Dovish remarks from Bank of England Governor Andrew Bailey helped to boost the FTSE 100’s housebuilders on Thursday at midday, while grocers rose following a strong interim showing from Tesco.
The FTSE 100 index was up 21.96, 0.3%, at 8,312.82. The FTSE 250 was down 18.71 points, 0.1%, at 20,765.07, and the AIM All-Share was down 0.26 of a point at 734.04.
The Cboe UK 100 was up 0.2% at 831.77, the Cboe UK 250 was down 0.1% at 18,219.81, and the Cboe Small Companies was up 0.1% at 16,794.09.
In European equities on Thursday, the CAC 40 in Paris was down 0.8%, while the DAX 40 in Frankfurt was down 0.5%.
The pound was quoted at $1.3114 at midday on Thursday in London, dropping sharply from $1.3271 at the equities close on Wednesday.
In an interview with the Guardian, Bailey said he was watching developments in the Middle East ‘extremely closely’ and that there were limits to what could be done to prevent the cost of crude rising if things ‘got really bad’.
Bailey also held out the prospect of the bank becoming a ‘bit more aggressive’ in cutting interest rates provided the news on inflation continued to be good. ‘I think the economy has come through the shocks of the last five years better than many of us feared,’ he added. ‘So there’s a base there to develop.’
Housebuilders topped the FTSE 100, given the outlook for lower interest rates which would incentivise house buying.
Persimmon rose 2.8%, Barratt climbed 2.1%, Vistry was up 2.3% and Taylor Wimpey added 2.1%.
Supermarkets were also strong during midday trade following a positive update from Tesco, which rose 3.3%.
The Welwyn Garden City, England-based grocer now expects to deliver around £2.9 billion in retail adjusted operating profit for the financial year ending in February, up from previous guidance of ‘at least £2.8 billion’ before. This will compare to £2.76 billion in financial 2024.
Pretax profit from continuing operations rose 20% to £1.39 billion in the 26 weeks to August 24 from £1.16 billion a year prior. Revenue from continuing operations climbed 3.5% to £31.46 billion from £30.40 billion.
Tesco also lifted its interim dividend 10% to 4.25p from 3.85p.
‘We are in good shape, with volume growth delivering strong financial performance,’ said Chief Executive Ken Murphy.
As noted AJ Bell investment director Russ Mould, the ‘healthy’ dividend hike shows Tesco’s confidence heading into the critical Christmas trading period. ‘This is underpinned by strong cash generation, which is also enabling Tesco to invest in the business and compete effectively on price,’ he added.
‘Its focus on value is clearly getting customers through the doors and the tills ringing and, alongside measures like its Clubcard discounted prices, should help to engender loyalty. A fairly astonishing 23 million households now have a Clubcard membership,’ Mould continued.
Fellow grocers Marks & Spencer rose 1.6% while Sainsbury’s gained 1.5%.
Meanwhile, Phoenix Group fell 5.0%, as its stock went ex-dividend.
Among London’s small-cap stocks, VP fell 8.0%.
The specialist equipment rental services issued a profit warning, citing ‘market headwinds’ in Construction and Housebuilding.
It was a better day for Atrato Onsite Energy’s stock, which rose 20%.
The London-based renewable energy investment trust has agreed to sell the entirety of its solar assets portfolio at a headline price of £218.7 million. If the deal is approved by shareholders and takes place, the firm plans to seek shareholder approval for a voluntary liquidation. Its net assets would then be distributed back to shareholders.
Chair Juliet Davenport explained that the decision comes amid a ‘backdrop of persistently wide share price discounts in the investment trust sector, the subscale nature of the company and consistent shareholder feedback to sell the portfolio’.
Across global equity markets, investors are also focusing on developments in the Middle East, in anticipation of Israel’s retaliation against Iran.
Brent oil was quoted at $75.28 a barrel at midday in London on Thursday, up from $74.05 late Wednesday.
‘Brent crude has settled around $75/bbl for now, but any military strike, particularly one targeting Iran‘s oil or nuclear infrastructure, could trigger a significant spike. The US is reportedly working behind the scenes to prevent this escalation, knowing full well that such a strike could ignite a much broader conflict,’ said Stephen Innes, SPI Asset Management.
Gold was quoted at $2,645.83 an ounce, down slightly against $2,650.17.
Stocks in New York were called lower. The Dow Jones Industrial Average and the S&P 500 index both called down 0.4%, and the Nasdaq Composite was called down 0.5%.
The dollar was somewhat firmer, ahead of the afternoon’s economic data from the US. The euro stood at $1.1037, down against $1.1046. Against the yen, the dollar was trading at JP¥146.88, up compared to JP¥146.06.
‘Overnight the yen fell as new prime minister Shigeru Ishiba dampened recent speculation about an interest rate hike from the Bank of Japan. This helped give other Asian markets a lift,’ noted AJ Bell’s Mould.
Still to come on Thursday’s economic calendar, there’s a data drop from the US, including initial jobless claims, factory orders, and the S&P Global and ISM services PMIs.
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