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London open: FTSE nudges up ahead of BoE, amid earnings barrage
London stocks nudged higher in early trade on Thursday as investors waded through a deluge of corporate news and eyed the latest policy announcement from the Bank of England.
At 0855 BST, the FTSE 100 was up 0.1% at 8,375.24.
On Wednesday, the US Federal Reserve kept its benchmark rate at between 5.25% and 5.50% as expected. However, chair Jerome Powell signalled that the central bank would be prepared to loosen monetary policy at its next meeting if price pressures continue to ease.
“A reduction in the policy rate could be on the table as soon as the next meeting in September,” he said. “We’re getting closer to the point at which it’ll be appropriate to reduce our policy rate, but we’re not quite at that point.”
As far as the BoE is concerned, expectations are for a 25 basis points cut to 5%. This would mark the first reduction since 2020.
Patrick Munnelly at TickMill Group said: “UK traders’ attention will be focused on the Bank of England today, following the Bank of Japan’s second interest rate increase in 17 years and the clearest signal yet from the U.S. Federal Reserve that it could lower rates in September.
“Most economists anticipate Britain’s central bank will cut rates from their 16-year high. Markets estimate the likelihood at a more modest 58%, with the uncertainty not surprising given policymakers have not spoken publicly for over two months due to rules ahead of Britain’s July 4 election.”
In equity markets, Smith & Nephew surged as the medical equipment maker reported a jump in first-half operating profit and revenue.
Rolls-Royce rallied as it lifted full-year profit guidance, hailing a strong first half, and said it was reinstating dividends.
Next gained as the retailer increased its full-year profit guidance by £20m to £980m after second-quarter sales exceeded its expectations.
Shell gushed higher as the oil giant reported better-than-expected earnings for the second quarter of $6.3bn and announced a $3.5bn share buyback.
Barclays was in the black as it posted a decline in half-year profit but lifted its outlook for full-year net interest income.
Coats Group and Elementis also gained ground after half-year results.
On the downside, Schroders was under pressure after it missed half-year profit forecasts, while Melrose Industries and Wizz also fell after results.
Vesuvius was in the red as it said end markets were weaker than expected in the first half and that full-year headline trading profit was set to be “only slightly ahead” of last year on a constant currency basis.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Rolls-royce Holdings Plc | +9.68% | +43.50 | 493.10 |
| 2 |  |
Next Plc | +8.00% | +726.00 | 9,800.00 |
| 3 |  |
Smith & Nephew Plc | +6.46% | +72.50 | 1,195.50 |
| 4 |  |
Marks And Spencer Group Plc | +2.07% | +6.80 | 335.10 |
| 5 |  |
British American Tobacco Plc | +1.42% | +39.00 | 2,784.00 |
| 6 |  |
Shell Plc | +1.41% | +40.00 | 2,880.00 |
| 7 |  |
Flutter Entertainment Plc | +1.30% | +200.00 | 15,575.00 |
| 8 |  |
Associated British Foods Plc | +1.01% | +25.00 | 2,507.00 |
| 9 |  |
Bae Systems Plc | +0.93% | +12.00 | 1,309.00 |
| 10 |  |
Imperial Brands Plc | +0.79% | +17.00 | 2,161.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Schroders Plc | -7.84% | -30.80 | 362.00 |
| 2 |  |
Melrose Industries Plc | -7.30% | -43.00 | 545.80 |
| 3 |  |
Hsbc Holdings Plc | -4.43% | -31.20 | 672.80 |
| 4 |  |
Lloyds Banking Group Plc | -2.52% | -1.50 | 58.08 |
| 5 |  |
Ferguson Enterprises Inc. | -2.51% | -433.00 | 16,802.00 |
| 6 |  |
Antofagasta Plc | -2.50% | -50.50 | 1,969.50 |
| 7 |  |
International Consolidated Airlines Group S.a. | -2.02% | -3.35 | 162.45 |
| 8 |  |
Standard Chartered Plc | -1.90% | -14.60 | 752.60 |
| 9 |  |
Prudential Plc | -1.80% | -12.60 | 686.60 |
| 10 |  |
Easyjet Plc | -1.78% | -8.00 | 442.60 |
US close: Stocks surge as Powell puts September cut on the table
Hawkish comments from the head of the Federal Reserve ignited US stocks on Wednesday with hopes rising for an interest-rate cut at the central bank’s next meeting in September.
The S&P 500 jumped 1.6% to 5,522.30, while the Nasdaq surged 2.6% to 17,599.40. The Dow, however, only rose 0.2% to 40,842.79 with the index now just inches away from its all-time closing high of 41,198,08 reached on 17 July.
The Fed’s two-day policy meeting concluded on Wednesday with no change in policy, as was widely anticipated, but chair Jerome Powell indicated that the central bank would be prepared to loosen monetary policy at its next meeting if price pressures continue to ease.
