The FTSE 100 was range-bound on Tuesday as the index traded within a tight range ahead of major central bank meetings this week.
Investors held off making big bets opting to wait for the next instalments from the Federal Reserve and Bank of England meetings later this week. Neither is expected to cut rates and all eyes and ears will be on economic projections and hints of when the central banks’ will move to cut rates.
Markets are increasingly pricing June as the earliest date for the Federal Reserve to reduce borrowing costs, and it’s less clear when plotting the BoE’s course.
The Bank of England and Federal Reserve are moving in a different direction to the Bank of Japan who hiked rates last night sparking a rally in the Nikkei that helped European stocks to a stronger start.
“Just as the Bank of Japan finally gets around to raising interest rates, investors are still hoping that the US Federal Reserve will cut them, although the first reduction is now seen coming in June and not at the latest meeting in March, as markets had thought at the start of the year,” said AJ Bell investment director Russ Mould.
“Chair Jay Powell and his colleagues on the Federal Open Markets Committee are therefore moving more slowly than markets had expected and the consensus forecast now is the Fed will cut rates just three times to 4.75% by year end, rather than six times, and that is because US inflation is proving more resilient, and inflation stickier, than expected.”
The FTSE 100 was up just 3 points at the time of writing.
Unilever
Unilever was the FTSE 100’s top gainer, with a rise of 3%, following the release of an accelerated action plan that included disposing of its ice cream business and cutting 7,500 jobs. Unilever has been under pressure to boost performance, and slimming down its core business to four units with the ice cream operating as its own entity is the proposed course of action.
“Unilever says bye-bye to Ben & Jerry’s with its plans to ditch the Ice Cream unit. The company has hinted at a demerger, but all separation routes remain on the table at this stage as it looks to maximise shareholder value. At the same time, there’ll be a new cost-cutting programme over the next three years that aims to more than offset the impact of losing Ice Cream. All-in, these changes are expected to help drive mid-single-digit sales growth, an improvement from current targets of 3-5%, with margin expansion too,” said Matt Britzman, equity analyst, Hargreaves Lansdown.
“Action is what shareholders wanted to see from the new team at the top, and that’s what’s been delivered today. Ice Cream always looked like the odd one out when you compare it to other product lines, and performance has struggled of late. It’s not a huge shock to see this move, but it’s something prior management wasn’t able to deliver. Unilever’s not an overly expensive name at the minute so expect markets to react positively to the news, perhaps more due to the decisive action than anything else.”
