The FTSE 100 was on the back foot again on Friday as the pressures of a revised interest rate outlook, Donald Trump’s second term as president and disappointment at measures to stimulate China weighed on the index.

Miners were among the top losers and accounted for a large proportion of the points wiped off the FTSE 100 on Friday as the latest news from China failed to inspire confidence in a recovery in economic growth.

“The FTSE 100 was dragged lower by resources stocks on Friday morning,” says AJ Bell investment director Russ Mould.

“After a hectic week investors had more to digest in the form of further Chinese stimulus but what has been announced so far doesn’t seem to be moving the needle and the risks to China from a second Trump presidency are now overshadowing efforts to get the economy moving. The question on investors’ lips will be whether this encourages Beijing to unveil a bolder package of measures.

“Asian stocks sputtered overnight and the UK-listed miners who are reliant on China for much of their demand were also on the back foot.”

The Bank of England’s inflation projections and the pace of interest rate cuts issued yesterday provided another reason for caution among equity bulls on Friday.

Although stocks were broadly negative on Friday, IAG investors had some reason to be optimistic after the airliner smashed estimates, sending the stock 6% higher.

“British Airways owner IAG soared past estimates in this morning’s third-quarter results, with a revenue line beat and an even bigger one on operating profit,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

“In what’s been a miraculous turnaround from the troubles during the pandemic, IAG’s got its balance sheet into a strong enough position to start a €350mn buyback. There was a slight trim to capacity growth expectations for the year suggesting an easing into the fourth quarter, but broadly speaking this was a great set of results and analysts will likely be revising profit projections higher as a result.”

Vistry was the FTSE 100’s biggest casualty after further slashing costs due to cost miscalculations at its South Division. The housebuilder was rocked in early October by initial reports of cost projection musculations, and today’s drop means the housebuilder, which was doing so well after the merger of Bovis Homes, Linden Homes, and Countryside, is now down 18% year to date.

Persimmon is down only 3% YTD, while Taylor Wimpey is almost flat.

“Vistry delivered some more bad news for investors to build into their expectations. To set the scene, back in October, news broke that total build costs at nine of its housebuilding projects in the South had been underestimated. Revised estimates at the time caused a big £115mn hit to profit expectations, spread over a three-year period,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“Vistry’s since carried out a deeper dive into the issues, and it’s come to light that things were worse than realised at the time. As a result of this and other challenges, this year’s profit expectations have been lowered again by £50mn to £300mn.”

Vistry shares were sharply lower on Friday after the company announced further profit reductions due to cost miscalculations at projects within its South Division.

The Vistry share price was down 13% at the time of writing.

Housebuilder Vistry Group has disclosed that problems in its South Division will more severely impact profits than initially reported, forcing the company to lower its full-year profit guidance to around £300 million.

Vistry had initially reduced profit guidance to £350 million when the issues first came to light.

The company revealed today that the total impact from issues in its South Division will reach £165 million, spread across three years, with £105 million hitting profits in 2024, £50 million in 2025, and £10 million beyond 2025. This represents a significant increase from earlier estimates, with issues primarily affecting sites from the former Housebuilding business.

An independent review conducted by a forensics team from a major accounting firm found that the problems were largely confined to the South Division and stemmed from “insufficient management capability, non-compliant commercial forecasting processes and poor divisional culture.”

The investigation identified 18 sites with cost adjustments exceeding £1 million each, with five large multi-phase sites accounting for about 60% of the total cost increases.

“Vistry delivered some more bad news for investors to build into their expectations. To set the scene, back in October, news broke that total build costs at nine of its housebuilding projects in the South had been underestimated. Revised estimates at the time caused a big £115mn hit to profit expectations, spread over a three-year period,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

The additional costs related to the South Division have overshadowed what was otherwise a positive trading update.

Vistry now expects to complete around 17,500 units in 2024, a reduction from previous targets. Despite challenging market conditions, the company reported a year-to-date sales rate of 1.02, up 42% from 0.72 in the previous year, though activity slowed during September and October.

Vistry outlook

The outlook may offer some solace for investors. Vistry maintains a strong forward sales position of £4.8 billion, up 12% from the previous year. While the company remains committed to its medium-term targets and capital distribution policy, including plans to distribute £1 billion to shareholders, it is reviewing the timeline for achieving these goals in light of the South Division issues.

The company welcomed recent government initiatives announced in the Autumn Budget, including a five-year social housing rent settlement and an additional £500 million for the Affordable Homes Programme, bringing the annual budget to £3.1 billion.

However, Vistry noted that the April 2025 increase in Employer National Insurance contributions will cost the company approximately £5 million in 2025.

The euphoria that swept across equity markets in the wake of Donald Trump’s victory yesterday was nowhere to be seen in UK stocks on Thursday, with the FTSE 100 falling after the Bank of England cut interest rates to 4.75%.

