Proactive Investors -
- FTSE 100 slips to intraday low
- Bank fails to rule further hikes, inflation to fall slower than predicted
- Asos needs to raise cash
Footsie sent even lower
London’s blue-chip FTSE 100 index continues to fall in the wake of today’s 25bps rate hike from the Bank of England, which brought borrowing costs to a 15-year high of 4.5%.
At the time of writing, footsie was 0.62% lower against yesterday’s close, trading at 7,693.
Among the day’s worst performers are Rolls-Royce (LON:RR), which was dragged lower following today’s trading update.
Most other players in the heavy industries, including Glencore (LON:GLEN), BP (LON:BP), Rio Tinto (LON:RIO) and Antofagasta (LON:ANTO), are similarly being pummeled.
Asos will need to raise cash, says Barclays
Asos’ failed to instil Barclays (LON:BARC) with confidence that the online retailer would not need to raise equity following yesterday’s interims.
Barclays remained equal weight on the stock while lowering its target price to 500p from 625p.
Analysts at the high-street lender noted its “stretched” balance sheet because of a £500mln convertible loan note, due in April 2026, £100mln in outflows and its £350mln revolving credit facility due in November 2024.
“We continue to believe it needs to raise equity,” Barclays said.
Barclays was also less upbeat about the online retailer’s plan to sacrifice sales to improve margins, labelling it “not sustainable.”
It comes at a bad time for Asos to raise cash, given today’s 25bps interest rate hike to a 15-year high of 4.5%, which will inevitably increase the retailer’s cost of raising capital.
Asos’ stock was down 7%, changing hands at 455p at the time of writing.
Interest rate rise a boon for Brits heading abroad
British holidaymakers are the big winners should today’s interest rate hike spur expected inflows into the pound from foreign investors looking to capitalise on attractive rates.
Though Cable has lost half a percent in today’s session, the pound is near 11-month highs against the dollar and five-month highs against the euro.
“Higher interest rates here make the pound more attractive to foreign investors, and sterling has been on a roll all week,” Simon Phillips, managing director at the travel money specialists No1 Currency.
“!All this is welcome news for anyone planning a summer holiday abroad, as their spending money will now go that bit further,” he added.
Look out Prague!
Sterling dips, recovers following rate hike
Cable slid back to 1.257 following the widely expected 25bps hike from the Bank of England.
In the following hours, the pound recovered back above 1.26 where it is currently straddling the line.
Gilts have hardly moved, with a slight improvement on 10-year bonds dropping 0.07% to 3.732% and two-year bonds also dropping 0.07% to 3.758%.
“This would suggest that markets perceive a high degree of uncertainty when it comes to whether we will see another rate hike when the Bank of England next meets on June 22nd,” said Michael Hewson, chief market analyst at CMC.
Hewson struck a critical tone against the Bank of England after today’s interest rate hike, stating that “the Bank of England procrastinated in getting ahead of the problem, and getting the plumber in earlier, when it had started to become increasingly obvious to almost everyone else that the central bank was behind the curve”.
Back to footsie, the blue-chip index has hit an intraday low of 7,699, marking a 0.56% day-on-day dip.