Traders shifted their attention to the Bank of England’s interest rate decision on Wednesday, with a drop in GBP/USD providing another welcome boost to the FTSE 100, which again touched fresh intraday record highs.

UK equity investors must be pinching themselves. The FTSE 100, the UK’s flagship equity index, has notched up another gain and continued its outperformance versus the S&P 500 and other major equity indices.

The FTSE 100 was 0.2% higher at the time of writing after touching a fresh intraday record high of 8,364 earlier in the session.

“The FTSE 100 was up over 0.4% just short of 8,350 in early trading. Over the last month it’ s risen 5% strongly outperforming the US market. The S&P 500 is down 0.3% over the same period,” said Derren Nathan, head of equity research, Hargreaves Lansdown.

During much of 2023, the FTSE 100 was a real dog. Its exposure to China, lack of technology stocks, and general defensive nature meant it trailed well behind its US counterpart and much of Europe.

However, resurgent miners and improving sentiments around UK-centric sectors such as banks and housebuilders have helped the index outperform.

On Wednesday, a dovish tone swept over UK assets sending the pound lower against the dollar on hopes the Bank of England would provide a hint of rate cuts at its meeting tomorrow.

The FTSE 100 tends to have an inverse relationship with the pound, and weakness in sterling played into the strength of the FTSE 100 on Wednesday.

“The FTSE 100 continues to forge to new all-time highs with sterling weakness providing the index with a bit of a kicker,” said AJ Bell investment director Russ Mould.

“A fall in the domestic currency is typically helpful to the FTSE 100 because it boosts the relative value of its dominant overseas earnings.

“Currency traders are betting against the pound ahead of the Bank of England’s latest meeting tomorrow, amid a growing expectation it will cut rates earlier than counterparts at the US Federal Reserve.

“It’s extremely unlikely there will be any action tomorrow but the market will be watching the surrounding commentary for any clues on when the Bank of England might take the plunge on rates.”

As one would expect, the weaker pound led to gains in overseas earners such as HSBC, BAE Systems, GSK, and Unilever. The gains weren’t spectacular but were enough to offset weakness in mining stocks such as Antofagasta and Glencore.

BP continued to fall after releasing very average results yesterday, and oil prices slipped.

Easyjet and IAG were among the top gainers as oil prices declined on hopes of a ceasefire in Gaza. IAG shares were 3.2% higher at the time of writing.

Wetherspoons shares were higher on Wednesday as investors cheered a decent quarter of sales growth driven by a recovery in traditional ales including Abbot Ale, Ruddles Bitter and Doom Bar.

Sales for the 13 weeks to 28th April 2024 were 5.2% higher on a like-for-like basis and were 8.3% higher year-to-date.

“Wetherspoons seems to be moving in the right direction, following a difficult few years. Like-for-like sales are growing and profits are expected to come in towards the top end of expectations,” said Charlie Huggins, Fund Manager at Wealth Club.

“Wetherspoons is being helped by moderating inflation combined with a proposition that is clearly resonating with the consumer.

“Despite higher interest rates, consumers are still spending. However, they are becoming increasingly discerning. Wetherspoon’s commitment to low prices and doing the basics well are helping to keep punters loyal.”

Although sales came in at the top end of expectations, margin pressure will still be a concern for the group. Energy bills remain steady, but are lacking of any meaningful declines that would help boost the pub group’s profitability.

“Rising energy and labour costs are still a concern, and while the share price has performed valiantly since the 2022 lows, it is still languishing well below pre-pandemic levels,” Mark Crouch, analyst at investment platform eToro commented.

“The cost of a pint in a London Wetherspoons has more than doubled since 2019, and the company, who are famous for offering a cheaper pint over their rivals, are having to yield to inflationary pressures in order to defend their margins.”

Premier African Minerals shares dipped on Wednesday after the company revealed recent progress at its Zulu lithium plant in Zimbabwe.

The company has been dogged by delays and is subject to a punishing offtake agreement with Chinese partners Canmax which sets out a 1,000 tonne per month minimum production – a target Premier African Minerals is yet to meet.

Today’s update focused on optimising the floatation circuit that processes lithium into a saleable product. While today’s announcement had some bright spots, it also had several sources of disappointment.

The plant is expected to begin production at 50 tonnes per day, which will satisfy the minimum production targets. However, further work is needed to ramp production up, and there is no guarantee this will be easy.

There are legacy issues with the mill and ore sorter which still need to be overcome. Many investors would have hoped these setbacks would have ben rectified by now.

Premier African Minerals shares were down 8% at the time of writing.

The PREM CEO provided a comprehensive overview of the current situation:

“Thanks to the support the Company receives from ENPROTEC, the supplier of the float plant components and innovation and dedication from our team at Zulu, we are now able to run the floatation circuit continuously and produce saleable spodumene concentrate,” said George Roach, CEO, Premier African Minerals.

