FTSE 100 hits 2-week low
The FTSE 100 is down 0.6% in early trade this morning and is at a two-week low.
BoE to hike rates for 14th time
The Bank of England meets today and is expected to increase interest rates by a 0.25 percentage point, which would mark the 14th consecutive increase and would take rates to their highest level in 15 years at 5.25%.
However, there is an outside chance (of around 36%) as far as economists are concerned that we could see a larger 0.5 percentage point increase today, with the BoE having surprised the markets with a larger hike than anticipated in June.
That is because, while markets in the US and Europe are growing increasingly confident that rates are approaching their peak, the UK is having a tougher time with inflation considering CPI was up 7.9% annually in June and still well above the desired 2% target. Currently, markets believe UK interest rates will peak around 5.75% around the end of this year.
Importantly, we have final PMI figures out this morning at 0930 BST.
The most important sectors to watch today include banks, housebuilders and other property stocks due to their sensitivity to interest rates.
Outside of the BoE meeting and UK PMI figures, the economic calendar today includes PMI figures out of Europe this morning followed by initial jobless claims and services PMI in the US this afternoon.
It will also be a busy day on the earnings front for US markets, headlined by quarterly results out from Apple and Amazon (click for previews) after markets close today. They are two of the three largest players in the Nasdaq 100.
FTSE 100 analysis: Where next for the UK 100?
The UK 100, which tracks the performance of the FTSE 100, is on course to lose ground for a third consecutive session today and is at its lowest level in two weeks.
We can see the overriding trend remains in play. The narrowing wedge, which has contained the index by the year-to-date falling trendline and the supportive trendline that can be traced back to the lows we saw during the pandemic, remains intact.
The index has slipped below the 50-day moving average today and the RSI has now slipped into bearish territory. Plus, we can see the 200-day moving average is on the cusp of surpassing the 100-day average following that death cross we saw last month. The index could find some support at 7,450 if it remains under pressure.
Recapturing the moving averages is the immediate job on the upside before it can look to target 7,650 and then upper trendline that has provided reliable resistance this year.
Top UK stock news
Next is up 0.1% in early trade after it sweetened its outlook for 2023 this morning after full price sales rose more than anticipated thanks to warmer weather, while its end of season sale was also a success after it cleared more stock than it expected. The retailer is now targeting annual pretax profit of £845 million, up from its previous goal of £835 million. Full price sales were up 6.9% in the second quarter and, since then, they have risen another 3.7% from last year – well ahead of Next’s guidance for just 0.5%.
Pets at Home is down 0.5% this morning. The retailer said it had an ‘encouraging’ performance in the first quarter as it left its expectations for 2023 unchanged. Revenue was up 7.9% from last year at £436.8 million, with its pet supply stores reporting a 7.1% rise and its veterinary business seeing a jump of 16.3%. The firm said it remains ‘comfortable’ with analyst expectations for the rest of the year.
Rolls Royce reiterated that it smashed expectations in the first half and raised its guidance for the remainder of the year. Underlying operating profit came in at £673 million in the first half, marking a significant improvement from just £125 million the year before. Rolls Royce had already said it had smashed expectations on this measure last month, when analysts had pencilled in profits of just £328 million. Free cashflow of £356 million was also welcome considering it burnt through £68 million the year before and that the consensus last month sat at just £50 million. The announcement last month means this improvement should have already been priced-in, with the stock down 1.6% this morning.
Wizz Air is down 2.1%. The airline returned to profit in the first quarter as the recovery from the pandemic continues and demand for travel remains high. Wizz said revenue was up 53% from last year at EUR1.2 billion and said its profit at the bottom-line came in at EUR61.1 million compared to the hefty EUR452.5 million loss we saw this time last year. Profits came in ahead of the EUR51.5 million forecast by analysts. The airline said it remains confident of delivering annual profit of between EUR350 million to EUR450 million. It did say that available seat miles, which represents capacity, will grow 25% in the first half rather than the 30% it originally envisioned.
