Yahoo Finance FTSE 100 Live 1 August: Bank of England cuts interest rates to 5%
Rolls-Royce and Next shares are riding high amid a packed session of corporate results.
Both firms upped guidance, with the engine maker also pledging to reinstate dividends.
Other blue-chips in the spotlight include BAE Systems, Barclays and Shell.
FTSE 100 down over 85 points in closing trade as drop on Wall Street tracks US slowdown worries
16:56 , Michael Hunter
London’s FTSE 100 fell over 85 points in closing trade in line with falls on Wall Street stock markets stoked by concern that the US economy could be slowing down.
The drop came on the day of the Bank of England’s long awaited interest rate cut, which took the base cost of borrowing in the UK down from a 16 year peak. The monetary policy committee voted 5 to 4 to make a quarter-point to 5%, with Governor Andrew Bailey taking the casting vote for action.
But after New York markets opened lower, a wave of pressure swept world markets, taking the UK’s main index away from near-record highs and down overall on the day.
The FTSE 100 was down 85 points, or 1%, at 8,236.36. The mid-cap FTSE 250 had outperformed the top tier index for a while after the action on rates in Threadneedle Street. But it too ended lower, caught in the wider selling, and fell almost 240 points to 21362.72.
Has the Bank of England's cut been too narrow
15:49 , Simon Hunt
Here’s one view:
The Bank of England’s Monetary Policy Committee (MPC) has voted to cut interest rates. In what must feel like a novel experience for the MPC, it has finally made the correct decision. The MPC failed in its main task as it ignored the major warning signs and allowed inflation to get too high. This significantly contributed to the cost of living crisis and pushed millions of households into poverty.
Once the MPC finally decided to do its job it again fumbled the bag. It increased interest rates too far and kept them high for too long. Again it ignored all the warning signs both in terms of inflation being projected to fall below target and the impact on the real economy in terms of sluggish growth and rising unemployment. The MPC should never have raised interest rates above five per cent and it should have started cutting them and abandoning Quantitative Tightening months ago.
While the MPC might have finally done the right thing by cutting interest rates, it has been far too cautious by cutting Bank Rate from 5.25% to 5%. It should have been much bolder by making a bigger cut and reducing Bank Rate to 4.25%. This is for a number of reasons.
Wall Street's S&P 500 rises on well-received earnings news from major corporate names
14:40 , Michael Hunter
Well received corporate news from a run of big-name companies including Meta and Conoco helped US stock indices rise in opening trade.
The S&P 500 added almost 30 points to 5550.63.
Facebook’s parent Meta looked well-liked by investors, with its shares up 8%. ConocoPhillips ticked up around 1%.
BOE action could help boost outlook for London listings, says Investegate
13:12 , Michael Hunter
According to a veteran City commentator , today’s BOE interest rate cut could brighten the outlook for much-needed new listings on the stock market.
Tony Cross at Investegate – the database seen as the private investors’ shop window on the Square Mile – said:
“Any rate cut ought to give equity markets cause for cheer and could help a little with the hunt for new listings too”.
Bur he also issued a warning on the outlook for further action:
“The reality is the move today is looking as if it could be a one-off – at least for 2024.
“Compare that to the USA where a slew of cuts are now expected to start after the summer, with the trajectory then maintained well into the New Year.
“Inflation certainly needs to be tamped down, but questions will remain as to whether monetary policy in isolation is the most effective solution.”
'Finely balanced' Bank of England rate cut reflects dilemma at other central banks, says Edison
13:04 , Michael Hunter
Today’s close call to cut interest rates at the Bank of England reflects the dilemma faced by other global policy makers, according to the latest City reaction to the dovish action in Threadneedle Street.
Robert Murphy, managing director, financials and investment trusts at investment consultancy Edison, said:
“Central banks in other markets are facing similar challenges of highly-indebted governments running large deficits, cooling job markets and signs of consumer slowdown in corporate earnings. The cut will be a welcome relief for borrowers, however, and help support the housing market generally.
“Moving forward, all eyes will be on the impact of these rate cuts, as economists remain concerned about pressures in the domestic economy- especially with persistent price pressures in the services sector, which accounts for around 80% of the British economy. “
FTSE 250 outpaces FTSE 100 after Bank of England interest rate cut
12:56 , Michael Hunter
London’s second-tier stock market index shone after the Bank of England’s quarter point rate cut today, amid hopes that increased household spending power would boost the domestic economy.
The mid-cap FTSE 250 rose 83 points to 21683.0 in afternoon trade. It is seen as more representative of the UK than the FTSE 100, which was down by about 4 points at 8364.59, in line with sluggish trade across global markets,
Pound under $1.28 after Bank of England interest rate cut
12:49
Sterling took a hit after the Bank of England cut interest rates in August, a month earlier than many City experts had expected.
