- FTSE 100 closes above earlier lows, down 41 points
- Bank of England hikes rates by 25bps to 5.25%
- UK service sector at six-month low in July
4:30pm: FTSE 100 closes off the lows
The FTSE 100 closed 41 points, 0.55%, lower pricing the blue-chip benchmark at 7,519 after an eventful day at the exchange and Bank of England.
3.55pm: US Treasury yields hit 9-month high
US Treasury yields hit to a nine-month high as a sell-off in the world’s biggest bond market intensified, adding to the woes of the stock market.
The 10-year Treasury yield climbed 0.09 percentage points to 4.16%, extending a rise that began on Wednesday after the US government lifted its issuance target for the coming quarter in the wake of Fitch’s unexpected downgrade of Washington’s credit rating.
The Treasury department announced on Wednesday that it plans to issue US$103 billion in its quarterly refunding next week, an increase of USD7 billion from the prior quarter.
In addition to the refunding, the Treasury said it will also increase the size of its two-year and five-year auctions by US$3 billion each month over the coming three months.
Hedge fund manager Bill Ackman said he was shorting US 30-year debt, citing “large deficits as far as the eye can see”.
“It is hard to imagine how the market absorbs such a large increase in supply without materially higher rates,” the Pershing Square chief executive said in a post on X, formerly Twitter.
I have been surprised how low US long-term rates have remained in light of structural changes that are likely to lead to higher levels of long-term inflation including de-globalization, higher defense costs, the energy transition, growing entitlements, and the greater bargaining…
— Bill Ackman (@BillAckman) August 3, 2023
"From a supply/demand perspective, long-term Treasurys (T) also look overbought."
"With $32 trillion of debt and large deficits as far as the eye can see and higher refi rates, an increasing supply of T is assured. When you couple new issuance with QT, it is hard to imagine how the market absorbs such a large increase in supply without materially higher rates," he added.
3.30pm: US service sector slows down in July
The US service sector expanded at a more moderate pace in July as it was restrained by a softening of employment growth, according to a closely watched survey.
The Institute for Supply Management’s services index decreased 1.2 points to 52.7 last month.
Anthony Nieves Chair of the ISM’s Services business survey committee said: “"There has been a slight pullback in the rate of growth for the services sector.”
.@ISM’s Anthony Nieves: “(S)light pullback in the rate of growth for the services sector. This is due mostly to the decrease in the rate of growth for business activity, new orders and employment, as well as ongoing faster delivery times.” https://t.co/Q0yMnhKnfY #ISMPMI #economy
— Institute for Supply Management (@ism) August 3, 2023
“This is due mostly to the decrease in the rate of growth for business activity, new orders and employment, as well as ongoing faster delivery times.”
“The majority of respondents are cautiously optimistic about business conditions and the overall economy."
Readings above 50 indicate expansion, though the latest figure came in just below expectations.
ISM’s measure of employment at service providers indicated scant hiring during the month.
The ISM said economic activity had expanded for the seventh consecutive month in 37 of the last 38 months, with the lone contraction in December of last year.
3.02pm: Oil prices rise as Saudi extends production cut
Oil prices rose after Saudi Arabia said it would extend its voluntary production cut of 1mn barrels of oil per day for at least another month.
The cut, which was first implemented in July, will be maintained to the end of September and could be extended or “deepened” further, the state news agency said.
The reduction in output is in addition to a voluntary 500,000 b/d cut announced by the kingdom in April, when its output was around 10.5mn b/d. It means Saudi Arabia’s oil output will remain at 9mn b/d until at least the end of September.
“This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets,” the news agency said, citing the Saudi Ministry of Energy.
The price of Brent crude jumped 1.2% to US$84.11, up 1.1%, while a barrel of West Teaxs Intermediate fetched $80.21, up 0.9%.
