FTSE 100 was clinging on to gains on Wednesday as several poor corporate updates offset a wider improvement in investor sentiment.
Negative reactions to earnings updates from Persimmon and Beazley moderated the FTSE 100’s gains after US equities touched fresh record highs overnight.
Investors have been buoyed by yesterday’s US inflation reading, which came in line with economists’ estimates and paved the way for the Federal Reserve to cut interest rates in September.
The absence of any material impact on inflation from Donald Trump’s tariffs means that the Federal Reserve will likely act to stem the slowdown in the US labour market.
Equity bulls jumped on the prospect of lower borrowing costs, and the S&P 500 recorded yet another all-time high overnight.
“Global equities continue to ride this out and keep going. The S&P 500 and Nasdaq made record highs as the cooler-than-expected July inflation print buoyed risk sentiment,” said Saxo UK Investor Strategist, Neil Wilson.
“The S&P 500 climbed 1.1% and the Nasdaq rallied 1.4%, while the small cap Russell 2k rallied 3% because lower-quality stocks do well when rates fall. The MSCI All Country World Index also made an all-time high.”
The impact of the interest rate cut hopes helped the FTSE 100 rise by 0.2% in mid-morning trading. The gains were broad with 68 of the 100 constituents trading higher at the time of writing.
AstraZeneca did a lot of the heavy lifting in terms of the number of points added to the index with a 1.8% gain.
Miners enjoyed the risk-on sentiment, and Antofagasta added over 1% as Glencore and Rio Tinto made smaller increases.
Beazley was the top faller after slashing its outlook on rising geopolitical and climate change risks. Shares were down 8% at the time of writing.
Persimmon shares slipped 2% despite issuing a relatively positive half-year report with completions increasing 4% over the period. One-off charges were the main detractor on results day as the company’s earnings fell due to costs related to a CMA investigation.
“Results from Persimmon suggest the UK housebuilding sector is not a total lemon, and at their current low ebb, these stocks might pique the interest of contrarian, value investors,” said Russ Mould, investment director at AJ Bell.
“However under the bonnet things don’t look quite so rosy, thanks to some rather chunky exceptional items which mean earnings per share is actually down by 10%. Seven housebuilders have agreed to pay £100 million into affordable housing programmes following a CMA investigation into price collusion, and Persimmon’s contribution adds up to a £15.2 million hit to its income statement.”
BP was also among the top fallers as oil prices slipped ahead of crucial talks between Trump and Putin on the Ukraine war this Friday.
“Oil markets look to have assumed that a resolution of the war in Ukraine is done and dusted, before either the US or Russian leaders set foot on Alaskan soil. Brent futures contracts are continuing to slip lower, dropping through $66 in early morning trade today,” explained Steve Clayton, head of equity funds, Hargreaves Lansdown.