- FTSE 100 closes down 8 points at 7,622
- Bank of England leaves interest rates unchanged
- Shell launches $3.5bn share buyback
4:40pm: FTSE slips after 'hawkish' BoE hold
The FTSE 100 ran out of steam to close in the red after the Bank of England left interest rates unchanged and gave no hints as to when rates would be reduced.
The FTSE 100 closed down 8 points at 7,622.
3:46pm: Marshalls jumps after Berenberg upgrade to 'buy'
Marshalls bounced 6.8% after Berenberg upgraded to buy from hold with an increased price target of 420p.
The bank noted the firm has had a pretty torrid time since it announced the largest acquisition in its history, Marley, in April 2022.
End-markets turned against the company and much of its product range proved to be far more discretionary than many investors and analysts had expected.
As volumes fell, negative operational gearing kicked in, and the earnings sensitivity was material.
However, Berenberg thinks Marshalls also presents arguably one of the more interesting rebuild stories in the sector, particularly in light of the new CEO, Matt Pullen, joining at the start of 2024.
“As with most cyclical stocks, we think the Marshalls share price is likely to move quickly at the start of a new cycle before earnings momentum really kicks in.”
“We run a number of scenarios and conclude that there is interesting upside in the stock on a multi-year view, particularly given the magnitude of weakness over 2022-23,” Berenberg said.
2:45pm: US markets rally
US stocks rallied after Wednesday's heavy falls as figures showed a cooling labour market ahead of Friday's jobs report.
Shortly after the opening bell, the Dow Jones Industrial Average was up 0.2% at 38,213.45, the S&P 500 was up 0.5% at 4,867.95 and the Nasdaq Composite was up 0.7% at 15,274.27.
In economic news, US initial jobless claims rose at a faster pace than expected in the most recent week, numbers on Thursday showed.
According to the US Department of Labor, new jobless claims 224,000 in the week to January 27, rising from 215,000 a week prior, topping the 212,000 consensus.
Stocks on the move include Merck, up 3.4%, after it reported a jump in fourth quarter sales while Align Technology leapt 7.6% after seeing sales grow and net income nearly treble in its fourth quarter.
1.32pm: Here’s a recap of the risers and fallers on the market today
adidas AG will continue selling its leftover Yeezy stock in 2024, despite cutting ties with Kanye West, the brand’s creator, in 2022.
During the fourth quarter, the group decided to not write off the additional €300 million Yeezy stock it had left over and instead will look to sell it for “at least at cost” in 2024.
Shares in adidas are down over 7% at €163 on Thursday.
Share in Tekcapital PLC (LSE:TEK) fell 15% following its portfolio company MicroSalt PLC (AIM:SALT)’s AIM debut.
MicroSalt, which is 77% owned by Tekcapital, raised over £3 million before expenses through the initial public offering (IPO), giving the low-sodium salt manufacturer an £18.5 million market capitalisation.
Gem Diamonds Limited (LSE:GEMD, OTC:GMDMF) failed to sparkle as a trading update showed it sold fewer carats at lower prices in 2023 compared to a year earlier. Shares fell 19% to 10.2p.
Emmerson plc shares travelled 10% higher after the company published an encouraging update on the Khemisset Multi-mineral Process (KMP).
1:03pm: BoE sends soft signal rates cuts ahead - Capital
Paul Dawes at Capital Economics said while leaving interest rates unchanged the Bank of England sent some “soft signals that the next move will be a cut, but it pushed back more strongly against the idea that rates will be cut soon or far.“
But Dawes thinks that with inflation set to fall further and faster than the Bank expects it will change its tune in the coming months.
“A rate cut in June is still possible and we think rates will end 2025 at 3.00%,” he said.
He was surprised two MPC members (Mann and Haskel) continued to vote to raise rates to 5.50% and that one member (Dhingra) voted to cut rates to 5.00%.
