The FTSE 100 broke its streak of record closing highs on Tuesday, and flat trade on Wednesday suggests it’s unlikely to set a fresh intraday high in today’s session.
The pause for breath can be attributed to a multitude of factors, including softer UK house price data hitting housebuilders, the Federal Reserve deciding on rates later today, weaker UK manufacturing data and simply good old-fashioned profit-taking.
“Having broken its run of record closes on Tuesday, the FTSE 100 ticked higher on Wednesday morning despite selling on Wall Street overnight,” said AJ Bell investment director Russ Mould.
Interest rate concerns could well grip markets again later today as the Federal Reserve meets to decide on rates and provide its commentary on the economy. Markets have pushed the pricing of the first rate cuts back until much later in 2024, and the Federal Reserve isn’t expected to make any changes to rates today.
The focus will almost entirely be on the commentary. Markets have gradually priced fewer and fewer interest cuts this year. Last year, as many as seven rate cuts were forecast for 2024. Now, only one is expected, and two as an absolute maximum.
Should the Fed say anything tonight that suggests interest rate cuts are being pushed out further than already priced for, history tells us to expect a broad market reaction felt in equities.
Housebuilders were among stocks suffering on Wednesday after new data revealed UK house prices had fallen for a second month amid poor weather and the ongoing pressures of higher mortgage rates and overpriced housing. The house price data comes just a couple of days after major lenders said they would increase mortgage rates in the face of interest rate uncertainty.
Persimmon was 1% weaker while Taylor Wimpey gave up 0.5%.
Next
Next’s trading updates have been drawing a crowd recently, and its Q1 trading statement will have done nothing to send people home early but also did little to inspire demands for an encore.
Group sales grew at a better-than-expected 5.7%, but flat retail sales kept any enthusiasm in check.
“Next seems to be the gift that keeps on giving as they deliver an increase in sales for Q1 that has come in ahead of expectations,” said Adam Vettese, analyst at eToro.
“They have been cautious about raising the full-year outlook due to a particularly warm Q2 last year and as a result anticipate a potential dip upcoming in comparison.”
“Whilst the macro outlook has certainly improved, there may be some risk factors for retailers, as some uncertainty lingers, but it is still fair to say that Next is a pick of the sector. Despite a slight dip in the share price this morning which could well be a bit of profit taking, there is still scope for the price to push on this year.”
Next shares were flat at the time of writing.
Smith+Nephew
Smith+Nephew was the FTSE 100’s top riser after announcing Q1 sales increased 2.9% to $1,386 million with strength in Sports Medicine & ENT and Orthopaedics.
Smith+Nephew maintained full-year guidance helping shares rise 3%.
