There’s no stopping the FTSE 100’s ascent this week as the index looked set to break to another fresh record high.
The FTSE 100 was 0.4% higher at 8,077 at the time of writing on Wednesday, as upbeat earnings helped lift the index while the risk premium associated with geopolitical tensions dimished.
“The FTSE 100 continues to enjoy a robust showing, this time led by resources stocks and a well-received update from Reckitt,” said AJ Bell investment director Russ Mould.
“Markets seem to have put a wobble inspired by Middle East tensions and interest rate worries behind them for now, with Friday’s core PCE reading of US inflation the next key test. If this suggests inflationary pressures are looking entrenched it could lead to a further scaling back of rate cut expectations across the pond.”
Although interest rate concerns are never far away, they are taking a back seat this week as investors focus on corporate earnings.
“The large volume of company results this week gives investors a lot more to focus on than purely macro events, which is leading to the extra levels of market vitality,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.
Reckitt Benckiser
Reckitt Benckiser was the FTSE 100’s top gainers after the consumer products group said they saw positive volumes in early 2024 and prices helped like-for-like sale growth.
It’s been a tough few years for Reckitts and shares rose over 4% as investors cheered the long-awaited recovery.
Lloyds
Lloyds shares were higher at the time of writing after starting the session in the red following the release of Q1 earnings. Profits and income were lower due to lowered interest rate expectations, and the outlook for 2024 didn’t inspire much enthusiasm.
“There wasn’t much for shareholders to celebrate from Lloyds’ first quarter numbers. The company fell down on the key metric of net interest margin on which every bank is judged, with the difference between what it generates from loans and pays out for deposits shrinking,” Russ Mould said.
“The company has seen competition in the mortgage market bring down its returns and savers move deposits into higher interest accounts – meaning it is paying out more to customers.
Mould echoed our sentiments around Lloyds going into earnings that the favourable period of higher interest rates is over for Lloyds and the group will face a tougher environment in 2024:
“Lloyds’ brief moment in the sun, when rates moved sharply higher and it was able to generate higher margins, seems to have come to an end. This period has not translated into any meaningful gains for a share price which has basically gone nowhere after making a partial recovery from pandemic losses. Costs are going up thanks to planned restructuring and a change in the charging approach for the Bank of England levy on the sector.”