2.45pm: US stocks weaken, Apple and Amazon report later
US stocks made a weak to the day as a spike in bonds yields, spurred in part by Fitch's downgrade of US credit rating, put rate-sensitive shares under pressure.
Shortly after the opening bell the Dow Jones Industrial Average was down 69.89 points, 0.2%, at 35,212.63, the S&P 500 fell 15.95 points, 0.4%, to 4,497.44 and the Nasdaq Composite slipped 39.89 points, 0.3%, to 13,933.56.
Tech stocks extended Wednesday's heavy falls ahead of results from two of the sector’s big beasts, Apple Inc and Amazon.com Inc due after the closing bell.
It’s another bumper day of earnings. Qualcomm stock slumped 10.0% after the company’s third-quarter results after the market close Wednesday disappointed in terms of sales and guidance.
The company reported adjusted earnings of $1.87 per share, above Street expectations of $1.81 but drastically short of the $3.29 per share it reported a year earlier. Revenue was $8.44 billion, short of the $8.5 billion street consensus.
But Moderna Therapeutics Inc rose 2.1% as it reported better than feared second quarter earnings.
The mNRA vaccine maker reported a net loss of $1.4 billion on $300 million of revenue in its second quarter, representing a $3.62 loss per share - versus market expectations of $3.84 per share.
Albemarle Corp rose 2.0% after it reported second quarter profit was up alongside soaring revenue, driven primarily by higher prices and volumes in its Energy Storage business.
The Charlotte, North Carolina-based lithium producer also nudged up sales guidance for 2023 to between $10.4 billion and $11.5 billion from May's guidance of $9.8 billion to $11.5 billion
2.23pm: US weekly jobless claims in line with forecast
Initial claims for unemployment insurance in the US were higher week-on-week, but came in line with market forecasts, according to figures from the US Department of Labor.
Initial jobless claim in the week that ended July 22 totalled 227,000, up 6,000 from the previous week's unrevised level of 221,000, in line with the FXStreet-cited market consensus.
The four-week moving average was 228,250, a decrease of 5,500 from the previous week's unrevised average of 233,750.
The figures follow JOLTS job vacancy ADP private payrolls figures earlier in the week and provide the backdrop to Friday's non-farm payrolls.
2.10pm: Peak interest rates seen lower after latest increase
The expected peak in UK interest rates has fallen in the wake of the Bank of England's interest rate rise.
Sky's Ed Conway pointed out yesterday charts were pricing in a peak in rates of 5.8% or so. Now down to 5.65% or so…
Markets are now trimming back their expectations for the likely peak in UK interest rates, following today’s @bankofengland announcements.
Yesterday these charts were pricing in a peak of 5.8% or so. Now down to 5.65% or so… pic.twitter.com/zNPV0inaI0
— Ed Conway (@EdConwaySky) August 3, 2023
Panmure Gordon's chief economist Simon French explained this was even more marked given markets had been pricing in a peak of 6.51% in early July.
Also worth noting that peak UK bank rate is seen at 5.67% after this report, having been at 6.51% in early July. That's a big move in prospective financial conditions. https://t.co/ABCVaRxVGD
— Simon French (@shjfrench) August 3, 2023
He described the BoE's move as a "relatively dovish 25bp hike."
ING Economic reckons the Bank of England is keeping all its options open on future rate hikes, although another rise in September seems highly likely.
"Whether that's repeated in November is a more open question, particularly if services inflation starts to fall more noticeably between now and then," it said.
Samuel Tombs at Pantheon Macroeconomics continues to "think that the MPC will raise Bank Rate by just 25bp in September, and that this will be the last increase in this tightening cycle."
1.35pm: To recap, here are some of today’s share price movements
Kodal Minerals PLC (AIM:KOD) shares jumped as a US$3.5 million payment from China came through as part of the funding package for the Bougouni lithium project.
Hainan Mining stumped up the money, which is repayable or convertible into Kodal shares should a funding package not be agreed.
