Market news and an update from IG Group.
Market News
US equity markets were little changed last night – S&P 500 (+0.1%); Nasdaq (+0.3%) – following the release of inflation data and hopes the Federal Reserve may pause rate hikes. This morning in Asia, markets were more buoyant: Nikkei 225 (+1.4%); Hang Seng (+0.5%); Shanghai Composite (+0.1%). The FTSE 100 is currently trading 0.4% higher at 7,553.
The 10-year Treasury currently yields 4.22%, while gold remains subdued at $1,907 an ounce. Japan bond yields fell after strong demand in a 20-year note auction, helping soothe jitters over BOJ comments earlier this week that signalled potential policy normalisation. Brent Crude trades at $92.20 a barrel.
Today is the ECB interest rate decision. The central bank’s dilemma over whether to deliver a 10th straight rate hike will hinge on how quickly it sees inflation retreating. Updated projections for the euro area through 2025 will be the most crucial input as policymakers choose to either pause or lift the deposit rate to a record 4%. The meeting will be a cliffhanger, with 34 economists surveyed by Bloomberg predicting a hold, and 32 foreseeing a hike. Money markets place two-in-three odds on an increase.
The slump in the UK housing market has deepened, with the fewest sales since lockdown. The RICS House Price Index fell to -68% (vs. -55% in July), the most negative reading since February 2009. In contrast, the lettings market is seeing tenant demand at +47%. Sterling trades at $1.2484 and €1.1626.
Arm priced its IPO at $51 a share, the top end of the range, to raise $4.87bn and value itself at about $54.5bn in the largest listing of the year. After the IPO, SoftBank will still control about 90% of the company’s stock. Underwriters have the option to buy as many as 7m additional shares. The stock is set to start trading on the Nasdaq today.
Source: Bloomberg
Company News
IG Group has this morning released a robust revenue update for the three months to 31 August, representing the first quarter of the financial year ending 31 May 2024. In response, the shares are little changed in early trading.
IG is a global leader in online trading, providing contracts for difference (CFDs) and spread betting services. The service allows retail, professional, and institutional clients to trade via its platforms 24 hours a day, 7 days a week. IG also provides a range of fully managed investment portfolios, which provide a comprehensive offering to investors and active traders.
The slight increase in total revenue from £241.8m to £242.9m reflected the benefit of business diversification over the past few years, as some moderation in OTC derivatives revenue in the quarter (-8% to £183m) was offset by significant growth exchange traded derivatives (+37% to £49.8m) and stock trading (+61% to £10.4m).
Similar to the trends seen in the previous quarter, a decrease in net trading revenue reflected substantially lower volatility across a range of asset classes, which was more than offset by strong growth in interest income, which resulted from a combination of higher interest rates and stable client money balances from the year end.
Net interest income within total revenue rose from £7.1m to £34.4m. Of this, £11.8m was related to OTC derivatives, £18.0m was attributable to exchange traded derivatives, and £4.6m to stock trading and investments.
Total active clients fell from 279,300 to 267,000. The company believes this is a resilient performance reflecting the quality of its clients and its ability to engage and retain client cohorts through superior technology, trade execution, and overall customer service. Total client money balances of £4.1bn remained stable during the quarter as clients maintained their interest in trading financial markets around the world.
In July, the group announced a £250m share buyback programme, the first £100m tranche of which commenced during the quarter. By 12 September, around £39.6m had been repurchased. The first tranche is anticipated to be completed on or before 12 December 2023.
On 1 January 2022, the group transitioned to the Investment Firm Prudential Regime (IFPR). Following the first Supervisory Review and Evaluation Process (SREP) under the new regime, the group’s regulatory capital requirement reduced from £497m as at 31 May 2023 to £290m as at 31 August 2023, evidencing the high quality and strength of the group’s risk management frameworks and controls. IG continues to be highly cash-generative, and the reduction in its regulatory capital requirement further strengthens the financial capacity for strategic growth initiatives and shareholder distributions.
Source: Bloomberg