FTSE 100 dips after Fed keeps rates on hold, Halma soars

The FTSE 100 retreated on Thursday after the Federal Reserve kept interest rates on hold overnight and gave little away in terms of when interest rates may be cut.

London’s leading index burst higher yesterday after US CPI came in slightly lower than expected. However, a fairly benign instalment from the Federal Reserve yesterday evening did little to keep the FTSE 100’s run going and focus shifted back to domestic issues on Thursday.

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“Fed chair Jerome Powell didn’t give a huge amount away, although it felt telling that he was fairly cautious about the cooler than expected inflation figures from earlier in the day. The central bank is clear that it wants further signs inflation is on the path to the magic 2% level before it is prepared to start cutting rates. One major sticking point being the continued tight labour market conditions,” said AJ Bell’s Russ Mould.

“The FTSE 100 was held back by weakness in the housebuilding sector although specialist engineering firm Halma was in demand as it delivered yet another record set of results. The company’s focus on niche areas and providing technology-enabled health, safety and environmental solutions proved to be a winning formula yet again.”

Housebuilders are approaching a fascinating juncture. Both the Tories and Labour have promised to boost housebuilding in the new parliament, yet higher interest rates are curtailing underlying activity, with affordability biting as more people end fixed-term mortgage terms and move on to higher rates.

However, the decline in housebuilders on Thursday was a result of a Crest Nicholson profit warning, which sent shares down over 10%. The builder said it was experiencing slowing demand and slashed its dividend and profit outlook.

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Persimmon dropped 2% while Taylor Wimpey dipped 1.84% in sympathy.

Halma was the standout performer after releasing record-breaking profits and revenue for the full-year period.

“Halma’s attraction is simple. It’s a mash-up of businesses working to provide technology solutions in the safety, health, and environmental markets,” said Matt Britzman, equity analyst, Hargreaves Lansdown.

“These may not be the most exciting businesses, but Halma’s clear purpose and quality of execution mean performance is impressive. Revenue passed the £2bn mark for the first time in Halma’s history, and improving margins meant profits had an even bigger uplift, coming in ahead of expectations too.”

Halma shares were 11% higher at the time of writing.

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