.8% up, the S&P 500 2.1% higher and the Nasdaq Composite 2.9% to the good.
Traders in New York resisted intraday selling pressure ahead of today’s Federal Reserve meeting aimed at tackling rampant inflation.
The positive momentum continued through to Asia. The Hang Seng index in Hong Kong soared 9%, though it remains 2.3% lower over the week after a brutal few days.
In China, the Shanghai Composite was up 3.4%, while Japan’s Nikkei 225 index ended up 1.6%, and the S&P/ASX 200 in Sydney ended 1.1% higher.