The quarter-point cut came at today’s meeting after a 5 to 4 vote on the monetary policy committee, with Andrew Bailey, the Bank’s governor, backing the move.
After it was made, sterling took a hit and made the biggest fall among major currencies.
The pound lost the $1.28 mark against the dollar, down 0.5% at $1.2792.
Bank of England interest rate cut: Governor Bailey had casting vote
12:43 , Michael Hunter
Andrew Bailey, the Bank of England’s governor, was one of five members of the monetary policy committee who voted for a quarter-point rate cut today.
In effect, that makes his backing for action in August the casting vote, in what was a knife-edge decision backing the doves in Threadneedle Street. Four members of the non-person panel wanted to leave rates at their 16-year peak of 5.25%.
The BOE took the base cost of borrowing down to 5%, in the first cut since the onset of the pandemic.
It will cut the cost of variable rate mortgages and loans and should give the house market a lift, as well as easing pressure on household budgets and boosting the economy.
Bank of England's rate cut ' shot in the arm for the housing and mortgage markets'
12:24 , Michael Hunter
Today’s quarter-point cut in interest rates from the Bank of England which came a month earlier than most City experts expected, was seen as welcome news for the house market.
Andrew Montlake, Managing Director at mortgage broker Coreco called the knife-edge, 5 to 4 vote on the monetary policy committee “much needed.
He referred to the August action as “a shot in the arm for the housing and mortgage markets”, adding:
“Had it not moved, the Bank of England would have been accused of being over-cautious and out of touch with the mood on the High Street, but this move shows that they can listen.”
Bank of England interest rate cut: Just the start, says Scope Markets
12:19
Reaction from City experts to the Bank of England’s first interest rate cut since the pandemic is coming in.
The close call on the monetary policy committee, which voted 5-to-4 to make the quarter point cut to 5%, came after expectations that there would be action this summer.
But most commentators thought it would come in September.
Joshua Mahony at Scope Markets said the cut marked “the beginning of a phase that many hope will see the cost of borrowing slashed over the coming years”, but he added:
“The beginning of a phase that many hope will see the cost of borrowing slashed over the coming years.
“For traders, the focus now shifts to the pace of easing from here on in, as we look for signs of confidence that further easing will not exacerbate and rekindle the inflation pressures that the BoE have fought to hard to control.”
Bank of England cuts interest rates cut to 5%
12:03
The Bank of England has cut interest rates to 5%, a quarter-point move which will reduce the repayments on variable rate loans and mortgages.
It is the first cut since the pandemic and there will be hopes that it will boost the economy by increasing household spending power.
The Monetary Policy Committee voted by 5 to 4 to make the move.
It came after a run of 14 consecutive rate hikes took the base rate to what became a 16-year peak at 5.25%, which was first hit in August 2023.
The increases were designed to tame runaway inflation stoked by soaring energy prices in the aftermath of Vladimir Putin’s invasion of Ukraine.
Having peaked over 11%, the consumer prices index returned to the BOE’s 2% target in May and stayed there is June.
On the MPC’s decision today, the BOE said:
“The Committee expects the fall in headline inflation, and normalisation in many indicators of inflation expectations, to continue to feed through to weaker pay and price-setting dynamics.
“A margin of slack should emerge in the economy as GDP falls below potential and the labour market eases further. Domestic inflationary persistence is expected to fade away over the next few years, owing to the restrictive stance of monetary policy.”
Smith & Nephew and Haleon shares maintain progress, FTSE 100 lower
10:35 , Graeme Evans
The FTSE 100 index is down 0.3% or 25.44 points to 8342.54, still a decent showing given declines of more than 1% for other European benchmarks.
Alongside big gains for Rolls-Royce and Next, medical devices firm Smith & Nephew jumped 7% to its highest level in a year amid further signs of turnaround progress.
The hip and knee replacements specialist reported a 5.6% rise in revenues on an underlying basis and reiterated full-year guidance for a margin above 18%.
Sensodyne and Centrum business Haleon also lifted 6.3p to 355.7p, extending the past month’s rebound to near 10%.
It said second quarter revenues growth accelerated to 4.1% in the second quarter, leading to full-year guidance of 4-6% and a forecast that profits will rise by a high-single digit.
Many of the other stocks on the FTSE 100 risers board came from the retail sector as investors cheered the strong summer trading update by Next. Marks & Spencer rose 7.1p to 335.4p and Primark owner Associated British Foods cheered by 27p to 2509p.
GKN Aerospace owner Melrose Industries drifted 6% or 34.4p to 554.4p, even though it said it was confident of meeting 2024 and 2025 guidance.
