FTSE 100 on hold as Shell gains offset and bank rate hike considered

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Footsie’s early positive was reversed, with falls in BT and Bunzl outweighing rises in Compass and Shell

  • The FTSE 100 borders 5 points lower
  • Compass and Shell topping premier risers
  • Tech stocks hit after Facebook/Meta fall

The FTSE 100 is in a holding pattern ahead of the Bank of England’s policy announcement later, remaining slightly underwater just below 7,578.

“Seatbelts are still fastened for a period of volatility as the quieter moment for tech stocks is likely to be short-lived given the market jolt, Facebook owner Meta, with falling stock prices. reported earnings,” said Susannah Streeter, senior investment and market analyst. to HL.

Ahead of the announcement of the new energy price cap, which will mean higher bills for millions of households, Streeter says the cost of living squeeze is “looming” today.

“With budgets already under such strain due to the rising cost of goods and services, it is highly likely that trying to stem soaring inflation will be the number one priority for policy makers in the hot seat of decision-making. Although an increase in the official interest rate to 0.5% is expected, a swift decision by the Bank of England to significantly tighten its massive bond buying program which was aimed at reducing yields and reduce the cost of borrowing risk causing a new wave of nervousness in financial markets,” she said.

9:47 am: Turnaround in the red

The Footsie fell into the red as Shell-led energy gains are offset by declines for the industrials, mining, telecoms and software sectors.

Retail group Bunzl PLC (LSE:BNZL) and tech-focused Scottish Mortgage Investment Trust PLC (LSE:SMT) now frame BT’s declines at the bottom of the stack.

After being the only European benchmark in positive territory, London’s blue chip index has now fallen about 5 points below the watermark to 7,578.

Traders are already thinking about the Bank of England and ECB central bank meetings later today.

The BoE meeting looks rather more interesting than its European counterpart, Neil Wilson told Markets.com.

Indeed, with inflation at a 30-year high and the negative economic impact of Omicron less than feared, the BoE’s Monetary Policy Committee is expected to raise rates for the second consecutive meeting.

“Not quite a done deal, but close to a slam dunk given the outlook,” Wilson says. “There are many signs of inflationary pressures persisting and building; a cost of living crisis is already here.

“But it’s not a zero-sum game,” he warns, “raising rates will hit people who have variable-rate mortgages, for example. Raising the cost of borrowing right now has some risks , but at the end of the day, it’s the right thing to do – in fact, they should have done it much earlier last year.”

The Bank is expected to begin “quantitative tightening” by not reinvesting proceeds from bond purchases, and is not expected to start selling off its huge balance sheet until the end of this year.

Financial markets are currently pricing five MPC rate hikes, adds Wilson, “which is quite hawkish, so risks open up for a dovish surprise. If he sticks to his view that ‘a modest tightening of monetary policy… will likely be needed, “the market probably views this as accommodative.”

9:37 a.m.: Positive start in London

No thanks to BT Group PLC (LSE:BT.A), the FTSE 100 got off to a good start.

London’s heavyweight stock index rose 9 points (0.1%) to 7,592 despite BT losing 3.5% to 188.6p after the telecoms giant lowered its revenue forecast for the whole year.

“BT is making avenues to improve its content position, which in the current climate is not a bad thing. That said, there is an argument that sport is much more immune to changes in habits. media than other outlets, so even if BT can’t rest on their laurels, they have a bit more leeway. BT Sport is a real asset,” said Sophie Lund-Yates of Hargreaves Lansdown.

“It is disappointing to see other areas of the business looking less than stellar as the Covid disruptions and supply issues continue. The telecom giant is burdened with a number of legacy products that have fallen out of favor for some time. The problem with being an internet or phone service provider is that the primary product differentiator is price. It’s a tough place to live,” she added.

A warmer welcome was given to oil leviathan Shell PLC’s (LSE:SHEL, NYSE:SHEL) third quarter fiscal update, with shares rising 1.0% to 1,951.6p after the company reported a new share buyback program.

Richard Hunter of Interactive Investor said it was a return to form for the multinational.

“Revenues, cash flow and adjusted earnings all significantly exceeded expectations, and for the full year, the previous loss attributable to shareholders of US$21.7 billion turned into profit. of US$20.1 billion,” Hunter reported.

“These high levels of cash generation, partly aided by disciplined capital spending but primarily enabled by Shell’s ability to capitalize on higher energy prices, ticked several financial boxes,” said he added.

However, the best performing blue chip company this morning is Compass Group PLC (LSE:CPG), the contract caterer.

Shares rose 7.0% to 1,769p after the company reported continued improvement in trading across all areas of its business.

“The structural outlook for new business and market share growth is compelling; however, we remain cautious given uncertainties over near-term volume and margin recovery given the challenging market conditions,” brokerage Liberum said, as it stuck to its “hold” recommendation. and its price target of 1,600p.

6:36 am: Careful start in store

The FTSE 100 was set for a cautious start on what is expected to be a huge news day for investors and households in the UK.

An hour before the open, spread betting firms were calling Footsie eleven points lower at around 7,579, but with oil stocks and banks likely to feature today and mixed tech earnings overnight in the US , trading will likely be volatile.

Households in the UK are bracing for a likely 50% increase in their heating bills as Ofgem announces price caps for the next six months. A figure close to £2,000 is widely expected.

Around the same time, the Bank of England is expected to raise interest rates for the second consecutive month, the first time since 2004.

A rise of 0.25% to 0.5% is the city’s forecast, plus some changes in the current quantitative easing program.

“We remain concerned about the risk of financial market overreaction following a BoE announcement on quantitative tightening (QT), which we view as likely at 12pm today when the BoE releases the policy report. monetary policy and the minutes of the MPC meeting,” Kallum Pickering told Berenberg.

Elsewhere, there will likely be bumper earnings reports from Shell and more modest progress at BT, where the prognosis is for another stable quarter of sales and profits, in the series of trade updates.

This all follows a night of winnings in the US which saw a major split in the fortunes of FAANG members.

Google/Alphabet shattered forecasts, with a 36% jump in profits to $20 billion, while sales jumped 32%.

Facebook/Meta shares, however, fell 20% as it reported the first reduction in daily user numbers in its history, alongside lower-than-expected revenue expectations this quarter.

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