While he thinks the next move in rates will be a cut, he noted the Bank pushed back against the market view that rates will be cut to 5.00% in June and to 3.25-3.50% by the end of 2025.
The Bank retained the language that policy will remain “sufficiently restrictive for sufficiently long” and restrictive for an “extended period”, he pointed out.
He felt the message “is that the market has got ahead of itself with rate cuts.”
12:33pm: Markets little moved by rate decision
Equities have come off a touch but the financial markets have taken the rate decision in their stride.
Attention will now focus on Andrew Bailey's press conferencde where he may be pushed on his thoughts on the timing of a rate cut.
Comments by Fed Chair Jerome Powell in his press conference last night sparked sharp falls in equities.
The pound has pared losses against the dollar while gilt yields are a touch higher.
12:13pm: BoE in 3-way split, drops tightening guidance
More on the decision to leave interest rates unchanged.
The MPC voted by a majority of 6–3 to maintain Bank Rate at 5.25%.
Swati Dhingra voted to cut rates to 5%, while Jonathan Haskel and Catherine Mann continued to argue that rates should be hiked.
The other six members of the MPC voted to leave rates unchanged.
The BoE said the restrictive stance of monetary policy is weighing on activity in the real economy and is leading to a looser labour market with the risks to inflation now more balanced.
But the BoE dropped its previous reference to the “risk of further tightening” and Governor Andrew Bailey talked explicitly about rate cuts for the first time since the hiking cycle began.
But, he still said evidence is needed “before we can lower” rates.
The BoE expects CPI inflation to fall temporarily to the 2% target in 2024 the second quarter before increasing again in the third and fourth quarters.
It continued to judge that the risks around its CPI inflation projection are skewed to the upside over the first half of the forecast period, stemming from geopolitical factors.
But it sees the risks from domestic price and wage pressures are more evenly balanced.
12:01pm: Bank of England leaves interest rates unchanged
The Bank of England's Monetary Policy Committee has left UK Base Rate unchanged at 5.25% at its first meeting of the year.
The vote was a 3-way split with one member voting for a cut, two for a rise and six to leave rates unchanged.
The BoE also dropped guidance linked to further tightening.
The decision to leave rates at a 16-year high means the BoE has decided to maintain rates at successive meetings in September, November, and December.
The BoE has enacted 515 basis points worth of hikes since lifting bank rate from its pandemic-induced low of 0.10% roughly two years ago as it seeks to reduce inflation to its 2% target.
11:45am: Nasdaq set to rally after heavy losses
Stocks in New York are expected to rally following heavy losses Wednesday after the Federal Reserve Chair Jerome Powell knocked back hopes for an interest rate cut in March.
In pre-market trading, futures for the Dow Jones Industrial Average were up 0.1%, while those for the S&P 500 rose 0.3% and contracts for the Nasdaq 100 futures declined 0.5%.
In a press conference which followed the decision by the Federal Open Market Committee to leave interest rates unchanged for a fourth meeting in a row, Powell said a rate reduction in March, was not the "most likely case."
"I don’t think it's likely that the committee will reach a level of confidence by the time of the March meeting, to identify that March is the time to do that," he said in a press conference.
James Knightley at ING Economics said the Federal Reserve "doesn't seem to be in a hurry to cut interest rates."
"We still think May is the more likely start point for policy easing rather than March, even if the arguments for earlier moves are building."
"We suspect that the Fed recognises its credibility was damaged by its 'inflation is transitory' assertion in 2021 only to have to rapidly reverse course with significant rate hikes through 2022 and 2023."
"The last thing the Fed wants to do is get it wrong again at a key turning point, loosen too soon, too quickly and reignite inflation pressures," he added.
Goldman Sachs agrees, pushing back its expectations for a first rate cut to May from March.
“We now expect the FOMC to deliver four consecutive cuts at the May, June, July, and September meetings before slowing to a quarterly pace and adding a final cut this year in December.”
