The FTSE 100 clawed back early losses on Thursday as initial weakness attracted bargain hunters to cyclical sectors. Ex-dividends played a part in the softness on Thursday, with HSBC, Standard Chartered and Rio Tinto trading without the rights to the latest dividend.
The FTSE 100 was trading 0.2% higher as the US session got underway on Thursday.
Rentokil Initial stormed to the top of the leaderboard after revealing the synergies achieved by the acquisition of Terminix.
“It’s far from glamorous but someone has to do it’ may well be an argument for the utility of Rentokil Initial in the eyes of investors and in fairness it’s not far wrong. The company has acquired well, with synergies from the Terminix purchase proving to be even more fruitful than originally expected and a fair chunk of cash on the sidelines to continue expansion,” said Adam Vettese, analyst at investment platform eToro.
Rentokil Initial shares were the FTSE 100 top gainers rising over 17%.
Spirax-Sarco was another notable gainer after the engineering group, which was ‘well positioned for a return to growth in 2024’. Revenue grew 4% in 2023 due to acquisition contributions, but operating profit fell 11%.
Ocado gained 4% as the food technology firm traded on broader market sentiment after announcing its first profit in some years last week.
ECB Rate Decision
The FTSE 100 extended gains after the ECB held rates steady but signalled it is not amazingly far away from cutting rates. The European Central Bank said it saw inflation rates falling and suggested that supporting the economy would be a priority.
🇪🇺 ECB on hold, staff projections revised lower as expected, including core back to 2% by 2026.
— Frederik Ducrozet (@fwred) March 7, 2024
Broken record but a forward-leading central bank with a tight policy stance, forecasting inflation back at target in 2025, should cut rates now as real rates move higher. pic.twitter.com/QgqibzDLHG
The market reaction to the ECB’s comment saw bond yields fall and stocks rise. While the ECB held off providing forward guidance on rates, there is a growing sentiment they may be the first Western major central bank to reduce borrowing costs.
“The ECB’s upcoming rate decision on April 11 may shed further light on their stance, with potential implications for investor expectations. However, with inflation still hovering above target levels and uncertainties regarding wage growth, the ECB appears poised to tread cautiously in its monetary policy approach,” said Richard Flax, Chief Investment Officer at Moneyfarm.
Investors may expect equity bulls to bid up major indices if the BoE and Federal Reserve make similar sounds in their upcoming meetings.
