- FTSE 100 has reached a new record, as Anglo American rejects BHP takeover
- Microsoft and Alphabet shares rise on earnings beats
- Brent crude trading above $89 a barrel
- NatWest – Q1 results beat on lower impairments, trends look good
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:
“The FTSE 100 has reached yet another untouched summit, as investors remain in a positive mood. There has been a flurry of strong results from big hitters like Barclays and AstraZeneca on Thursday, which has helped carry the FTSE to these new highs. The market’s also reacting to the news that consumer confidence has improved slightly, according to data from GfK. Anglo American has also rejected BHP’s surprise takeover bid, deeming the multi-billion pound offer as unattractive. The proposed deal would hugely reshape the business, and the Anglo board has suggested the current bid isn’t reflective of the opportunity. There’s every chance BHP will come back to the table, and these conversations will remain the core cause of market reactions for both groups.
The FTSE’s also being lifted by positive news in the US overnight, with markets moving higher in the region. That follows positive news from both Microsoft and Alphabet. The Google owner in particular impressed the market, with an earnings beat and announcement of its first ever dividend. With so much cash languishing on the balance sheet, it’s encouraging to see tech companies leaning into using these resources more freely. Operating profit from the growing cloud business more than quadrupled, which is one of the benefits of being a smaller player – there’s more of a runway for exponential growth. Even more important was the better-than-expected YouTube ad revenues, which had been an area of apprehension, as competition in the media space increases.
US Treasury Secretary Janet Yellen told Reuters on Thursday that US GDP growth for the first quarter may be revised higher, as more data come in, which would signal a need for further monetary tightening. Despite this traditionally having a loosening effect on the oil price, Brent crude has moved past $89 a barrel as investors continue to assess ongoing geopolitical, and supply, risk in the Middle East.”
NatWest – Q1 results beat on lower impairments, trends look good
Matt Britzman, equity analyst, Hargreaves Lansdown:
“NatWest is best of the bunch. Lloyds and Barclays led the way this week and NatWest certainly hasn’t disappointed with first-quarter results very nearly a clean sweep vs expectations. Impairments came in lower than expected, net interest margin ticked higher from the previous quarter and both customer loans and deposit levels grew.
The UK banking sector looks strong. NatWest has followed its peers in calling out a slowing of some of the headwinds that have been impacting performance in recent quarters. Customers shifting to higher-rate accounts is slowing as expected, impairment rates on loans have stabilised at low levels, the economic outlook has improved, and balance sheets remain strong.
Of the UK-listed banks, NatWest looks best placed to benefit from a higher rate environment as its structural hedge comes off some of the lowest rates in the sector. Think of this like a bond portfolio that’s rolling on to higher yields over the next few years. Management has kept guidance largely in place, which still looks on the conservative side given it factors in several rate cuts this year that really don’t look likely to come. That leaves NatWest not only with the potential for operational strength but also paves the way for positive income surprises later in the year.”
The UK government has confirmed its intentions to sell its stake in NatWest to the general public “at the earliest opportunity subject to supportive market conditions and value for money.” Chancellor Jeremy Hunt said the Treasury wanted to “create opportunities for a new generation of retail investors to engage with public markets”. HL expects to be an intermediary in this share sale.
