UK equity bulls were out in force on Monday as markets geared up for a busy week of central bank action, with the Bank of England and Federal Reserve both deciding on interest rates this week.

The two are expected to keep rates on hold, although there is plenty of scope for a surprise interest rate cut, and markets are positioning for such an event. In any case, even if there isn’t a rate cut this week, the accompanying commentaries to the rates decisions are likley to hint very heavily at a rate cut.

Interest rate optimism helped the FTSE 100 rise on Monday. At the time of writing, the index was trading 0.85% higher at 8,355.

“UK markets open higher after avoiding too much backlash from last week’s tech selloff over the pond,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

“Thursday’s Bank of England meeting could be the start of the journey to lower rates for the UK. Markets are unsure, pricing in around a 55% chance of a cut. If we do get cuts, sectors that have been under pressure in a higher-rate world, like infrastructure and real estate, could be due for a bump.”

Oil majors were in good form as energy prices rose, with Shell and BP adding a significant number of points to the index.

“Energy producers gave the FTSE 100 a welcome boost at the start of the new trading week,” said Dan Coatsworth, investment analyst at AJ Bell.

“Shell and BP were among the biggest contributors to the index’s performance as oil prices nudged higher to $81.21 per barrel. Oil prices had been on a downward trend since early July, so finding price stability has offered some reassurance.

“Shell and BP will update the market this week, and both have already got bad news out of the way with recent earnings previews that detailed multi-billion-dollar write-downs.”

Entain and Reckitt Benckiser

Although the index was firmly higher on Monday, there were two major drags on the index in Reckitt Benckiser and Entain.

“Shares in Reckitt are down around 9% this morning after news that a key rival in the US baby formula market has been fined $495mn by a US jury,” Matt Britzman said.

“Mead Johnson, a Reckitt subsidiary, is under threat of similar litigation. Reckitt has put the business on the chopping block as part of a recently announced strategy shift, which seems like a smart move. Reckitt has maintained stalwart support for innocence, but while Mead Johnson remains part of the group, developments in these cases will continue to have a significant impact on Reckitt’s performance.”

Entain was down 9.5% after announcing trading conditions for its BetMGM joint venture. Although US-focused betting services revenue grew, it signalled an increase in the competitive environment.

Adsure Services announced a bumper increase in EBITDA and profit before tax for the full-year period ended 31st March after the internal audit and business assurance firm grew revenues and took action to control costs.

However, the most interesting element of today’s announcement for many investors may not be the 72% increase in profit before tax, but the update the company gave on the development of a Generative AI Large Language Model designed to enhance efficiencies for government-funded organisations.

Commenting on the AQUIS-listed company’s push to improve its technical capabilities in an effort to create operational efficiencies for its clients, Kevin Limn, CEO of Adsure Services, said:

“As part of our drive to improve efficiencies across the business, we have deployed an Innovate UK grant to develop proprietary Generative AI Large Language Model (LLM) technology specifically designed to enhance outcomes for our customers across government-funded organisations, including housing associations, healthcare services, emergency services, local governments and education institutions.”

Through its operating subsidiary, TIAA Ltd, Adsure Services provides government-funded organisations with a broad range of auditing and assurance services covering cyber security, HR, carbon emissions, IT systems, security management, and anti-crime.

Although Adsure is yet to release specific details about how the company will utilise an Innovate UK grant to help launch a Large Language Model, the successful implementation of such a service is likley to provide an additional source of growth for the company in the exciting world of Generative AI.

Indeed, in the full-year results released today, Adsure outlined a growth strategy with three core streams: ‘Organic growth in core markets, Accessing new markets for its existing range of services and Creating new technologies to revolutionise business assurance.’

Shareholders will eagerly await updates on the progress of the new technology.

Strong EBITDA and Profit before Tax growth

Beyond the group’s artificial intelligence developments, Adsure Services produced very respectable levels of growth in 2024FY. Revenue grew to £9.1m in the year to 31st March while profit before tax soared 72%.

“I’m delighted to report another year of growth for Adsure Services and TIAA Ltd,” said Vicky Davies, CFO of Adsure Services.

“Revenue for 2024 grew 3.4% to £9.3m (2023FY: £8.99m) and profit before taxation increased 72% to £471k (2023FY: £274k). Demonstrating action in cost control, our EBITDA margin improved to 9.4% (2023FY:7.31%).

“We have started the year strongly and will maintain our prudent approach to managing costs.”

The company has proposed a final dividend of 0.99p which will be paid later this year to add to the maiden interim dividend of 0.49p paid in April.

