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- Blue-chips index up 90 points at 2024 high
- Next results shine, shares up 5%
- Markets await interest rate decision
Next boss bucks trend with rosy outlook
Next results impressed the market, with shares bouncing 5% to an all-time high, after it reported record profits and promised shareholder returns through a share buyback.
However, analysts have been more impressed by boss Simon Wolfson as he offered a slight departure from his normal tactics.
“A key tenet of Lord Wolfson’s tenure at the helm of Next has been a bias towards under-promising and over-delivering – a discipline which has served the company well on the stock market over the years," said analysts at AJ Bell.
“It is striking therefore to see Wolfson be so openly positive about the prospects for the year ahead."
Next expects full-price sales to rise by 2.5% in the 2025 financial year while its products experience a slight deflation, meaning prices will not go up.
Guidance for projected group sales growth maintained at 6% and group profit guidance set at £960 million, up 4.6%. Forecasted post-tax EPS for the upcoming year is 606.3p, up 4.8%.
Flash PMI figures signal recession exit
The UK private sector grew for the fifth consecutive month in March, highlighting how Britain is nearing its exit from a short-lived recession.
Flash PMI figures came in at 52.9 in March, slipping slightly from February's 53, but importantly remaining above the 50-point mark.
PMI figures which come in below 50 highlight a contraction in the market.
Flash #PMI signals a solid end to the first quarter for the UK economy, indicates 0.25% Q1 #GDP rise. But price pressures have remained elevated, especially in the service sector., which will worry the #BoE. More at https://t.co/8H80uDeosW pic.twitter.com/ytB3dPqe1R— Chris Williamson (@WilliamsonChris) March 21, 2024
Service sector growth outpaced the manufacturing sector once again in March, however, it slowed from 53.8 to 53.4, coming in lower than consensus.
Manufacturing output picked up slightly from 47.5 to 49.9, beating the market's consensus of 47.8.
Chris Williamson, chief business economist at S&P Global said: "Further signs of the UK economy having pulled out of last year’s brief recession are provided by the provisional PMI data for March.
"A further robust expansion of business activity ended the economy’s best quarter since the second quarter of last year.
"The survey data are indicative of first quarter GDP rising 0.25pc to thereby signal a reassuringly solid rebound from the technical recession seen in the second half of 2023."
BoE meeting to be "uneventful" as analysts target August cut
Analysts are predicting that the Bank of England's interest rate decision this afternoon will be "relatively uneventful."
While inflation in February came in lower than expected, economists are confident the Monetary Policy Committee (MPC) will keep interest rates unchanged at 5.25%, echoing a similar decision by the US Federal Reserve on Wednesday.
UBS analysts said: "We expect the MPC to reiterate that it needs to grow more confident on the sustainable return of inflation to the target, implying the need to see more progress in inflation and wage data.
"We also expect the MPC to make no substantial changes to its forward guidance."
The Swiss bank pointed out how in February's decision both Haskel and Mann, two of the committee's hawkish members, voted to raise rates.
"Wednesday's inflation print indicates a risk of at least one of them switching to a vote for no change," UBS added.
It expects the first rate cut to come in August 2024, with 75 basis points of cuts to come in 2024, via three separate 25-basis point reductions.
UBS concluded: "For 2025, we continue to expect 175bp of cuts, bringing Bank Rate to 2.75% by year-end. The markets currently price 4bp for May, 12.5bp for June and 27.5bp for August."
FTSE 100 holding onto early gains
The FTSE 100 is attempting to hold onto its impressive gains this morning, up 71 points and maintaining its position at a 2024 high.
Leading the charge are gains from Ocado (LON:OCDO) (+6%), Next (+5%) and a string of mining companies like Fresnillo (LON:FRES) and Anglo American (JO:AGLJ).
The morning so far
The FTSE 100 got off to a roaring start by adding around 95% points to hit a year-to-date high of 7,829.
This was helped by a record-setting session in the US after the Federal Reserve signalled that it continues to see three rate cuts occurring in 2024.
It’s over to the Bank of England today, with markets widely expecting interest rates to be held at 5.25%.
However, yesterday’s softer-than-expected inflation print may preempt a more dovish outlook from policymakers when they convene this afternoon.
No one is expecting a rate cut, but eyes will be on forward guidance after yesterday’s soft inflation print.
Next plc (LON:NXT) delivered a great set of results this morning, with profits hitting a record £918 million in 2023, up 5% from the previous year, with earnings per share (EPS) slightly rising by 0.3% to 578.8p.
Shares rallied more than 5% in the aftermath.
Direct Line (LON:DLGD) shares were also up after the UK motor insurer Direct Line recovered to a pre-tax profit of £277 million last year, from a loss of £302 million in 2022.
That said, today’s results still managed to undershoot consensus forecasts marginally. Shares were last seen a percentage point higher.
Nationwide formally offered 220p per share in its acquisition of Virgin Money (LON:VMUK), consisting of a 218p cash consideration and a 2p dividend.
The offer values Virgin Money at approximately £2.9 billion, representing a 38% premium over the closing price on March 6, when Nationwide first announced the takeover.