Travis Perkins shares were the biggest FTSE 350 faller on Friday after the company said they were feeling the pressure of higher interest rates and inflation.

On Wednesday, the UK Investor Magazine included Travis Perkins in our premium article detailing FTSE 350 stocks most at risk of higher interest rates.

Today, these risks were confirmed as Travis Perkins said they were experiencing difficulties as a direct result of higher interest rates and issued a profit warning.

Travis Perkins said in a statement:

“Volumes in both the new build housing and private domestic RMI markets continue to be impacted by higher interest rates and weaker consumer confidence driven by persistent, higher than anticipated consumer price inflation.”

AJ Bell’s Russ Mould explains Travis Perkins’ challenges in their new home building and consumer-facing business.

“John Carter, when he was boss of Travis Perkins, used to say the health of the housing market was far less important to the business than repair, maintenance and improvement (RMI) demand for existing homeowners,” Russ Mould said.

“His argument was that you don’t need a sale or a purchase of a property to spend money with the builders’ merchant, and that RMI demand was less governed by the direction of interest rates.

“He also said new build homes were more of a sideshow for Travis Perkins than existing housing stock, calling work for the big housebuilders ‘padding’ and not that profitable.

“While Carter is no longer chief executive, it’s clear from Travis Perkins’ latest trading update that his argument would not stand up today.

“In its profit warning, the company cited weaker volumes in new build housing and private domestic RMI markets being affected by higher interest rates, together with weaker consumer confidence amid high levels of inflation.”

The FTSE 100 was heading into the weekend on a high after global equities rallied on hopes major economies were nearing the end of their hiking cycles.

Instalments by the Federal Reserve and ECB this week suggest that although there are more rate hikes to come, they are now largely priced into markets.

US and Asian stocks rallied overnight, and European stocks took hold of their tailcoats on Friday.

“A decent showing on Wall Street last night has helped to put investors in a good mood, with the key markets across Europe and Asia ending the trading week on a high,” said Russ Mould, investment director at AJ Bell.

The FTSE 100 was 0.2% higher at the time of writing on Friday.

FTSE 100 movers

Ocado continued a storming rally on Friday, gaining over 3% as the FTSE 100’s foremost performer. Ocado has gained 15% over the last five trading sessions.

Fraser Group was up 2.7% as the retailing group increased their stake in AO World to 21%. Fraser Group is on a spending spree, targeting online retailers AO World and ASOS. Fraser Group increased their ASOS stake to 10.6% yesterday.

Fraser Group took an initial 19% stake in AO World last week, saying the deal was the “culmination of productive talks over the last two years about establishing a strategic partnership”.

Miners were among the top fallers as investors booked profits after a strong rally in commodities companies ignited by Chinese stimulus. Antofagasta was down 1.6%, and Anglo-American dipped 2%.

ValiRx shares were tanking on Friday after the life science announced they would discontinue research on a cancer treatment.

ValiRx was undertaking trials on a candidate for the treatment of endometrial, pancreatic and bile duct cancers in conjunction with Hokkaido University.

ValiRx said: “the profile of the product has been found to be unsuitable for further development at this stage and the evaluation will now cease.”

The trial was one of ValiRx’s main operational highlights in their recent half-year report and the outcome will be a blow to the company.

ValiRx shares were down 12% at the time of writing and now trade at the lowest levels since 2020.

Dr Suzy Dilly, CEO of ValiRx commented: 

“Although it’s disappointing not to be able to progress this project further, this highlights the importance of our process of evaluating academic projects prior to full in-licensing.  In addition to returning the data to Hokkaido, we have made recommendations for further work, and we will be following the scientific progress of project with interest.”

Tekcapital’s Guident has received a grant from Space Florida to develop remote monitoring and control for autonomous vehicles facilitated by low-orbit satellites.

Tekcapital’s shares jumped over 5% in early trade on Friday after the announcement.

The grant has been made as a part of the Florida-Israel Innovation Partnership program and will bring together Space Florida, Guident and their Israeli partner, NOVELSAT.

NOVELSAT and Guident are working to improve the connectivity and speed of Guident’s remote monitoring and control centres by utilising satellites.

The grant pays testament to Guident’s innovative approach and demonstrates the commercial opportunity in the future of autonomous vehicle safety.

“Through this extraordinary collaborative partnership, Space Florida is at the forefront of welding cutting-edge innovation with the boundless knowledge derived from scientific exploration. It thereby forges a path that shapes the very essence of the future of autonomous mobility,” stated Tony Gannon, Vice President of Research & Innovation for Space Florida.

Guident’s technology is focused on improving the safety of autonomous and has won major contracts, including one with the Jacksonville Transport Authority.

Space Florida’s grant will allow Guident to improve its offering and broaden the scope for commercial agreements.

“Guident is privileged to have the invaluable support and guidance of Space Florida with their unrivaled experience and strategic location for this new initiative,” stated Dr. Gabriel Castaneda, Guident’s Vice President for AI and Research.

“This funding will help propel us forward as we embark on the development and scale of an effective Remote Monitoring and Control Solution with enhanced vehicle safety, together with our Israeli Partner NOVELSAT.”

The FTSE 100 was flat on Thursday as investors digested central bank guidance on interest rates after the Fed paused rate hikes and ECB hiked by 0.25%.

Last night the Federal Reserve held rates at 5%-5.25% but provided a hawkish outlook on rates which suggests the Fed will hike again twice this year. US stocks sank overnight and were pointing to a lower open on Thursday.

“The Fed’s decision to pause rates at the 5.0% to 5.25% range yesterday were met with a luke-warm reception, largely due to the hawkish tone set for the rest of the year,” said Derren Nathan, head of equity research, Hargreaves Lansdown.

The ECB followed on Thursday with a rate hike and a similarly hawkish outlook as ECB President Lagarde said it is likely the ECB will hike rates again in July.

The German DAX was down 0.6% at the time of writing while the FTSE 100 shook off rates concerns to gain 0.1%.

The Bank of England will meet and decide on interest rates next week – economists expect the BoE will also hike rates by 0.25%.

FTSE 100 movers

After avoiding demotion from the FTSE 100 by the skin of its teeth, Ocado shares have steadily rallied, and the rally continued on Thursday with a 3% gain.

Halma was the FTSE 100’s biggest disappointment on Thursday after the life-saving technology group provided lower guidance than the market had expected.

“Halma delivered record full-year record and profit, though headline figures were somewhat flattered by weaker sterling which meant its overseas income was worth more,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

“Looking under the hood, revenue was above expectations, but there was some weakness in margins due to supply chain disruptions, particularly in the safety sector. Guidance here was a little lower than markets were expecting, with return on sales expected around 20% for the coming year – analysts had pencilled in 20.4%, which is likely why shares are down in early trading.”

Legal & General shares were down over 2% after CEO Nigel Wilson announced he would step down.

“The new boss at Legal & General has a hard act to follow. Since Nigel Wilson was appointed to the top job in June 2012, Legal & General shares have outperformed its life insurance peers, Aviva and Prudential, to chalk up a total return of more than 200%,” said AJ Bell investment director Russ Mould.