The mid-cap FTSE 250 slipped 77.74 points to 21,522.97, with industrial threads business Coats the best performer after a results-day rise of 4.2p to 93.7p.
Last night’s rally for US tech stocks also benefited Allianz Technology Trust, which added 5p to 374.5p.
Wizz Air posted the biggest FTSE 250 decline, falling 14% or 267p to 1646p following first quarter results.
Barclays shares rise as it beats market expectations
09:30 , Simon Hunt
Barclays today unveiled a new £750 million share buyback as one of Britain’s biggest banks upgraded its long-term forecasts.
The Canary Wharf-based business posted quarterly adjusted earnings of 8p per share for the quarter ended in June, beating market expectations of 7p, while revenue rose 0.6% to £6.32 billion; ahead of expectations of £6.25 billion.
Barclays upgraded several longer-term goals, including a return on tangible equity greater than 12% by 2026, compared with a 10%-plus target in 2024, as well as an income goal of £30 billion by 2026. Its shares rose 2% to 238p.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “These results confirm that Barclays continues along the recovery path.
“The addition of Tesco Bank and other self-help measures continue to strengthen Barclays’ position and build a solid foundation for its three-year strategy, which is off to a good start.
“Barclays has often used its dividend as a signal for the future and, combined with its share buyback programme, today’s increase suggests the management team are optimistic about what lies ahead.”
LSEG shares rise as CEO upbeat over IPO pipeline
09:00 , Simon Hunt
The boss of LSEG today sounded an optimistic note over the prospect of more London IPOs after the stock exchange owner delivered a rise in sales and profits with double-digit growth in three out of five divisions.
David Schwimmer said: “The market for IPOs around the world has been pretty subdued over the past couple of years but it does appear to be looking up, certainly here in the UK from a listings perspective [due to ]esolution of the elections, the improving macroeconomic environment and capital markets reforms.
“A number of companies have made some indications that they are coming to this market so I feel pretty confident about the pipeline and the direction of travel.”
LSEG shares rose 3% to 9,750p.
FTSE 100 higher amid surge for Rolls-Royce, Next and Smith & Nephew
08:17 , Graeme Evans
Rolls-Royce shares have jumped 9% after the engines maker lifted guidance and pledged to reinstate its dividend with February’s 2024 results.
The stock surged 220% in 2023 and is up another 64% this year, including today’s rise of 42p to 491.5p.
Rolls is joined on the FTSE 100 risers board by Next after the retailer gave another boost to profits guidance. Its shares are up 8% or 686.9p to 9760.9p.
In a busy session for updates, Smith & Nephew shares are up 8%, Shell by 2%, BAE Systems by 0.5% and consumer healthcare firm Haleon by 2%.
The FTSE 100 index is up 0.3% or 24.57 points to 8392.55, with GKN Aerospace business Melrose Industries down 20.8p to 568p.
Next lifts guidance after robust sales performance
08:00 , Graeme Evans
Next has given another boost to profit guidance after reporting better-than-expected trading for the second quarter of its financial year.
The fashion retailer reported full price sales growth of 3.2% versus last year, exceeding expectations by £42 million.
Given the exceptional summer weather last year, the company had predicted that the second quarter performance would be down 0.3%.
Next increased its profit guidance for the full year by £20 million to £980 million, up 6.7% versus last year. This improvement has come from additional sales as well as cost savings, mainly in logistics.
Barclays profits lower but hails progress on three-year plan
07:44 , Graeme Evans
Barclays chief executive CS Venkatakrishnan said the lender is making “good progress” on its three-year plan, having posted interim results today.
Profits for the period fell 8% to £4.2 billion, including by 1% to £1.9 billion in the second quarter after investment banking income rose 10%.
The bank reported a return on tangible equity figure of 11.1%, which compares with a 2026 target of 12%. It has lifted its guidance for 2024 net interest income from £10.7 billion to £11 billion.
Barclays announced a half year dividend of 2.9p a share, up from 2.7p the year before. Together with a buyback of up to £750 million this brings shareholder returns to £1.2 billion in the first half.
It hopes to return at least £10 billion of capital to shareholders between 2024 and 2026.
During the period, Barclays sold its German consumer finance business and is on track to complete the acquisition of Tesco Bank in November.
BAE Systems ups profit guidance on increased defence spending
07:40
A rise in global military spending has sent orders at defence contractor BAE Systems to record levels and helped the FTSE 100 firm increase its profit guidance.
Half-year revenue to the end of June was up 13% to £13.4 billion, Wirth underlying earnings up by the same margin to £1.4 billion.