Despite only listing in London at the end of last year, the combination of the interim and final dividend infers a 5% dividend yield for the company.

Adsure generates recurring revenues from long-term contracts, which evidently provides the company with the confidence to pay dividends while pursuing a broad growth strategy.

“Our outlook is promising, and we have excellent visibility over our revenue in the years to come due to the long-term nature of our contracts, which deliver us recurring revenues,” Kevin Limn said.

We had been nervous for a few weeks over the possibility of a profit taking snap emerging. So the recent minor sell-off has come as no major surprise.

We can see how price action has “only” dropped down to the lower end of the existing bullish trend channels. So little technical damage has been done on this move, so far.

In order to turn more nervous we would need to see price further into the older bullish trading range, blue region, currently under 5450. Buyers have already been tempted in, on the recent selling, on the hopes that the “buy on dips” strategy that has proved so profitable for so many months now will be good for at least one more leg higher.

However there are some very early signs that this buying may be more retail based buying, and less institutional, raising concerns around the Hindenburg Omen we highlighted a few weeks ago.

So for the week ahead this follow through buying may come through with enough scale on the key names that it could lift the wider market back above 5,600. But concerns remain for Q3 ahead and into Q4 as the record breaking run of the inverted US yielded curve continues and we have so much geopolitical uncertainty around the US election and possible international flash points in Ukraine/Russia, Israel/Gaza/Lebanon, China/Taiwan but that until/unless we see price action consolidate under the 5,400 area we remain in a strong bullish trend.

Rising capital gains tax receipts and a public spending mismatch are fueling speculation about the new Labour government’s potential changes to CGT rates.

Some experts suggest that Chancellor Rachel Reeves may consider equalising CGT rates with income tax rates to address the total public finance gap of around £20 billion per year.

As well as shelving major spending projects, speculation is mounting that Reeves will boost the coffers through a raid on capital gains.

Recent data reveals that capital gains tax (CGT) receipts in the UK reached a record high of £16.929 billion in the 2022/2023 tax year. The number of individuals paying CGT has also seen a significant rise, increasing by 50% to 394,000 over the five years leading up to 2021/2022.

The annual tax-free allowance for CGT was substantially reduced from £12,300 in the 2022/23 tax year to £3,000 in the current tax year. This reduction is likely to bring more individuals into the CGT net, potentially leading to even higher receipts in the coming years.

Despite CGT already set to impact more individuals, the government is thought to be planning additional changes to the tax which could result in more people paying more tax.

The government will release more detailed information on Thursday, including breakdowns of the types of gains contributing to this record CGT haul.

“Capital Gains Tax speculation has intensified. As Rachel Reeves peers into the hole in the public finances and is set to reveal just how deep it goes, rumours are swirling as to whether CGT changes could be used to generate extra cash to help fill it,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.

“One of the suggestions doing the rounds is that capital gains tax rates could rise to match income tax. It was one of the things the Office for Tax Simplification explored in 2020. This would see a shocking hike for UK investors. 

“As the OTS highlighted in 2020, in the long term it runs the risk of people hoarding their profits until they die. This would mean, for example, buy-to-let investors refusing to part with properties they don’t really want in an effort to avoid CGT, while first time buyers struggle to get on to the property ladder. 

“The tax system should be encouraging and rewarding long-term investing. This has been absent from the CGT system since taper relief was abolished in April 2008. Right now, investors face the double-whammy of a system that taxes investments that are simply keeping pace with inflation and allows for far lower gains to be realised tax-free each year. If the rates do end up rising, it would add insult to injury. We’d urge the Chancellor to reintroduce incentives that reward long-term investing.”

Helium One Global has issued a progress update on its Tanzanian operations announcing its commenced drilling operations at the Itumbula West-1 well late last week.

Helium One said it plans to conduct an extended well test on two intervals at the project: the fractured basement and faulted Karoo. This follows a successful drill stem test in February 2024 that yielded 4.7% helium flow to the surface.

Investors will be pleased that Geolog – the firm contracted to perform mudlogging and testing during drilling to monitor helium gas shows – has already noted back ground indications of helium and hydrogen. A portable mass spectrometer and field pressure-volume-temperature specialist are on site to measure and validate helium gas shows and downhole samples from the extended well test.

The company said it anticipates that this phase of operations, from spud to completion of the extended well test, will take approximately five weeks. The Itumbula West-1 well previously demonstrated success in February 2024, with a drill stem test flowing 4.7% helium and 2.2% hydrogen to the surface from the fractured Basement.