The FTSE 100 recovered losses on Thursday after the Bank of England left interest rates at 4%, as expected.
London’s leading index started the day positive, but the gains quickly turned to losses, and the FTSE 100 was trading down around 0.35% heading into the Bank of England’s interest rate decision.
However, the FTSE 100 popped higher in the wake of the interest rate decision, with the 9 voters split 5:4 in favour of keeping rates unchanged. Such a tight vote suggests that the Bank of England will cut rates at its next meeting, which has fired up the equity bulls.
“With economic growth stagnating and cracks appearing in the jobs market it seems only a matter of time before the next interest rate cut arrives,” said Rob Morgan, Chief Investment Analyst at Charles Stanley.
Beyond the Bank of England’s rate decision, it was a busy day for FTSE 100 corporate updates with BT, AstraZeneca, Hikma, Smith & Nephew, Sainsbury’s, and Diageo reporting results.
It was a bloodbath for some.
Hikma and Smith & Nephew were both down around 10% after delivering disappointing results.
Investors dumped Hikma after the pharma group reduced its profit guidance to $730m to $750m from $730m to $770m amid increased competition and supply chain issues.
Smith & Nephew
Smith & Nephew felt the market’s wrath after missing estimates. Following a strong run since the April lows, Smith & Nephew was vulnerable to a pullback, and investors took the opportunity to book profits on Thursday.
“A slight miss to expected revenue growth amid weakness in its US knee implants business has put Smith & Nephew in the hospital ward,” said AJ Bell investment director Russ Mould.
“Smith & Nephew is a turnaround story, and it was finally gaining traction after a long wait. However, today’s update might leave investors worried the recovery efforts are running out of steam.”
BT had a positive reaction to its half-year results, with investors focusing on a 2% dividend increase and looking past falling revenues. BT shares were 4% higher at the time of writing.
“Cash flow was the real disappointment, falling well short as spending and some other moving parts weighed more than expected,” explained Matt Britzman, senior equity analyst, Hargreaves Lansdown
“Expectations were low, and early trading suggests markets are taking a glass-half-full approach, but this update still feels softer than hoped.”
Diageo
Diageo shares fell by more than 4% after cutting its forecast amid continued growth woes. China is now proving to be a soft spot for the drinks giant that can’t seem to catch a break.
Adam Vettese, market analyst for eToro, said: “Diageo’s latest update reveals a somewhat concerning outlook with some signs of resilience but also significant headwinds, and a cut in forecast being the main talking point.”
“While there was a steady performance in Europe, the slowdown in the US and China poses a real challenge. The impact of elevated living costs is visible, with US consumers spending more but buying less. This is weighing heavily on premium spirits demand and profitability, as well as stiff competition in the tequila space.”
AstraZeneca shares were largely flat following the release of Q3 earnings, which showed 11% revenue growth.