Proactive Investors -
- FTSE 100 up 25 points
- Card Factory (LON:CARDC), Smiths Group (LON:SMIN) slump on earnings
- Miners rally on China economic measures
BoE governor sees ‘downward’ path for interest rates
Bank of England governor Andrew Bailey has expressed confidence that interest rates are set to head lower after August’s initial 0.25% cut.
Bailey told the Kent Messenger newspaper on Tuesday that he was “very encouraged” by inflation, after price rises peaked at 11.1% in 2022 but since scaled back to 2.2% in August.
“Inflation has come down a long way,” Bailey commented, “I do think the path for interest rates will be downwards, gradually”.
The central bank had initially cut interest from 5.25% in August but opted to leave the base rate unchanged earlier this month.
Bailey added: “We still have to get [inflation] sustainably at the target and we have quite an unbalanced mix of components of inflation at the moment.”
Oil boosted by China stimulus plan
Oil got a boost on Tuesday morning following China’s raft of announcements overnight aimed at stimulating the country’s sluggish economy.
Brent crude ticked up 1.1% to US$74.88 a barrel following the measures, which included the likes of short-term interest rate cuts, scaled-back bank reserve requirements and liquidity support for equities.
According to XTB analyst Kathleen Brooks, eased mortgage rates will equate to US$5.3 trillion, with the support for equities from the People’s Bank worth US$113 billion.
“This has positive ramifications for global markets,” she said.
“It should be good news for commodity producers, stocks with links to the Chinese and Hong Kong property market, and European companies that sell to the Chinese consumer.”
Indeed, shares in London-listed mining companies jumped on Tuesday morning, as Anglo American PLC (LON:AAL) lead the pack with a 7% gain, while Prudential PLC (LON:PRU) and Standard Chartered PLC (LON:STAN) also rose.
“Today’s stimulus package offers a whole range of incentives and sweeteners for lenders and property developers to boost China’s beleaguered property sector,” Brooks added, in turn spelling good news for commodities.
Vodafone Italia sale approved in Europe
Vodafone Italia’s takeover by Swisscom has been approved by the European Commission, according to the Swiss telecoms company.
Though the deal still faces regulatory clearances, including from Italy’s competition authority, clearance by the EU marks a step forward for the deal, which was unveiled in March.
Vodafone said at the time this was worth €8 billion (£6.7 billion) and came under plans to right-size its European operations.
According to Swisscom, the deal is now expected to be completed in the early stages of next year.
Vodafone Group PLC (LON:VOD) climbed 0.3% on Tuesday.
Smiths Group leads fallers after results miss expectations
Smiths Group PLC fell over 5% after full-year results came in better than last year but still underwhelmed compared to expectations.
Headline operating profit ticked up 5% £526 million, the engineering firm said on Tuesday, while revenue climbed 3% to £3.1 million.
Profit was lower than consensus expectations for £535 million though, with Smiths also unveiling a new cost cutting plan in the results.
This will include a “footprint optimisation review,” according to the company, alongside efforts to improve “organisational effectiveness”.
Chief executive Roland Carter added plans to grow profitability would also see “prioritisation” of research and development, as well as “disciplined” merger and acquisition activity.
Smiths also unveiled acquisitions of US-based Modular Metal Fabricators and Canada's Wattco for £110 million in the results in a bid to grow its international heating business.
Revenue growth of between 4% and 6% was guided for the year ahead, which Smiths said would be coupled with improving margins.
Shares fell 7.3% following the results.
Raspberry Pi jumps on maiden results
Raspberry Pi Holdings PLC (LON:RPI) jumped after reporting what it said were stronger profits than expected in its first results since listing in London.
Underlying profits (EBITDA) of $20.9 million increased 55% from a year ago over the first half, on revenues up 61% to $144 million.
Sales volumes were marginally lower than expected, it said, though sales skewed towards higher margin variants. It noted that the same period a year ago was "supply-constrained"... Read more
Shares climbed 5.4% early on.
Miners, Asia-focussed firms rally on Chinese economic measures
Miners and Asian-focussed stocks dragged the FTSE 100 higher early on as investor sentiment appeared to be boosted by a raft of economic measures announced overnight in China.
Anglo American PLC soared 6.2% early on, as Antofagasta PLC (LON:ANTO) added 5.5% and Glencore PLC (LON:GLEN) climbed more than 4% alongside Rio Tinto (LON:RIO).
Asia-focussed insurer Prudential PLC and Standard Chartered PLC were also among the early risers.
This came after China’s central bank unveiled a string of measures overnight in a bid to reinvigorate the country’s struggling economy.
These included scaled-back requirements on bank reserves, interest rate cuts and a lower minimum down payment ratio for second homes.
“Of itself, the news is unlikely entirely to erase the investor apathy which has plagued the country over recent months,” interactive investor analyst Richard Hunter commented.
“But, [it] is nonetheless a promising sign that the authorities have recognised the need for some sustained and measurable stimulus.”