Bank of America pushed back its forecast for a first rate cut to June.
Away from interest rate speculation, it is another bumper day of earnings with tech heavyweights Apple, Meta and Amazon reporting after the closing bell.
In economic data, weekly jobless claims figures will be reported ahead of the US jobs report on Friday.
11:37am: Red Sea difficulties hit manufacturing - S&P
The downturn in the UK manufacturing sector continued at the start of 2024 with January seeing output and new orders decline further, a survey showed Thursday.
Supply chain difficulties as the Red Sea crisis led to the re-routing of input deliveries away from the Suez Canal added to the sector’s woes.
The seasonally adjusted S&P Global UK Manufacturing Purchasing Managers’ Index posted 47.0 in January, up from 46.2 in December but below the earlier flash estimate of 47.3.
Rob Dobson, Director at S&P Global Market Intelligence, said the Red Sea crisis had led to rising prices and extending supplier lead times.
Businesses estimated that a minimum of 12-18 days could be added to some expected deliveries, disrupting production schedules and raising inflationary pressures.
11:05am: Eurozone inflation eases in January but core above forecast
Consumer price inflation cooled in January in the eurozone, official figures showed on Thursday, while unemployment remained steady in December.
According to Eurostat's flash estimate, annual consumer price inflation ebbed slightly to 2.8% in January, from 2.9% in December.
But core inflation - which strips out food and energy - eased to 3.3% from 3.4%, and came in slightly above consensus of 3.2%.
ING Economics said while today’s figure still shows easing price pressures, "it is far too soon to give the all-clear on inflation."
It noted the ECB hopes that higher wages will be partially absorbed by lower profit margins.
"But if growth starts to pick up again in the second quarter, companies might have the pricing power to withstand margin compression, so inflation won't come down much further. "
"This is why we continue to believe that the ECB will be very cautious and will not contemplate any rate cut before June."
10:51am: Labour pledges to leave corporation tax unchanged
Shadow chancellor Rachel Reeves has pledged that Labour will not raise corporation tax if it wins the next election.
Speaking at Labour’s Annual Business Conference this morning, Reeves says that the next Labour government will cap the headline rate of corporation tax at 25% for the duration of the next parliament.
And, if competiveness comes under threat, Labour “will act”, she says – an indication that it could be cut.
10:40am: Barclays cuts Next on lack of short-term catalysts
Next is 2.2% lower after Barclays downgraded the retailer to ‘equal weight’ from ‘overweight.’
The bank said the change is driven overwhelmingly by valuation – the share price has moved beyond its previous price target of 8,250p and now sits close to its new price target of 8,500p.
“We continue to think NEXT is an exceptionally well managed company with interesting long-term growth prospects, strong cash flow generation and consistent cash returns.”
“However, NEXT is now trading close to its five-year average P/E and EV/EBITDA multiples and our valuation of the business is very close to the current share price.”
“We do not see obvious catalysts in the near term now that the company has set out its initial profit guidance for FY24/25,” it added.
10:05am: Shell ends tricky year on a high note
On Shell, Richard Hunter, head of markets at interactive investor, commented: “In what was a difficult year for the oil majors, Shell ended on something of a high note as fourth quarter numbers beat expectations despite lower earnings.”
Hunter highlighted the company’s "extraordinary" cash generation, despite the lower earnings, meaning an increase to the dividend, "where the forward yield of 4.2% provides some attraction to income-seeking investors."
In addition, he noted Shell announced another share buyback programme of $3.5 billion to be completed on the coming quarter.
Net debt is generally travelling in the right direction also, reducing from $44.8 billion the previous year to $43.5 billion, although ticking up from the figure of $40.5 billion at the end of the previous quarter, he added.
Shares are 2.6% in London.
9:24am: Goldman expects 9-0 vote to leave UK rates unchanged; first cut in May
Goldman Sachs expects a 9-0 vote to leave interest rates unchanged at midday.