Serco also ticked higher as booming demand for its immigration services prompted the outsourcer to raise some of its forecasts for the rest of the year.
Demand from the UK government for more staff to process asylum seekers and other migrants will mean a £280 million boost to revenue, it said.
Lastly, Shares in Devolver Digital Inc (AIM:DEVO) tumbled in early trade as the company announced delays to several new game releases, a reduction in revenue from subscription deals, and a softer performance in back-catalogue sales.
The digital publisher and developer of indie video games, known for its award-winning titles, revealed in its trading update for the first half of 2023 that these challenges would impact its performance for the current financial year.
1.04pm: Modest losses seen on Wall Street
US stocks are expected to nurse modest losses at the open ahead of another bumper day of earnings with tech heavyweights Apple Inc and Amazon.com Inc reporting after the closing bell.
Futures for the Dow Jones Industrial Average are down 54.00 points, or 0.15%, for the S&P 500 by 12 points, or 0.3%, and for the Nasdaq Composite by 66 points, or 0.4%.
Wednesday’s session saw the Nasdaq suffer its heaviest loss since February, while the S&P and DJIA also fell following the surprise Fitch credit rating downgrade.
The tech sector will remain in focus today with Apple and Amazon’s numbers. Investors will looking for guidance on Apple's artificial intelligence plans after it was forced to make drastic cuts to production forecasts for its mixed-reality Vision Pro headset.
Elsewhere, figures are due from ConocoPhillips, Kellogg, Expedia, Hasbro (NASDAQ:HAS), Airbnb and Coinbase.
In economic news, economists anticipate initial US state unemployment claims to have ticked up to 226,000 last week after falling to a five-month low of 221,000 last week. Separately, prices paid by businesses for services are expected to have fallen, with economists forecasting the July ISM services purchasing managers’ index reading at 53, down from 53.9 in June.
Qualcomm stock dipped 8.3% in extended trading after the company’s third-quarter results disappointed in terms of sales and guidance.
The company reported adjusted earnings of $1.87 per share, above Street expectations of $1.81 but drastically short of the $3.29 per share it reported a year earlier. Revenue was $8.44 billion, short of the $8.5 billion street consensus.
But Moderna Therapeutics Inc stock is pointing higher in pre-market, up 1.6%, as it reported better than feared second quarter earnings.
The mNRA vaccine maker reported a net loss of $1.4 billion on $300 million of revenue in its second quarter, representing a $3.62 loss per share - versus market expectations of $3.84 per share.
Warner Bros Discovery Inc was another stock heading upwards, rising 3.0% in pre-market, as it reported narrowed second quarter losses following a bump in revenue.
12.38pm: Wilko on the brink of collapse - reports
Thousands of jobs are at risk UK retailer, Wilko, after it signalled it was at risk of insolvency proceedings due to “mounting cash pressures," according to reports.
The privately-owned chain, which sells everything from stationery to hardware, has filed notice of its intention to appoint administrators at the UK’s High Court, following weeks hunting for a rescue deal.
Wilko homeware chain on brink of collapse https://t.co/B7X3bPCkEA
— BBC News (UK) (@BBCNews) August 3, 2023
Wilko, has 400 shops and employs about 12,000 people, and secured a £40 million lifeline from Hilco UK, the owner of Homebase, at the beginning of this year.
Filing notice of intention to appoint administrators can buy businesses protection while they continue rescue talks.
12.30pm: FTSE 100 steady after rise rise, pound lower
The FTSE 100 got a slighty bump from the as expected rate call but remains firmly in the red while sterling remained weaker as investors speculated a peak in interest rates could be near.
Victoria Scholar, Head of Investment, interactive investor said the magnitude of today’s hike is more about "sending a signal about how concerned the central bank is about inflation."
"Clearly there’s a long way to go to bring inflation back down to the 2% target, but recent data points to encouraging signs that we’re finally moving in the right direction with global supply chain bottlenecks fading, wholesale energy prices on the decline, and increased slack in the labour market."