“There is much to be encouraged by, notably, the use of an activator in the spodumene floatation plant that has seen recoveries in internal laboratory work approaching 90% and the indications that the ore body in situ grade is higher than was estimated in our Resource model.

“The overall plant is currently running at a feed rate to spodumene floatation that is approximately 50% of original floatation design capacity and will need a further conditioning tank and minor pump upgrades to operate at the full design capacity. This is over and above the recently completed flow changes. The required pumps are already at site and the additional civils for the conditioning tank should complete in May 2024.

“Target production for the coming week is expected to start at 50 tonnes spodumene concentrate per day with increasing production. Target full projected capacity remains at 4,000 tonne per month. Grade is consistently improving with continuous running and latest internal chemical analysis of spodumene concentrate produced by the floatation circuit indicates grades have now improved to between 4.5% and 6.3% Li2O.”

Grades may also be a concern for investors. At the top end of the stated range, Premier African Minerals will satisfy the grade requirements stipulated in its offtake. However, at the bottom end, it will not. Investors will be closely watching for any signs of further improvements in the grade.

Cornerstone FS announced landmark 2023 full-year results on Wednesday in which the company produced record revenue and its first year of profitability.

Revenues during the period grew 100% to £9.6m, leading to £1.3m in profit before tax.

Growing customer numbers and increased transaction sizes helped Cornerstone’s revenue higher. The group’s active customer numbers grew to 906, and average transaction sizes jumped 33%.

The foreign exchange and payments company generated £2m cash from operations during the year and ended the period with £2.3m in cash on the balance sheet. 

Cornerstone FS shares had staged a spectacular rally going into the results, gaining around 400% from 2023 lows so the minor bout of profit-taking on Wednesday will do nothing to upset long term holders.

Cornerstone FS announced that it will change its name to Finseta to reflect changes in its business and the launch of new services for complex clients.

“This has been an excellent year for our business, resulting in 100% revenue growth and our maiden full year of profitability and positive cashflow,” said James Hickman, CEO of newly named Finseta.

“This has been driven by the expansion of our sales team, which achieved an increase in client numbers as well as average transaction value. At the same time, we advanced key strategic initiatives that will be drivers of our future growth in the near term. We continued to expand our global payments network, and are now able to pay out to over 150 countries in 58 currencies, and we were thrilled to receive, post year end, regulatory approval to operate a payments business in Canada.

“Since the year-end, we also signed an agreement with Mastercard to launch a commercial card scheme, which will enable us to offer an additional payment method to corporate clients. In reflection of this progress, we were delighted to select ‘Finseta’ as our new company name to better align our brand identity with our mission, values and the comprehensive range of services we provide.  

“Looking ahead, the strong trading momentum that was experienced during 2023 has been sustained into the current year and we are on track to report significant growth for full year 2024, in line with the Board’s expectations. With the excellent progress made during the year and to date in executing on our strategic priorities, we have strengthened our operations and established the foundations to deliver long-term, sustainable growth. As a result, the Board continues to look to the future with great confidence.”

Fast fashion online retailers have experienced well-documented struggles with sales since the pandemic, and Boohoo is no exception.

Revenue for the 2024 full year plummeted 17%. The company has blamed macroeconomic conditions, but the problems may run much deeper than external economic factors. 

“Boohoo’s full-year results were a painful read for investors. Revenue declined at high double-digit rates across all regions, including an 18% in the US, which is seen as the group’s pathway to major growth,” said Guy Lawson-Johns, equity analyst, Hargreaves Lansdown.

Boohoo shares were down 3.9% at 33.8p at the time of writing. Shares in the group traded above 400p in the midst of the pandemic when online shopping boomed.

Boohoo has structural problems to address. Consumers of the fast-fashion brands housed within Boohoo are constantly chasing the latest trends. What was popular during Boohoo’s meteoric rise may not be as popular now.

Those who had an affinity with a brand in their 20s may not have the same affinity in their 30s. If these loyal customers diminish and aren’t replaced, it will act as a major headwind for sales.

There is also the impact of new entrants, such as Shein, stealing away market share, explains Yanmei Tang, Analyst at Third Bridge.

“Shein has been a clear threat, capturing market share from Boohoo. Our experts note that Shein’s affordability and successful TikTok campaigns make them more appealing to young customers.”

In addition, Boohoo has been embroiled in a series of scandals and investigations revealing unethical manufacturing practices. This will have done nothing to boost their appeal to young fashion consumers. 

The company said it had seen ’positive’ trends developing in its core brands from H12024 to H22024 when sales declines slowed from 9% to 4%. It is an improvement but only in the respect that sales performance has improved from being disastrous to worrying. 

The big concern for investors will be the widening loss. Loss before tax expanded to £159.9m in 2024FY from £90.7m in 2023FY. 

