The FTSE 100 rebounded from it’s worst levels on Wednesday after the Bank of England stepped in to support the bond market with long dated purchases.

UK 10-year Gilt yields had hit 4.611% on Wednesday before dropping back to 4.03% following the announcement of the BoE’s actions.

Soaring bond yields were a result of the UK governments mini-budget which was criticised by the IMF due to the timing of the measures.

The move by the Bank of England would have been unthinkable just a week ago as markets were focused on the bank’s tightening of rates.

The pivot has arrived:
Bank of England will carry out temporary purchases of long-dated UK government bonds from September 28 to restore orderly market conditions, according to a statement.

— zerohedge (@zerohedge) September 28, 2022

With bond yields around 4.5%, they rivalled the FTSE 100’s yield and made the equity index look less attractive for income seekers who would have been able to gain a similar yield in the safety of government bonds.

The Bank of England’s measures helped lift the FTSE 100 off lows of 6,836 to trade at 6,963, down 0.3% at the time of writing.

Burberry rallies

Burberry topped the FTSE 100 risers after the luxury brand announced Riccardo Tisci will be stepping down as Chief Creative Officer.

“The rise in Burberry’s share price is perplexing given the news that chief creative officer Riccardo Tisci is leaving, as he was well respected. Yet in the fickle world of fashion, trends come and go, and so the arrival of someone new may just have excited investors,” said Russ Mould, investment director at AJ Bell.

“Tisci’s replacement is Bradford-born Daniel Lee who is credited for helping to breathe some new life into Italian luxury brand Bottega Veneta.”

Burberry shares were 4.3% higher at the time of writing.

Housebuilding shares and UK banks were among the gainers as they cheered the Bank of England’s action at a time the news around the UK economy and housing market was deteriorating.

Asset managers and insurance companies were the biggest drag on the FTSE 100 with Legal & General, M&G, Aviva and Phoenix Group among the top fallers.

Boohoo shares suffered on Wednesday as the online retailer said they expected revenue to fall over the rest of the year after posting a 10% revenue decline in the six months to 31st August.

Compounded a poor performance so far this year, the company said the macro-economic environment and cost of living crisis would continued to hurt sales.

The company said of their outlook for the rest of the year: “our expectation is for a similar rate of revenue declines to persist over the remainder of the financial year if these conditions continue.”

Despite a gloomy outlook for Boohoo, there sales for the period are significantly higher than the same period prior to the pandemic highlighting the progress the business has made.

Nonetheless, such as stark warning on future earnings will not please investors.

“Once again Boohoo feels like a very apt name for the fallen fast fashion firm. Today’s warning shouldn’t come as a shock given the backdrop the business is facing but that doesn’t make it any less sobering,” said Russ Mould, investment director at AJ Bell.

“The peak in the shares above 400p at the height of the pandemic feels an awful long time ago. Though questions had emerged about the business model even during those heady days as the company was dogged by a scandal over working conditions in its supply chain.”

“If Boohoo leaned on unsustainably cheap labour to make the model work, it faces a very tough task now when other costs are going through the roof. This has not been helped by a big increase in return rates.”

Boohoo shares were down 6.5% on the day at 34.3p and are now down 72% year-to-date.

Saga shares has plunged following a profit warning that revealed a slowing insurance business was not going to be offset by a recovery in cruises and other travel products.

The group said profit before tax would now be in the range of £20m to £30m, down from their previous guidance of £35m to £50m.

Saga shares were down 21% to 105p at the time of writing, the lowest level since their IPO. Saga now has a market cap of just £189m, having been valued at around £2bn when they listed in 2014.

“Following a return to service for cruises and travel, Saga’s experienced impressive growth in the division allowing for reduced losses despite still facing some on-going disruptions from Covid-19 and the conflict in Ukraine. This growth has helped contribute to a positive underlying pre-tax profit of £14m at the half year mark,” said Charlie Williams, Equity Research Assistant at Hargreaves Lansdown.

“The insurance division hasn’t performed as well.  Larger than expected inflationary pressures and rising claims have reduced profitability for the division and resulted in a downwards revision of the groups full year pre-tax profit of £20-30m. Previous guidance was £35-50m.  For the long term however, Saga’s unique offering to the ‘grey pound’ works well and with many of its customers likely to have paid off their mortgages, it’s good to see them as more insulated than most from further interest rate rises.”