"Uncertainty remains around the outlook for food inflation and strong wage growth, both of which could slow the path for disinflation," she added.
12.08pm: Bank's MPC split 6-3 on rate increase
The decision by the Bank's Monetary Policy Committee was split.
The MPC voted by a majority of 6–3 to increase Bank Rate by 0.25 percentage points, to 5.25%. Two members preferred to increase Bank Rate by 0.5 percentage points, to 5.5%, and one member preferred to maintain Bank Rate at 5%.
Despite the recent fall in inflation the MPC said continues to judge that risks around the modal inflation forecast are skewed to the upside, albeit by less than in May, reflecting the possibility that the second-round effects of external cost shocks on inflation in wages and domestic prices take longer to unwind than they did to emerge.
The MPC will continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including the tightness of labour market conditions and the behaviour of wage growth and services price inflation. If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.
The Bank said it expected inflation to fall further, to around 5% by the end of this year.
12.00pm: Bank of England lifts interests by 25 basis points
The Bank of England has raised interest rates by 25 basis points taking Base Rate to 5.25%, its highest level since 2008.
The as expected increase is the 14th in a row as authorities battle to bring inflation closer to the Bank’s 2% remit.
The consumer prices index (CPI) fell last month, but remained well above most industrial nations at 7.9% and almost four times the Bank’s target.
11.38am: Greenpeace scales Rishi Sunak's roof in climate protest
Environmental activists have climbed on to the roof of Rishi Sunak’s family home in Yorkshire to protest against the government’s plan to back more North Sea oil and gas licences.
Protesters from Greenpeace released a picture of four campaigners on top of the £2 million grade II listed mansion in North Yorkshire on Thursday. They unfurled a 200 sq m sheet of black cloth to cover its façade.
Greenpeace activists have covered Rishi Sunak's £2m mansion in oil-black fabric after climbing on to the roof of the property in Yorkshire.
Mr Sunak was not in his mansion at the time of this morning's protest.
Read more here ???? https://t.co/bgl3HenvVc pic.twitter.com/n63hG3ZzxT
— Sky News (@SkyNews) August 3, 2023
The police are at the prime minister’s home and are engaging with protesters, a Downing Street source said.
11.31am: Teso embraces flexible working ahead of law change
Supermarket giant Tesco PLC (LSE:TSCO) has rolled out changes allowing all its staff to request flexible working from their first day at the chain, nearly a year ahead of an incoming change in the law.
The grocer brought in its new flexible working policy this week, which gives its more than 300,000-strong workforce the right to ask for part-time or flexible working hours from day one.
Under current rules, employees must wait six months before being allowed to make the request.
It sees Tesco make the move ahead of new laws expected to come in next spring which will give all employees the right to a flexible working request from day one.
11.09am: Next's useful habit of beating expectations strikes again
Next PLC (LSE:NXT) seems to be "keeping its head above water in a difficult environment" after the retailer raised its full-year profit guidance following a better-than-expected end of season sale.
That was the view of AJ Bell’s Laith Khalaf who noted a washout July “could have been catastrophic for retailers and so there was a sense of nervousness ahead of Next's summer trading update.”
Simon Wolfson, the boss of the Leicester-based retailer has a habit of outperforming skillfully managed expectations and he didn’t disappoint once more.
Aarin Chiekrie at Hargreaves Lansdown noted: “Next has got into a habit of beating market expectations on the upside lately, and today’s second-quarter trading statement continued the hot streak.”
“Next’s certainly weathering the storm of economic uncertainty admirably, and looks well-placed to prosper further when the cycle turns,” he added.
AJ Bell's Khalaf accepted the rate of its sales growth had slowed dramatically in the six weeks to 29 July versus the previous seven weeks, but noted Next seems to have avoided a downpour and still managed to shift quite a bit of stock in the period.