Hikma Pharmaceuticals is up 2.5% after delivering strong growth in the first half, led by its Generics arm. Revenue was up 18% in the first half at $1.4 billion thanks to growth across all of its main businesses, while core operating profit was up 35% at $401 million. Its Generics arm was the strongest performer after it saw sales growth of 39% and profits more than double. It said it is now expecting Generics to report annual sales growth closer to 30% in 2023, up from its previous goal of around 20%, and said the unit will also be more profitable than previously thought as it reiterated its goals for its other divisions. The interim dividend was raised 32% to 25 cents.
Smith & Nephew is down 2.6% despite raising its guidance this morning. Revenue was up 5.2% in the six months to July 1 at $2.7 billion, with underlying growth of 7.3%. Trading profit, its headline measure, fell to $417 million from $440 million the year before as its margin contracted to 15.3% thanks to seasonality and inflationary pressures. The medical device maker said it is now anticipating full year sales to rise by 6% to 7%, up from its previous range of 5% to 6%. It is still targeting an annual trading profit margin of ‘at least’ 17.5% to suggest we will see an improvement in the second half. It kept its interim dividend flat at 14.4 cents. It also announced that chief financial officer Anne-Francoise Nesmes will step down during the second quarter of 2024.
London Stock Exchange Group said it expects to deliver revenue growth at the top end of expectations in 2023 following a ‘strong’ first half performance. The exchange operator said total income was up 11.9% in the first half at £4.2 billion and adjusted Ebitda increased 4.1% to £1.9 billion as that topline growth countered tighter margins. LSEG said income should be at the upper end of its 6% to 8% growth target range this year as it reiterated its other guidance. The interim dividend was raised 12.6% to 35.7p and it expects to return another £750 million through buybacks by April 2024. The stock is down 5.8% today!
Serco is up 2.7% after it said it expects to generate more cash and pay down more debt in 2023 than previously thought as it reported a big improvement in performance during the first half. It said it is now aiming to generate free cashflow of £150 million this year, up from its previous goal of £130 million, while net debt should end the year at around £170 million rather than £190 million. All other guidance was left unchanged. Revenue rose 13% in the first half to £2.5 billion and underlying operating profit was up 14% at £148 million. It raised its dividend by 21% to 1.14p.
Mears Group is up 1.6% after delivering a record first half performance, prompting it to lift expectations for the rest of the year. The company, which provides services to the housing market, said revenue was up 8% at £525.6 million and that adjusted pretax profits were up 18% at £21.3 million, growing at a faster pace thanks to better margins. ‘The board is delighted at the positive start to 2023 and this momentum has continued into the second half. The board anticipates revenues for the full year of at least £1 billion and an adjusted profit before tax of at least £40 million,’ said Mears Group. It raised its interim dividend by 14% to 3.7p.
Paper and packaging provider Mondi is down 2.8%. Underlying Ebitda fell 28% to EUR680 million in the first half, although this fall was not as bad as expected considering analysts had forecast earnings of EUR661.6 million. Operating cashflow improved to EUR554 million from EUR519 million. ‘Whilst underlying EBITDA was lower, the business exhibited its strong cash generative characteristics, improving cash generation,’ said CEO Andrew King. Mondi said it is still working on selling the Syktyvkar mill after offloading three packaging plants in Russia for EUR30 million.
Pennon Group said chief financial officer Paul Boote will stand down by the end of 2023. He will be replaced by Steve Buck, the CFO of Anglian Water Group. The water utility firm is down 0.5% today.
DWF Group has been downgraded to Hold from Buy by Peel Hunt this morning. The legal services provider is trading marginally lower this morning at 96.94p.
How to trade the FTSE 100
You can trade the FTSE 100 with City Index in just four easy steps:
- Open a City Index account, or log-in if you’re already a customer.
- Search for ‘UK 100’ you want in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
Or you can practice trading risk-free by signing up for our Demo Trading Account.