The FTSE was trading flat this morning, with broad declines in the mining sector countering gains in the banking sector.
Investors were cautious following disappointing results from US bellwethers Apple and IBM, and ahead of tomorrow's government spending review.
Overnight, Apple and IBM reported their quarterly earnings after the closing bell, and while both companies surpassed earnings expectations, they underperformed in key aspects of their business. Firstly, Apple saw fourth-quarter earnings rise 70% to $4.31 billion, or $4.64 a share off the back of bumper iPhone sales. However, sales of the much talked about iPad missed expectations after they sold 4.19 million units, below consensus estimates of 4.5 million. Projected earnings for the current quarter were also conservative at $4.80 a share, falling short of the predicted $5.03 by analysts surveyed by Bloomberg. Shares in Apple slumped 5.12% to $301.72 in afterhours trading.
IBM suffered a similar blow, dropping 2.46% to $139.31. Net income in the third quarter rose 12% to $3.59 billion, or $2.82 a share, topping estimates of $2.75 a share. Sales narrowly beat expectations rising 3% to $24.3 billion. The company fell short, however, in their service signings, which fell 7% to $11 billion. The drop in signings doesn't bode well for the general economy, as it suggests large corporations are holding off on large outsourcing projects. This is a concern for IBM as signings account for around 60% of its revenue.
With both of these tech giants reporting mixed results, the FTSE 100 opened in the red this morning. The setback in Apple's iPad sales dragged on ARM Holdings, which licenses the chips that go into the iPhone and iPad. ARM was the biggest faller on the FTSE 100 losing 2.43% to 389.40p.
By 10.25am (London time) the FTSE 100 was close to unchanged, rising 3.19 points (+0.06%) to 5745.71, while the FTSE 250 rose 14.37 points (+0.13%) to 10889.46.
Further weighing on the index was the continued rebound in the US dollar, which saw metal commodities lose ground this morning. This saw BHP decline 0.75%, Anglo American fall 0.63% and Xstrata shed 1.8%. Xstrata issued an interim management statement this morning - the company said 'Strong momentum for coal, copper and nickel volumes was seen in the third quarter over the previous quarter.'
The banks were able to buck the negative trend and were broadly stronger this morning. Earnings results from Citigroup are still buoying the sector, but an important test will come this afternoon when Goldman Sachs and Bank of America report their quarterly earnings. Royal Bank of Scotland added 1.97%, Barclays rose 1.69%, while HSBC gained 0.89%.
UK investors are also cautious ahead of tomorrow's government spending review and the Bank of England's minutes. The government will be laying out the details of the spending cuts it announced in the emergency budget in June. The Bank of England minutes are also expected to provide more details on their stance on quantitative easing. Speculation has increased that the central bank is considering further QE to support the economy, and investors will be looking for confirmation of that in the minutes. BoE Governor Mervyn King is expected to make a speech tonight at 7.50pm (London time), which may also shed more light on the matter.