The FTSE 100-listed retailer earlier raised full-year pre-tax profit guidance by £10 million to £845 million.
Share are up 0.4% to 6,872p.
10.41am: GSK sues Pfizer over Arexvy alleged patent infringement
GSK PLC (LSE:GSK, NYSE:GSK) is suing Pfizer over patent infringement, alleging Pfizer's respiratory syncytial virus vaccine steals key elements of GSK's version.
The case, filed in federal court in the US state of Delaware, pits the producers of the only two approved vaccines for respiratory syncytial virus against each other.
In early May, the US approved GSK's Arexvy as the first vaccine for RSV; that was followed at the end of May with US approval of Pfizer's Abrysvo. Both vaccines have since been approved by the EU.
"Upon information and belief, Pfizer knowingly uses GSK's claimed inventions in Abrysvo without permission," said the GSK complaint.
The complaint describes Arexvy as "the result of more than 15 years of research and development by GSK scientists," adding that Pfizer's program on an RSV vaccine began "no earlier than 2013."
RSV is a widespread, highly contagious pathogen most known for causing bronchiolitis – an irritation and inflammation of the small airways – in young children, especially in winter.
10.12am: Service sector slip backs case for 25bps rate rise
The recovery in the services sector appears to be running out of steam, strengthening the case for the MPC to announce a mere 25bp increase in Bank Rate later today, according to Gabriella Dickens, senior UK economist, at Pantheon Macroeconomics.
She was commenting after the latest S&P service PMI hit a six-month low.
"The business activity index fell in July to its lowest level this year, while the new orders index fell to a six-month low of 50.8, from 52.8 in June," she pointed out.
"In addition, the headline composite PMI now is consistent with zero quarter-on-quarter GDP growth in Q3, giving the MPC good grounds for revising down its forecast for growth today from the 0.5% figure in May’s Monetary Policy Report."
She anticipates Bank Rate rising to 5.25% today, from 5.00%, and then being increased for the last time in this cycle to 5.50% in September.
9.49am: UK service sector at six-month low
The UK service sector fell to its lowest level in six months as business conditions remained subdued.
The S&P Global/CIPS services PMI was 51.5 in July, down from 53.7 in June and the lowest in the current phase of expansion that began in February.
Tim Moore, economics director at S&P Global Market Intelligence, said: "The loss of momentum signalled by service providers in July suggests that the UK economy is set to flatline at best in the coming months as higher borrowing costs take a bigger toll on consumer spending and business confidence.”
“Service sector companies saw the weakest rise in new work for six months, while job creation slipped as some firms responded to softer market conditions by putting the brakes on hiring,” he noted.
UK service sector saw the weakest performance in six months with the #PMI posting 51.5 (Jun: 53.7). Input cost inflation picked up from June's 25-month low.
Read more: https://t.co/tysJwlwbVJ pic.twitter.com/2tM5HaZoya
— S&P Global PMI™ (@SPGlobalPMI) August 3, 2023
The report showed firms experienced another period of subdued business conditions during July, with activity levels and new work expanding at much slower rates than in the previous month.
Pressure on operating capacity subsequently showed signs of easing as backlogs of work declined at the fastest pace for nearly two-and-a-half years.
The survey showed input cost inflation picks up from June's 25-month low although the rise was among the weakest seen since the summer of 2021.
9.33am: Bond yields jump adding to equity weakness
Equities remain firmly on the back foot with rising bond yields in the wake of Fitch's decision to downgrade the US credit rating adding to the woes.
Laith Khalaf, head of investment analysis at AJ Bell noted: "The decision by the credit agency to cut the rating led to higher US government bond yields which in turn has a negative impact on equities."
The FTSE was pulled down by banks, miners and consumer goods companies, he said, but: "It wasn’t just a risk-off day – even the so-called defensive stocks were out of fashion. Perhaps investors just want to enjoy their summer break and so we could see markets drift until everyone is back behind the desk in September."
