The FTSE 100 maintained its positive tone on Thursday, with corporate earnings providing investors the impetus to buy into London’s leading equities.
London’s leading index briefly traded above 8,100 – a new intraday high – before falling back to trade at 8,077 at the time of writing.
“The FTSE 100 is having the time of its life as takeovers continue to power the market. BHP’s move on Anglo American has got investors excited at who else in the blue-chip UK stock index might be next for a bid,” said Russ Mould, investment director at AJ Bell.
That said, Thursday’s top riser, Anglo American, which gained 13% after receiving a bid from BHP, represented an underlying threat to London’s market as another major FTSE 100 constituent looks set to leave.
Earnings season is in full swing, and investors received updates from Barclays, Persimmon, AstraZeneca and Sainsbury’s, among others, on Thursday. A generally positive trend among those reporting helped support the index as investor optimism on earnings increased.
Barclays
Barclays investors have a lot to be pleased about. Income and profit beat expectations, and Barclays’ UK net interest margin, a key profitability metric, was much better than Lloyds who reported yesterday.
“Credit where it’s due, cost controls look to be making a difference for Barclays. First-quarter trading was better than expected, but the weaker net interest income guidance for 2024 will be a little disappointing,” said Matt Britzman, equity analyst, Hargreaves Lansdown.
Barclays shares were over 6% higher at the time of writing.
Sainsbury’s
Sainsbury’s shares were slightly lower after reporting full year preliminary results. The move was more likely a result of profit-taking rather than any major disappointment with the data.
The company has decided to refocus its efforts on the food business and grocery sales grew 9.4%. The drop in shares today can be attributed to a soggy reaction in shares.
“Sainsbury’s results didn’t hit the right note with investors despite upbeat commentary from management. Underlying profit growth of 1.6% is pedestrian and a lack of dividend growth hardly signals a business going places. While it’s done well by focusing on food and broadening its appeal with more value-led products, clothing sales remain miserable and Argos’ performance is nothing to write home about,” Russ Mould explained.
Anglo American
The BHP bid for Anglo American is another blow to London. The problems with low valuations and diminishing risk appetite are well documented but another major company in Anglo American leaving London is a bitter pill to swallow.
“Anglo American was a sitting duck after the sharp decline in its share price last year. The firm saw its market value shrink by 39% in 2023 due to operational setbacks, weaker commodity prices and downgraded production guidance. That provided an opportunity for a larger rival to pounce on the business, taking a long-term view that its assets have considerable value and any short-term operational issues can be fixed. BHP has been the one to step up to the plate,” said Dan Coatsworth, investment analyst at AJ Bell.
“Miners have a nasty habit of chasing acquisitions precisely at the wrong time, often striking deals at the top of the market. They get dollar signs in their eyes when commodity prices are rallying and often end up over-paying for acquisitions. It’s therefore instructive to note the recent rally in the copper price, now trading at a two-year high.”
Anglo shares were up over 13% at the time of writing.
Incidentally, Anglo American was one of UK Investor Magazine’s Top 15 Stock Picks for 2024. It would be a real shame if it weren’t here at the end of the year.
