The FTSE 100 was gently undulating between positive and negative territory on Tuesday as investors weighed a raft of solid updates from UK companies with a worrying development for the UK’s spending deficit.
London’s leading index was 5 points higher at 9,015 at the time of writing after touching a fresh intraday record high early in the session.
“Investors are weighing up fresh company results alongside the latest public borrowing figures,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“Despite an overshoot in June, borrowing is clinging to the OBR’s forecasts, but storm clouds are gathering as weaker tax receipts and soaring debt interest payments signal tougher times ahead. With economic growth faltering and spending cuts unravelling, the Chancellor faces a £15-25bn Budget shortfall, likely forcing higher taxes to preserve fiscal discipline.”
While the state of the UK public finances will be a concern for investors, there were reasons to be optimistic in several company updates on Tuesday.
Compass Group was the FTSE 100’s top riser as investors cheered an 8.6% increase in Q3 sales and strong guidance driven by growth in North America and the integration of recent acquisitions. Shares were over 6% at the time of writing.
“For the full year, organic growth is expected at over 8% with underlying operating profit to expand faster at close to 11%,” explained Derren Nathan, head of equity research, Hargreaves Lansdown.
“The group’s also leaping on the opportunity to consolidate this fragmented market, announcing another 1.5 billion Euro acquisition today for Vermaat Group, which operates at the premium end of the market and comes with an impressive growth and margin profile.”
Centrica shares were 4% higher on news that the group would take a 15% stake in the Sizewell C nuclear plant.
“Sizewell C is a compelling investment for our shareholders and the country as a whole, and I look forward to working with our world-class partners, EDF, La Caisse, Amber Infrastructure Group and the UK government, to make the project a great success,” said Chris O’Shea, Group Chief Executive, Centrica.
Housebuilders were among the losers as trader reacted to rising gilt yields in the wake of the public spending figures. Barratt Redrow lost 2.6% and Taylor Wimpey dipped 1.6%.
“Housebuilders were knocked by the public sector finance figures as the rise in gilt yields suggests the market believes interest rates could stay higher for longer,” said Russ Mould, investment director at AJ Bell.
“Housebuilders are desperately waiting for rates to come down as that could make mortgages more affordable and help more people get on the property ladder.’