“Expectations for another interest rate hike from the Bank of England at lunchtime means the FTSE 250 is vulnerable to a sell-off if rates are lifted by more than expected," he suggested.
"The market widely expects rates to go up by 25 basis points to 5.25% but a more aggressive hike could be bad news for housebuilders and retailers as it would put further pressure on household finances."
9.14am: Bank of England expected to slow pace of rate rises
The Bank of England is expected to raise interest rates again on Thursday, but at a slower pace following cooling inflation pressures.
A 25 basis point increase is broadly expected although a 50bps rise can’t be ruled out.
It would be the 14th consecutive increase and take Base Rate to 5.25%, the highest level since 2008.
Since the Bank’s last meeting there have been some more encouraging figures on inflation which “should take the pressure off the BoE to deliver another bumper rate increase at this month's meeting," according to Matthew Ryan at Ebury.
Simon French, chief economist at Panmure Gordon, notes “financial markets see it 70:30 in favour of 25bp vs 50bp.”
“The smaller increment would appear more sensible given the leading indicators (broad money growth, commodity prices, inflation expectations, high labour inactivity, weak sterling) have all shown improvements in recent weeks,” he thinks.
The Bank of England is also expected to raise its predictions for economic growth in 2023 and update its guidance for inflation.
But French thinks of more importance will be the guidance offered towards further increases in interest rates.
“I suspect the MPC will give itself optionality for a pause in September if the crucial July CPI data (16 Aug) is another downside miss,” he said.
8.50am: Sell-off continues but Next holds firm
The FTSE 100 continues to head south, now down 96 points at 7,465, with only four stocks in the green.
Next PLC (LSE:NXT) continues to hold firm, up 0.8% after its raised guidance, following a strong end of season Sale but London Stock Exchange Group PLC (LSE:LSEG) has tumbled after its resuts.
The firm said operating profit of £729 million was around 19% lower year on year, with basic earnings per share falling 21% to 77.2p.
But the value of subscriptions rose 6.9% slowing from 7.6% in the first quarter.
Analysts at Jefferies said underlying earnings (Ebitda) of £1.87 billion was a 2% miss to consensus hit by higher costs.
Also weighing on the FTSE 100 was BT Group, which fell 5.2% as shares of the telecom firm traded ex-dividend.
Packaging firm, Mondi PLC (LSE:MNDI) is also under pressure, down 4.2%, after it reported underlying Ebitda of €680 million, down 28% from €942 million a year ago.
Andrew King, chief executive officer, said: "Mondi's performance in the first half of 2023 reflects a strong delivery against a backdrop of challenging market conditions."
8.15am: Equities extend falls as Fitch downgrade continues to weigh
The FTSE 100 has plummeted further, still reeling from the Fitch credit rating downgrade, while investors are also eyeing the latest interest rate decision by the Bank of England.
At 8.15am London’s lead index was down 62.18 points, 0.8%, at 7,499.45 while the FTSE 250 fell 54.54 (points, 0.3%, to 18,758.34.
Deutsche Bank expects a 25bps hike in UK rates to bring the policy rate to 5.25% and looking ahead, see two further quarter point rate hikes, with the terminal rate at 5.75%.
A rise in borrowing costs would be the 14th in a row and take them to their highest levels since 2008.
Next PLC (LSE:NXT) shares rose 0.4% as it raised guidance for pre-tax profit by £10 million to £845 million after reporting full price sales in the second quarter (May-July) were up +6.9% on last year.
The retailer said the end-of-season Sale has gone well and clearance rates were ahead of expectations.
Aarin Chiekrie at Hargreaves Lansdown noted: “Next has got into a habit of beating market expectations on the upside lately, and today’s second-quarter trading statement continued the hot streak.”
“Next’s certainly weathering the storm of economic uncertainty admirably, and looks well-placed to prosper further when the cycle turns,” he added.
