Must read: FTSE 100, interest rates, GSK, Royal Mail, Aston Martin, Metro Bank

Stock markets are positive on Wednesday, but there'll be plenty of action later as the US Federal Reserve announces its latest decision on interest rates. Our head of investment runs through the big news so far.

GLOBAL MARKETS 

European markets are trading higher with Next (LSE:NXT) at the top of the FTSE 100 thanks to better-than-expected third-quarter sales. 

It is a busy couple of days for central bank action with the Fed expected to hike rates by 75 basis points for the fourth time tonight, while a similar rise is anticipated from the Bank of England tomorrow.

Strong Jolts labour market data stateside on Tuesday points to the ongoing need for hawkish action from the Fed to cool economic activity and bring inflation back down closer to target. Focus shifts to the ADP employment report at lunchtime as a precursor to Friday’s US non-farm payrolls report. 

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Global trade bellwether, shipping group Maersk warned of ‘dark clouds on the horizon’ in a foreboding sign about the outlook for the global economy. 

Gold and oil are both trading on higher on the back of US dollar weakness and a surprise drop in US crude inventories respectively.

GSK 

GSK (LSE:GSK) reported third-quarter adjusted earnings per share of 46.9p, topping analysts’ expectations for 40.1p, while revenue hit £7.83 billion also ahead of expectations for £7.32 billion. The British drug maker raised its full-year 2022 guidance and said it expects good momentum in 2023.

GSK set aside £45 million in terms of provisions for increased fees relating to the Zantac litigation, ahead of forecasts for £40 million. The heartburn drug was recalled in 2019 amid concerns about alleged contamination with NDMA, a potentially carcinogenic chemical, prompting lawsuits across the US. Shares in GSK fell more than 10% in August on Zantac litigation fears. 

This is a strong set of quarterly earnings with a beat on the top and bottom line. However, Zantac continue to be a drag on the shares with higher than expected provisioning announced this morning. Since the spin-off of its consumer health division Haleon (LSE:HLN), shares in GSK have shed more than 15%. However, price action over the last month has started to see some more positivity come back into play with a 10% rally off the lows.

ASTON MARTIN 

Aston Martin Lagonda Global Holdings Ordinary Shares (LSE:AML) downgraded its full-year 2022 wholesale delivery volume guidance, sending shares down double-digits. It now expects to deliver 6,200-6,600 vehicles this year, falling from its previous forecast for more than 6,600. It also downgraded its EBITDA margin outlook to growth of 100-300 basis points from its previous estimate for 350-450 points. 

Problems with the global supply chain post Covid-19, the global chip shortage and Russia’s invasion of Ukraine that added to inflationary pressures have created major headwinds for Aston Martin, dampening its outlook for deliveries and margins. On top of the supply problems, fears of a global recession and stiff competition could weigh on demand for its luxury cars.

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The British automaker has been struggling with its turnaround plan despite new investment from Saudi Arabia’s Public Investment Fund. Although Aston Martin has been working to reduce its debt levels, net debt still stands at £833 million. 

Investors have had an extremely difficult time with the stock, which is down by more than 80% year-to-date and almost 98% since its IPO in 2018.

ROYAL MAIL 

Royal Mail postal workers have announced plans for two 48-hour strikes on 24 and 25 November and on 30 November and 1 December. The walkouts land around Black Friday and Cyber Monday, a critical period for online shopping and deliveries in the run up to Christmas.

However, the Communication Workers’ Union (CWU) also cancelled strikes on 12 and 14 November. Royal Mail’s workers and its parent company International Distribution Services are in a dispute over pay and conditions, with the CWU rejecting the latest pay hike offer from the postal group on Monday, prompting plans for further industrial action. Earlier this week, Czech billionaire Daniel Kretinsky announced plans to increase his 22% stake in Royal Mail after receiving the green light from the government, sending shares higher on Monday. 

Shares in International Distributions Services (LSE:IDS) are up over the last month but are still down 60% year-to-date. The postal service has been struggling with a perfect storm of heavy strike action, a structural decline in letter demand, a fading pandemic parcel boom, pressures from cost inflation and an onslaught of dynamic competitors to the market. While its international business GLS has been robust, its domestic service has struggled with chairman Keith Williams warning in July that the business is losing £1 million a day.

METRO BANK 

Metro Bank (LSE:MTRO) said it had returned to profitability in September, ahead of previous guidance, sending shares in the challenger bank sharply higher. It also expects net interest margins to improve through 2023.

Third-quarter total deposits fell in line with expectations, while Metro Bank said there no signs of stress or increased delinquency across its customer base. Despite this, the lender still set aside £10 million in provisions against potential defaults. 

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Investors are cheering Metro Bank’s upbeat trading statement this morning, with the Bank of England’s rate hiking path helping to drive profitability at the challenger bank. Despite macroeconomic pressures from a looming recession and the cost-of-living crisis, the British lender painted a positive picture of the consumer, which appears to remain robust at least for now with few indications of loan defaults as of yet. Metro Bank has struggled this year, down by nearly 17% but shares are sharply outperforming today, surging double digits.