The FTSE 100 was nearing 11,000 on Thursday shortly after the Bank of England voted to hold rates at 3.75%.
London’s leading index traded as high as 10,979 on Thursday morning before fading back amid a slew of upbeat company earnings.
There’s rarely a busier day for UK equity traders. Not only was the market digesting results from Lloyds, Rolls-Royce, Shell, BAE Systems, Rentokil Initial, and British American Tobacco, but the Bank of England also announced its interest rate decision on Thursday.
The Bank of England was widely expected to keep rates on hold so the decision was a bit of a non-event for markets.
“The decision will come as little surprise, with financial markets having largely priced in no change ahead of today’s announcement. Inflation eased in June, helped by lower energy prices, but the Bank continues to tread carefully as global events complicate the outlook,” said Isaac Stell, Investment Manager at Wealth Club.
But analysts pointed to a change in voting patterns as a reason to be cautious with more members now calling for interest rate hikes.
Sam North, market analyst for etoro, says: “The Bank of England may have left rates unchanged at 3.75%, but this was a hawkish hold and a clear warning shot. The shift from 7–2 to 6–3, with Catherine Mann joining Megan Greene and Huw Pill in calling for an immediate rise, shows that the centre of gravity on the MPC is moving towards tighter policy.
Nonetheless, traders seemed quite happy with the decision to hold and the FTSE 100 ticked up in the immediate reaction.
FTSE 100 movers
Rolls-Royce was the FTSE 100’s top riser on the back of yet another solid set of results. It would take a brave trader to bet against Rolls-Royce, which continues to surprise to the upside and lift guidance.
Adam Vettese, market analyst for etoro, says: “Rolls-Royce shares are climbing after the engineer delivered a barnstorming first half and jacked up full year guidance, proving that chief executive Tufan Erginbilgic’s turnaround is still in full flight.
“Underlying operating profit surged 46%, with margins expanding to a punchy 22.5% across civil aerospace, defence and power systems. Free cash flow hit £2 billion, the balance sheet sits in a healthy net cash position, and the company is already more than halfway through this year’s £2.5 billion share buyback.”
Rolls-Royce shares were 3% higher on Thursday.
Shell was always going to have an interesting Q2 and half-year update given the backdrop of higher oil prices and disruption in the Middle East. However, investors will be encouraged to see Shell navigate the challenges and harness the higher oil prices to beat expectations, sending shares 1.4% higher.
“As expected, Shell’s integrated gas production was adversely impacted by the closure of its Qatari LNG facility following Iranian missile strikes in March,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“But save for lower margins from its lubricant products, all other parts of the business pulled together strongly to power a substantial earnings beat. One consequence of the disruption in the Middle East is higher realised prices. Another is heightened volatility on which the group’s trading division thrives. Adding in new production in Brazil and the Gulf of America, and refineries running at full capacity has led to a very strong performance on the bottom line.”
Investor favourite Lloyds didn’t disappoint on Thursday, delivering a 30% dividend hike that helped offset concerns about a lack of change in guidance. Shares ticked 1.5% higher.
British American Tobacco shares were 1.4% lower after it revealed nicotine pouches were its fastest-growing products, with those smokeless products now making up 19% of revenue.
Rentokil Initial was the FTSE 100’s top faller, tumbling 17%, after missing targets for its North American business.