Rolls-Royce Holdings PLC (LSE:RR.) after it flagged much of today’s half-year results statement last week.
The firm reaffirmed its increased guidance as it unveiled a return to profit driven by rising margins.
“Rolls-Royce has reported strong H1 results, which was expected after the trading update last week,” said Shore Capital’s Jamie Murray.
“These results indicate, in our view, that the Rolls turnaround story may be happening at a faster rate than previously expected,” Murray added.
Shares eased 2.2%.
7.52am: Next ups guidance as end of season Sale goes well
Next PLC (LSE:NXT) has raised guidance for pre-tax profit by £10 million to £845 million after reporting full price sales in the second quarter (May-July) were up +6.9% on last year.
The retailer said that since its last update on June 19, full price sales have risen 3.7% on last year, ahead of guidance of 0.5% growth.
The end-of-season Sale has gone well and clearance rates were ahead of expectations, Next said.
The firm said it maintaining its forecast for full price sales to be up 0.5% versus last year in the second half, which implies full price sales for the full year will be up 1.8%.
7.46am: Smith & Nephew raises guidance
Smith & Nephew PLC (LSE:SN) reported improved revenue, profit and margin in the first half making progress towards achieving sustainable higher growth under its 12-point plan.
In the six months to July 1, the medical equipment manufacturing company said revenue rose 5.2% to US$2.73 billion from US$2.60 billion the year before while operating profit climbed to US$275 million from US$242 million.
Operating margin improved to 10.0% from 9.3%.
As a result, the firm increased full-year underlying revenue growth guidance to 6.0% to 7.0% (previously 5.0% to 6.0%). It left trading profit margin guidance unchanged of at least 17.5%.
In the second quarter, orthopaedics revenue rose 5.8%, Sports Medicine & ENT revenue improved 12.0% and Advanced Wound Management revenue advanced 6.2%.
Smith & Nephew also said Anne-Françoise Nesmes is to step down as chief financial officer during the second quarter of 2024.
7.28am: Rolls-Royce profit motors as margin improves
It's another busy day for earnings and kicking us off today is Rolls-Royce Holdings PLC (LSE:RR.) which swung back into profit in the first half of 2023 driven by improved margins, higher volumes and cost cutting.
The FTSE 100-listed engineer reported statutory revenue £7.52 billion up from £5.60 billion a year ago, with pre-tax profit of £1.42 billion swinging from a loss of £1.75 billion before.
Rolls-Royce said the results reflect continued end-market growth, a focus on commercial optimisation and cost efficiencies across the group.
Margin improvements were led by Civil Aerospace and Defence, driven by higher volumes, commercial improvements, and cost efficiencies. Power Systems margins were lower but are expected to improve in the second half due to pricing actions.
The firm reaffirmed the raised guidance issued last week for underlying operating profit to £1.2-£1.4billion and free cash flow to £0.9-£1.0billion.
7.00am: All eyes on Bank of England with 25bps rate rise expected
The FTSE 100 is expected to open higher after falling heavily on Wednesday with all eyes on the interest rate decision by the Bank of England at midday.
Spread betting companies are calling London’s lead index by around 10 points after closing down 104.64 points at 7,561.63 on Wednesday.
The BoE is expected to hike rates by another 25 basis points to 5.25%, a more modest increase than the larger 50bps raise at its last meeting.
Since then, there have been some more encouraging figures on inflation which “should take the pressure off the BoE to deliver another bumper rate increase at this month's meeting," according to Matthew Ryan at Ebury.
In London, it’s another bumper day of company news with updates from Mondi, Next, Rolls-Royce, Serco, Smith & Nephew amongst others.
On Wednesday, US markets fell sharply in the wake of the credit ratings downgrade by Fitch while today markets in Asia were mixed.
The Nikkei 225 index in Tokyo was down 1.2%. In China, the Shanghai Composite was up 0.4%, while the Hang Seng index in Hong Kong was up 0.3%.