The vote split remains “difficult” to predict given limited recent commentary by MPC members, the bank said, and a dovish dissent in the form of Dhingra voting for a 25bp cut and/or a hawkish dissent in the form of Mann voting for 25bp hike are possible.
But “we think hawkish dissents are less likely given that there has been a moderation in underlying services inflation since the MPC’s last meeting.”
Goldman expects the updated projections to show “meaningful revisions.”
It expects the growth forecast to be revised upwards and the inflation projections down in the near-term given lower energy prices.
Goldman suggested that the MPC may mitigate its tightening bias and soften its policy language somewhat by no longer stating that “further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.”
It continues to expect the first 25bp cut in May, followed by 25bp cuts every meeting until Bank Rate reaches 3% in May 2025.
But it sees risks to the baseline forecast as being skewed towards later cuts.
8:51am: Goldman adds Rolls-Royce to Conviction List; Next hit by downgrade
Plenty moving stocks this morning.
In the FTSE 100, Airtel Africa leads the risers, up 4.9% after launching a £100 million share buyback alongside third quarter results.
BT is up 2.5% after its third quarter trading statement while Shell is 1.1% to the good after its buyback and results.
Rolls-Royce is another riser, up 0.9%, after Goldman Sachs added the aerospace outfit to its ‘Conviction List’.
Heading the other way is Next PLC (LSE:NXT), down 2.4%, after Barclays downgraded to ‘equal weight’ from ‘overweight’ while Pets at Home is 2.1% lower as Berenberg downgraded to ‘hold’ from ‘buy’.
Elsewhere, EasyJet is flying 0.9% higher as JPMorgan upgrades to ‘overweight’ from ‘neutral’.
8:33am: JD Sports knocked by weak Adidas outlook
JD Sports is down 2.9% after Adidas said 2024 operating profit would be below expectations.
The German sportswear manufacturer expects to generate an operating profit of around €500 million in 2024, less than half the €1.27 Bloomberg-cited consensus.
Adidas blamed negative currency movements for the profit shortfall.
The company plans to mitigate some of the damage by continuing to sell left-over inventory from its defunct Yeezy partnership with the rapper Ye.
This will boost 2023 operating profit as the firm will no longer write-down the value of the inventory.
The company cut ties with rapper Ye, formerly known as Kanye West, in October 2022 after he made antisemitic and other offensive remarks online and in interviews. It left Adidas holding €1.2 billion worth of unsold Yeezys.
Shares in Adidas are down 7.8% in Frankfurt.
8:15am: FTSE flat ahead of BoE rate call
The FTSE 100 was little changed in early trading ahead of the interest rate decision by the Bank of England at midday.
At 8:15am, London’s blue-chip index was up 1 point at 7,632 while the FTSE 250 was down 0.7% at 19,230.25.
The UK’s central bank is widely expected to leave interest rates unchanged with the focus on any hints to the timing of a future rate cut.
Michael Hewson at CMC Markets said: “No changes are expected to monetary policy today with the main question being around whether our resident hawks decide to vote with the majority for no change and temper their hawkishness.”
“Of the 19 meetings Catherine Mann has voted in she has voted to increase the base rate at 17 of them so a hold will be a rare event for her.”
“There is also the possibility of a dovish outlier with the potential for Swathi Dhingra voting for a rate cut, prompting a split in the opposite direction to what we saw in December,” Hewson added.
In company news, BT rose 4.1% after reporting modest growth in third quarter revenue and adjusted earnings while Shell rose 1.1% after launching a fresh $3.5 billion buy-back and better-than-expected fourth quarter profit.
7:54am: Shell launches new buyback as lower profit top City forecasts
Shell PLC (LSE:SHEL, NYSE:SHEL) on Thursday launched a $3.5 billion share buyback, and boosted the dividend 4%, despite reporting a big drop in fourth quarter profit.
