Market Report: Bank of England in focus after the US rate pivot finally begins
Matt Britzman, senior equity analyst, Hargreaves Lansdown: “The FTSE 100 has opened 0.9% higher as investors digest the US rate pivot and look to the Bank of England for signals as to how the rest of the year might play out at home. Yesterday’s inflation print isn’t likely to have a major impact on today’s decision, with the headline jump in services inflation due to volatile airfares. Still, slow and steady wins the race, and the general expectation is that rates will be held steady at 5%, following the narrow 5-4 vote to cut back in August.
Looking across the pond, the Fed opted to go big yesterday and cut rates for the first time in four years by a bumper 0.50% – perhaps a sign that there was a slight feeling that they missed the boat last time around. But US markets ended up trading lower yesterday after the initial excitement, and a brief all-time high on the S&P 500, was quelled by more hawkish comments from Fed Chair Jay Powell in his press speech. Though, if we look at futures markets, trading suggests that those highs could be tested again when markets open this afternoon.
There are two key takeaways here. The first is that the cutting cycle has begun, which should be supportive of growth and equity prices, especially small caps. The second is a potential shift in priority for the US central bank. No longer pursuing the (arguably arbitrary) 2% inflation target at all costs, there seems to be a pivot toward economic growth. The Fed’s mettle will be tested in the coming quarters as inflation measures like CPI look likely to remain volatile over the short term.
Ocado has raised its sales guidance for the year after a strong three quarters from its grocery joint venture with M&S. Sales are now expected to grow by low double-digit levels over the year as investment in a wider range of products, more delivery slots, and improving value propositions are keeping customers coming back for more.
Brent oil prices have been slowly ticking higher all week, with futures now trading at $74. However, the path higher is difficult, with demand concerns still weighing heavy despite yesterday’s interest cut from the US central bank and ongoing tensions in the Middle East adding to supply concerns.”
Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “Next has been on a hot streak of delivering positive news lately, and today’s results didn’t disappoint investors. Just six weeks after its last upgrade, Next has issued yet another improved profit outlook as sales since the half-year mark landed higher than previously expected. Skyrocketing demand in its online channel remains a running theme. Despite already accounting for more than half of group sales, the online channel is still seen as the main growth driver. Expansion overseas is still in the early stages, and if Next can execute its strategy well, there’s a lot of room left to run.”