Its backlog of orders hit a record £74.1 billion, up by £4.3 billion, reflecting increased demand in tense geopolitical times.
The Farnborough-based multinational is working on the new defence pact between Australia, the UK and the US, AUKUS, which will take nuclear submarines into the Pacific. It also makes the Eurofighter jet.
It now expects annual revenue to rise by between 12% and 14%, up from a previous range of 11% to 13%.
Charles Woodburn, Chief Executive, said:
“Working closely with our customers, we have maintained momentum on key strategic activities, including AUKUS and the Global Combat Air Programme.
“We also continued evolving our technology portfolio through strategic acquisitions and the ongoing integration of our new Space & Mission Systems business.
Shell launches $3.5 billion share buyback as profit drops to $6.3 billion in the second quarter
07:30 , Michael Hunter
Shell has announced plans for a $3.5 billion (£2.7 billion) share buyback after its profit came in at $6.3 billion in the second quarter, down from $7.7 billion in the preceding three months.
The UK’s second most valuable company said the capital return would be completed by the end of the third quarter.
Wael Sawan, its CEO, called it “another strong quarter of operational and financial results. We continue to demonstrate that we are delivering more value with less emissions."
Rolls-Royce in dividend pledge as recovery steps up pace
07:20 , Graeme Evans
Rolls-Royce is to resume paying dividends next year after the engine maker’s interim results today revealed further turnaround progress.
The pledge came as the group also lifted full-year guidance, boosted by an underlying operating profit of £1.1 billion and an improved margin of 14%.
Shareholder distributions will be reinstated with February’s 2024 results, starting at a 30% pay-out ratio of underlying profit after tax.
Chief executive Tufan Erginbilgic.said: "Our transformation of Rolls-Royce into a high-performing, competitive, resilient, and growing business is proceeding with pace and intensity.
“We are expanding the earnings and cash potential of the business in a challenging supply chain environment, which we are proactively managing. We are on track to deliver our mid-term targets.”
FTSE 100 seen higher ahead of BoE rates decision, US markets rally
07:05 , Graeme Evans
Financial markets are pricing in a 64% probability that the Bank of England will cut interest rates from their current level of 5.25%.
The decision is finely balanced because even though headline inflation is at 2% the core figure is still at 3.5% and services even higher at 5.7%.
Deutsche Bank thinks that there’ll be a narrow 5-4 majority for a cut, which if it happens will follow similar moves by the central banks of Europe and Canada.
Last night, the Federal Reserve said that a rate cut could be on the table at September’s meeting in comments that helped US markets to finish higher.
The S&P 500 index had its best session since February after a rise of 1.6%, with futures markets pointing to a further improvement on the back of a positive response to results by Facebook owner Meta Platforms after the closing bell.
The FTSE 100 index is seen 10 points higher at 8378, having risen 1.1% in yesterday’s session.
Recap: Yesterday's top headlines
06:51 , Simon Hunt
Good morning from the Standard City desk.
What a difference an election makes. Britain’s housebuilding sector has endured a dismal couple of years with the shock of the Kwasi Kwarteng mini-Budget followed by a sustained period of high interest rates frightening away buyers at a time of soaring costs.
Reservation rates, starts and completions have all been massively depressed by an environment that could hardly be more hostile at a time when the need for new housing could scarcely be more acute. Something had to give.
The downgrading of the hallowed status of the green belt that followed polling day has been a long time coming. The green belt has served Britain well for more than 70 years but the time for a review was long overdue. London’s green belt covers three times as much land as the capital itself and has been a major contributor to the housing crisis.
The reforms to the National Planning Policy Framework, revealed by Angela Rayner on Tuesday less than a month after polling day, shows that this government is serious about rolling up its sleeves and getting on with making unpalatable decisions that have been ducked by successive governments of all stripes. The green belt is in play, albeit with significant caveats, and this is a once in a generation opportunity.
It is now up to the likes of Taylor Wimpey, Barratt, and Persimmon to prove that they are up to the challenge. The task will be to replace ugly open space with beautiful homes. Over to you housebuilders.
~
Here’s a summary of our top headlines from yesterday:
Housebuilder Taylor Wimpey half-year profit down almost three fifths to £187.7 million but says it “welcomes” the government’s “recognition that planning is a major barrier to economic growth”
GSK raises profit forecasts for the second time this year on strong sales of HIV and oncology drugs
HSBC appoints new CFO as it delivers little changed first half profits of $21.6 billion and unveils new $3 billion buyback programme
Metro Bank makes £26.8 million first half loss but upgrades profit guidance for the year
Just Eat revenue slips amid decline in demand in Southern Europe and North America
Euros coverage helps Reach profits rise as cost cutting offsets falling revenue
