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FTSE 100 reverses early gains following Bank of England rate decision

FTSE 100 reversed early gains on Thursday afternoon after the Bank of England kept rates on hold and gave a more positive outlook on the UK economy than expected. 

The Bank of England’s optimism around the UK economy saw the pound stage a rally against the dollar and reversed much of the earlier gains seen in dollar earning shares.

The FTSE 100 was trading at 6,495, down 0.2% shortly after 1pm on Thursday. GBP/USD was up 0.22% at 1.3674. 

It was a busy day for the FTSE 100 as a number of high-profile companies announced their results. Shell, BT and Unilever, among others, released trading updates and results early this morning, leading to gains in the morning session.

Shell dividends

The FTSE 100’s biggest story of the day came from oil giant Shell. The company, like its competitor BP, is still feeling the effects of a tough year on the oil industry. However, despite posting a $21bn loss, Shell announced it would be increasing its dividend. The company’s mid-morning trade was largely flat, down to 1,319p. 

In better news for the industry, oil prices rose by just under 2% this week as reports showed US crude stockpiles to be at the lowest point since March. “Oil prices continued to show strength after yesterday’s big gains on signs of tight supply, helping Royal Dutch Shell shares to remain steady despite a patchy set of results,” said Russ Mould, investment director at AJ Bell.

BT

The telecommunications giant’s revenue plunged by £16bn over the first nine months of the financial year. The FTSE 100 company put the fall down to the coronavirus pandemic. As announced in May 2020, BT will not be paying a dividend to its shareholders until 2022, when it will be cut to 7.7p per share.  After an initial early morning rise, BT’s share price dropped back down to 128p, around the closing point from the previous day’s trading.

“It feels like BT should have fared better than it did through the course of the last year. You would have expected a properly structured business which faced a relatively modest impact from both Brexit and Covid to have outperformed rather than underperformed the wider market,” said Russ Mould, investment director at AJ Bell.

Unilever

The share price of Unilever, one of the biggest companies on the FTSE 100, took a dip despite reporting a rise of 3.5% in underlying sales for Q4. In mid-morning trading Unilver shares dipped by nearly 4.5%. 

“Unilever is seen as the market’s old reliable friend, trustworthy and dependable no matter the economic backdrop. Coming in short of full year sales forecasts is not the done thing and so Unilever is somewhat punished by investors today for not delivering the required goods” said Russ Mould, investment director at AJ Bell.  

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