In the year ahead, Boohoo promises £125m in costs savings and wants to see general merchandise value sales grow. 

If Boohoo doesn’t stop the rot in 2025FY and produce top-line growth after a series of dismal years, one will really worry about shareholder value creation over the long term.

“Investors want Boohoo to make profit, but raising prices due to inflation while customers face financial strain puts them in a tough spot. Offering affordable basics is good, but they risk losing out on successful fashion products,” Yanmei Tang said.

“Consumers have shifted away from Boohoo’s core going out and bodycon styles. Fashion trends have moved towards more casual and basics, which will continue to drive negative sales growth for Boohoo near term.

“Boohoo’s limited product range lacks diversity in brands and adjacencies, such as sportswear, which typically drive incremental sales for multi-brand retailers.”

And there goes 8,300. Another technical milestone for the equity bulls was easily overcome as the FTSE 100 continued to march higher.

The FTSE 100 set another all-time intraday high of 8,311 in early trade on Tuesday before dipping to trade at 8,299 at the time of writing.

“The FTSE 100 has scaled fresh heights as buds of May hope unfurl about interest rate cuts on the horizon. The blue-chip index smashed through the 8300 mark in early trade as the feel-good factor around London-listed stocks continued,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

The index has consistently broken to record highs in recent weeks, reminiscent of how the S&P 500 made fresh highs throughout last year’s AI boom.

Of course, the factors at play are very different, but this will be of little concern in the short term, with London’s markets playing catch-up with overseas peers. 

Indeed, the economic influences on stocks this morning may have longer-term ramifications for equities. Yet, a big miss in the US Non-Farm Payrolls last week, and slower UK retail sales and patchy house price data all feed the narrative the Bank of England and Federal Reserve will have to cut interest rates to support the economy before long. 

Concerns were creeping in that both major central banks would push their first rate cuts into 2025. Data over the last week has dispelled this notion, and stocks have reacted accordingly.

“Rising another 1.1% as post-Bank Holiday trading gets underway, the FTSE 100 is now up 2% so far in May and 7.4% year-to-date. That’s quite a performance given we’re not even at the halfway point in the year. Add in returns from dividends on top and it’s easy to see why more investors might finally have rekindled their interest in the UK stock market,” said Russ Mould, investment director at AJ Bell.

The FTSE 100 gains were broad on Tuesday, with 89 of the 100 constituents trading positively at the time of writing.

Although the Halifax House Price Index released on Tuesday shows big disparities across different regions, the trend for UK property prices is definitely going in the right direction, which helped spark a rally in the housebuilders.

“Housebuilders were among the stocks in demand after British house prices returned to growth, albeit only by a fraction. Halifax data gave hope that the property market was getting up on its feet after a soggy patch, enticing investors to look at names such as Persimmon and Barratt,” Russ Mould said.

Persimmon was 3.4% higher at the time of writing, and Barratt Developments gained 2.4%.

Ocado had a good showing as the lower interest rate narrative helped boost the stock due to its technology credentials. DCC was the FTSE 100’s best performer with a 4.5% gain after Deutsche Bank rated the stock a ‘buy’.

The headline corporate update came from BP and a massive fall in profits in Q1 2024 compared to Q1 2023. Lower oil prices have ravaged the bottom line, but there was a bright spot for investors in a share buyback, preventing any significant share price declines.

“Consistency quarter to quarter seems to be tough to achieve for BP at the moment with a missed forecast in Q1 following on from a very strong update last time out to round off 2023,” said Adam Vettese, analyst at investment platform eToro.

“Lower energy prices and weaker fuels margin are to blame for the slump. Investors will be pleased to see this miss will not affect the buyback programme and the dividend is being held steady.”

Last week we stayed positive overall on the S&P 500 seeing a move back towards the 5200 area as the most likely outlook, so the past few days trading has been largely in line.

The issue now is that the RSI has managed to recover to such an extent that it is now back to the previous break levels, black line on chart. Price also may start to struggle as it approaches the 5150, as this was the break area just a fortnight ago.

So how price behaves around the 5150 area could prove to be quite instructive for the rest of the month. A confident push higher will allow many of these concerns to be quickly allayed and confidence will build for a push back to fresh all-time highs. Whereas failure to push the 5150 at the first attempt will lift concerns amongst the bears that all of the recent price action has been nothing but a minor leg higher within a more meaningful correction.

Despite the coincidence of a number of technical resistances we still are skewed to the positive, and expect the broad 100 period trend, red region on graph, to continue to contain much of the price action in the days ahead Keeping a positive skew for next week, on the caveat that traders may need to be cautious as a rapid move back towards the 5000 area is quite possible on any minor scares, which could be more rapid than usual. But we would not expect the tone to turn bearish overall until/unless the recent lows around 4955 were to be broken.