The FTSE 100-listed oil and gas producer said fourth quarter adjusted earnings were $7.31 billion, up from $6.22 billion in the third quarter, but down from $9.81 billion the year prior.
Shell said profit - which was around $1 billion above City forecasts - reflected a robust operational performance and strong LNG trading and optimisation results.
But the firm booked impairment charges and reversals of $3.9 billion and noted unfavourable movements due to the fair value accounting of commodity derivatives.
Cash from facility operations totalled $12.6 billion for the quarter and $54.2 billion for 2023.
Looking ahead, Shell said cash capital expenditure for 2024 is expected to be within $22 to $25 billion with Integrated Gas production expected to be approximately 930 to 990 thousand boe/
Upstream production is expected to be approximately 1,730 to 1,930 thousand boe/d and marketing sales volumes are expected to be approximately 2,150 to 2,650 thousand b/d.
The firm increased its dividend by 4% to $0.344.
7:35am: BT ekes out modest growth in third quarter
BT Group PLC (LSE:BT.A) on Thursday eked out modest growth in revenue and earnings in the third quarter but warned performance continued to be hit by rising costs and that its broadband base continued to decline.
The telco said in the third quarter ending December, adjusted revenue rose 3% to £5.34 billion from £5.21 billion the year prior while adjusted Ebitda edged 1% higher to £2.03 billion from £2.01 billion.
Delivering her first trading update as Chief Executive, Allison Kirkby, said: “BT Group has delivered another quarter of revenue and EBITDA growth, while rapidly building and upgrading customers to our full-fibre broadband and 5G networks, and we continue to be on track to achieve our financial outlook for the year.
But BT said financial performance continues to be impacted by higher input costs, legacy declines and prior year one-offs, partly offset by cost transformation and growth in Small & Medium Business and Security.
The firm said Openreach broadband average revenue per user grew by 10% year-on-year but reported broadband line losses of 369,000 in the year to date, a 2% decline in the broadband base.
It warned ongoing weak broadband market conditions mean losses will exceed 400,000 in 2024.
The firm said fibre to the premises (FTTP) build rate accelerated to 73,000 per week delivering a record of 950,000 premises passed in the quarter with the FTTP footprint now expanded to 13 million premises with a further 6 million where initial build is underway.
Openreach customer demand remained strong for FTTP with net adds of 432,000 in the third quarter with total premises connected now 4.4 million.
The company reconfirmed all 2024 financial outlook metrics.
7:08am: FTSE 100 called lower as Fed says March rate cut unlikely
The FTSE 100 is expected to open lower after the chair of the US Federal Reserve poured cold water on hopes for a cut in interest rates in March as they left interest rates unchanged.
Spread betting companies are calling London’s lead index down by around 26 points after closing down 35.74 points at 7,630.57 on Wednesday.
The move comes ahead of the Bank of England’s own interest rate call at midday - it too is expected to leave interest rates unchanged.
US equity markets sold off heavily after the Federal Reserve Chair Jerome Powell dented hopes for a cut in interest rates in March, saying it is not the "most likely case."
On Wall Street, the Dow Jones Industrial Average closed down 0.8%, the S&P 500 tumbled 1.6% and the Nasdaq Composite declined 2.2%,
"I don’t think it's likely that the committee will reach a level of confidence by the time of the March meeting, to identify that March is the time to do that," he said in a press conference.
James Knightley at ING Economics said the Federal Reserve "doesn't seem to be in a hurry to cut interest rates."
"We still think May is the more likely start point for policy easing rather than March, even if the arguments for earlier moves are building."
"We suspect that the Fed recognises its credibility was damaged by its 'inflation is transitory' assertion in 2021 only to have to rapidly reverse course with significant rate hikes through 2022 and 2023."
"The last thing the Fed wants to do is get it wrong again at a key turning point, loosen too soon, too quickly and reignite inflation pressures," he added.
Back in London, BT, Glencore and Shell lead the agenda, ahead of the BoE’s rate call.