“A reduction in the policy rate could be on the table as soon as the next meeting in September,” Powell said. “We’re getting closer to the point at which it’ll be appropriate to reduce our policy rate, but we’re not quite at that point.”
“As we expected, Chair Powell stopped short from fully committing to a rate cut in September, but at the same time conveyed that the Fed was almost there,” said analysts at TD Securities. “While we think the bar is high for the Fed to cut by 50bp in September, we cannot discard the possibility that the Fed eases policy at each of the last three meetings of 2024 if inflation continues to come in better than expected.”
Economic data floods in
On the macro front, US mortgage applications fell 3.9% in the fourth week of July, according to the Mortgage Bankers Association, extending the prior week’s 2.2% drop to record the steepest weekly decline in almost two months. Applications to purchase a home fell by 1.5% for a third weekly decline in a row, while those to refinance a mortgage tanked by 7.2% week-on-week.
The Chicago purchasing managers index fell to 45.3 in July, according to the Institute for Supply Management. July’s reading was down from a seven-month high of 47.4 in June but came in above analysts’ expectations for a print of 44.8.
US private sector employment rose less than expected in July, according to figures released by ADP. Employment increased by 122,000 from June, versus expectations for a 150,000 jump. June’s gain was revised from 150,000 to 155,000. The service sector added 85,000 jobs, while the goods-producing sector saw a 37,000 increase.
Finally, pending home sales rose in June for the first time in the last three months, according to the National Association of Realtors, driven by an improvement in supply and a slight moderation in mortgage rates. The pending home sales index surged 4.8% month-on-month in June to 74.3, ahead of expectations for a 1.5% increase. On an annualised basis, pending home sales were down 2.6%.
Market movers
Advanced Micro Devices was up 4% after the chipmaker posted second-quarter results that topped consensus estimates.
The rest of the chip sector was also putting in impressive gains after Microsoft’s results the day before, in which it indicated that it would continue to invest heavily in data centre infrastructure on the back of surging AI demand. Broadcom, Micron Tech, TSMC, ASML and Super Micro all surged during the session.
Meanwhile, Nvidia closed up 12%, rebounding after recent falls, after Morgan Stanley named the stock as a ‘top pick’.
Boeing shares flew 2% higher on the back of its announcement that Robert Ortberg would take over as chief executive.
Image platform Pinterest tanked more than 14% despite beating forecasts with second-quarter results as the company disappointed with third-quarter guidance.
Thursday newspaper round-up: Meta, Mohsin Issa, Arm Holdings
Meta’s shares rose in after-hours trading on Wednesday off the back of a strong earnings report that comes as the company is spending heavily on AI tools. The company’s stock price grew around 5% following the report, which revealed the company outperformed analysts’ expectations for its second quarter. Meta, which owns Facebook, Instagram and WhatsApp, reported $39.07bn in revenue and $5.16 earnings per share. Both results outpaced market predictions of around $38bn in revenue and $4.7 per share, while the company also reported $8.47bn in capital expenditures – lower than analysts expected. – Guardian
Two of the largest City firms have joined forces to invest as much as £20bn of pension money in fast-growing UK businesses such as green energy, after government reforms designed to increase returns for savers and the British economy. Phoenix Group, the country’s largest savings and retirement business, and Schroders, the investment manager, announced the launch of a joint venture to plough pensions money into high-growth companies which are not listed on the stock market. – Guardian
Asda chief Mohsin Issa has announced an emergency £30m cash injection amid an alarming sales slump at the troubled supermarket chain. The investment package, which will be used to boost staffing hours and improve customer service levels, will be implemented before the end of the year. It comes amid growing concern over Asda’s dwindling market share, as it is the only major supermarket losing customers. – Telegraph
A senior member of the Barclay family, which owns The Telegraph, has struck a confidential settlement with a leading private bank to avoid the threat of bankruptcy. According to court filings, Investec has dropped a legal claim against Alistair Barclay after months of wrangling over almost £1m in unpaid debts. The settlement was submitted to the High Court in late July, two days before Mr Barclay was expected to appear before a judge. – Telegraph
Two former directors of Chill Brands Group have been accused of “blatant fraud” and embezzlement against the London-listed vaping company, and of allegedly misusing funds for personal expenses and using a company email account to “engage with an X-rated business for personal purposes”. Chill Brands has been locked in an extraordinary dispute and power struggle with Antonio Russo, its former chief commercial officer, and Trevor Taylor, its former chief operating officer, and has now begun legal action in the United States in an attempt to regain control of its chill.com domain and some trademarks. – The Times
Arm Holdings, widely considered to be the most successful British technology group in decades, reported better-than-expected first quarter earnings but disappointed investors by keeping its full-year revenue guidance in line with forecasts. The Cambridge company, which is majority-owned by Japan’s SoftBank Group, and which floated on the Nasdaq exchange in New York last September, maintained its full-year revenue guidance of between $3.8 billion and $4.1 billion, in line with analysts’ views. – The Times
