The FTSE 100 edged higher on Thursday in a broad global equity rally which saw European and US equities gain.
Downbeat economic data has been responsible for stock declines so far this week. However, the deterioration in US data has caused a shift in market expectations of interest rate trajectories.
Markets now predict the Federal Reserve will pause interest rate hikes in the coming months. On Thursday, the prospect borrowing costs will not increase again in the short term helped support sentiment and risk assets.
The FTSE 100 gained 0.2% on Thursday, while the S&P 500 had jumped 0.4% at the time of writing.
Despite improving sentiment on Thursday, analysts cautioned the looming debt ceiling could bring today’s positivity to an abrupt end.
“Despite this positive sentiment, there remains a large elephant in the room. Joe Biden is dangerously close to the 1 June deadline to reach an agreement on raising the US debt limit, otherwise the US government will default on its bills,” said Russ Mould, investment director at AJ Bell.
“That could cause all kinds of problems with federal workers and to the US economy and likely cause a global stock market correction.”
FTSE 100 movers
A day after saying they were targeting record £1 billion earnings this year, JD Sports received broker upgrades sending shares over 5% higher. JP Morgan has hiked their price target to 215p from 210p.
JD Sports shares were 5.4% higher at 172p at the time of writing.
BT
BT shares sank on Thursday after the telecoms group announced full-year results. Revenue was down 1%, and operating profit slipped 12%.
The group is taking steps to cut costs by slashing 55,000 jobs, but concerns about cash generation sent the stock down by around 5%.
“Headlines will no doubt focus on the job cuts, with up to 55,000 to come over the next decade as BT looks to find more ways to cut costs despite a cost-cutting plan already delivering £2.1bn in savings. It’s drastic, but it’s not overly surprising given the mounting costs and slim margins in the wider business,” said
“Once the Openreach and 5G networks are built out the strategy shifts to monetising the infrastructure that’s in place and leveraging new technologies to do that. Progress on both is looking promising, BT’s 5G now covers 68% of the population and Openreach is on track to reach 25m premises by 2026.
“Challenges are looming, though, not least a pension review in the coming months that’s likely to result in a write-down, which will add to the burdens on cash, whether in the form of increased payments now or an extension to the deficit recovery timeframe.”
Burberry
Burberry shares were over 5% weaker following the release of full-year results. Burberry saw improvement last year as China reponed, but kept guidance the same and highlighted poor macroeconomic conditions.
Investors took the comments as a signal to book profits in the company after a bumper run in the stock.