London’s leading index was down marginally at the time of writing, having spiked lower shortly after the Bank of England delivered a 0.25bps interest rate cut but warned the budget would be inflationary, slowing the pace of rate cuts in the coming months.

“This decision was expected by the market, but the timeline for future cuts has changed significantly over the past fortnight,” said James McManus, chief investment officer at J.P. Morgan owned digital wealth manager, Nutmeg.

“The significant increases to government spending set out in the Budget as well as a rise in wages, underpinned the OBR’s forecast for elevated inflation next year. It means a further cut before Christmas is now uncertain and markets expect only two more cuts of 25bps by September 2025, down from three at the previous meeting in September.”

Equity bulls who were hoping for support from lower borrowing will also be sorely disappointed by comments in the Bank of England press conference that inflation is projected to fall to target over the medium term without major changes in rates. This, coupled with the budget last week, means UK rates are likely to stay where they are in the coming months.

“The next 25bp Bank Rate cut, then, is likely to come in February, in conjunction with updated forecasts,” said Michael Brown Senior Research Strategist at Pepperstone.

“If, at that stage, policymakers have greater confidence in the disinflationary path being well-embedded, the pace of normalisation could well quicken through the early part of 2025. Quarterly cuts, though, remain the base case for now.”

In addition to bad news on rates, UK equity investors were digesting pretty poor corporate updates from BT Group and Autotrader that weighed on sentiment.

BT Group lost 6% after lowering its revenue forecast for the full-year period.

“BT shareholders enjoying a near 50% recovery in the share price this year from its lows may have had the wind taken out of their sails this morning reading this update,” said Adam Vettese, market analyst at investment platform eToro.

“The company has warned that revenue will be lower than previously indicated partly due to tough market conditions. The broadband market is extremely competitive and saturated with choice for consumers and BT has lost out as a result.”

Autotrader was the top faller after saying the second-hand car market remained ‘challenging’. Shares were down 7% at the time of writing.

Long-suffering BT shareholders faced yet another blow on Thursday after the telecoms group said they now saw lower revenue for the full year.

BT shares were down 3% at the time of writing despite the company affirming EBITDA outlook for the period.

“BT shareholders enjoying a near 50% recovery in the share price this year from its lows may have had the wind taken out of their sails this morning reading this update. The company has warned that revenue will be lower than previously indicated partly due to tough market conditions,” said Adam Vettese, market analyst at investment platform eToro.

“The broadband market is extremely competitive and saturated with choice for consumers and BT has lost out as a result.”

Higher competition was a central component in lower revenues over the most recent half-year period that ultimately cut profit before tax by 10% to £1bn.

The rollout of fibre continues apace but investors will be frustrated the huge number of people now using the service isn’t translting into improved financial performance for BT.

“Openreach is BT’s key asset, and as the fibre rollout gathers pace, it’s benefitting from higher prices and a more favourable mix of fibre vs. older technology,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

“But new entrants are pricing aggressively, and there’s a weaker overall market for broadband and new homes, leading to 377,000 line losses over the first half. While the fibre build continues, BT’s most pressing challenge at Openreach is limiting these line losses.

“BT finds itself in a period where investors can see an end to the massive investment in fibre buildout, which should bring a material improvement in areas like cash flow, but the current market remains a challenge.”

Sainsbury’s shares eased off slightly on Thursday even though the supermarket giant announced rising operating profits amid strong grocery volumes in their half-year period.

Sainsbury’s has reported strong grocery performance with sales growth of 5.0% in its latest results, driving overall sales excluding fuel up by 4.6%. The retail giant saw like-for-like sales increase by 3.4%, with momentum building from 2.7% in Q1 to 4.2% in Q2.

The company’s core Sainsbury’s business showed robust growth, with its operating profits contribution rising by 8.7%, supported by strong grocery volume growth and an operating margin improvement of 20 basis points year on year.

However, this positive performance was partially offset by challenges in other segments, with General Merchandise and Clothing sales declining by 1.5% and Argos experiencing a 5.0% drop in sales. Argos is starting to be a drag on the group’s performance after several soft periods.

Overall, the retailer’s underlying operating profit rose to £503 million, representing a 3.7% increase.

“Sainsbury’s delivered a sweet set of first-half results, and investors will be relieved to see a volume-driven uplift in the Grocery business. But consumers haven’t been as hungry for General Merchandise & Clothing, which posted a decline in the period. That’s not been helped by its ownership of Argos, which gives it extra exposure on the general merchandise front and has weighed on overall performance a touch,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“But with that slip-up aside, Sainsbury’s continues to gain market share, and at a faster pace than competitors according to industry data. That’s been helped by its huge push to improve its service, products and value perception, which is helping to sway more customers to do their big food shop at Sainsbury’s, driving strong basket size growth.”