Market report: FTSE 100 scales fresh heights, while oil dips back on Gaza truce talks
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “The FTSE 100 has scaled fresh heights as buds of May hope unfurl about interest rate cuts on the horizon. The blue-chip index smashed through the 8300 mark in early trade as the feel-good factor around London-listed stocks continued. A set of soggy retail sales figures hasn’t squished enthusiasm, instead the data has served to provide fresh optimism that demand in the economy is falling back and that could help bring about the beginning of the end to painfully high borrowing costs. Although wet weather and the early time of Easter conspired to dampen sales in April, according to the British Retail Consortium, shoppers are clearly cautious and won’t spend unless there’s a good incentive. Barclaycard data also showed that consumers were less inclined to splash out in April, with consumer card spending growth slowing to 1.6%, down from 1.9% in both March and February.
This wariness is also showing up in the housing market, with house prices staying relatively flat over the first four months of 2024, according to Halifax. Expectations that better mortgage deals would be dropping into the market by now have been dashed, given the uncertainty over where rates will be later this year, so it’s little surprise that homebuyers are pausing plans to make a move. The Bank of England is not expected to budge on rates on Thursday, however, given the latest retail snapshot, hopes are creeping back in about a summer interest rate cut, although September is still very much a possibility.
With the US labour market snapshot on Friday weaker than expected, positivity has also been pulsing through Wall Street, and helping lift sentiment elsewhere. But policymakers are once again attempting to temper the optimism that the fight against inflation is close to being won. The president of the Richmond Federal Reserve, Tom Barkin, stressed that the mission was not yet accomplished, though he did put to bed some worries that there could be another hike, saying the current level should contain demand and help the Fed hit its target. Wariness about inflation resurging has prompted the Reserve Bank of Australia to keep interest rates on hold, at 4.35%, where they’ve been since November.
Disney will update the market later and investors will be watching closely for signs the magic is returning. There has been a distinct lack of sparkle at the House of Mouse amid tough conditions in the streaming market. Even though sales rose 15% in the first quarter, this doesn’t yet make up a big enough piece of the pie to offset the decline in revenue linked to its traditional networks. It is super important that the company can get more eyes on screens, rather than relying on price hikes for growth. Disney is shapeshifting, but enticing new viewers with its streaming content is an expensive business, in a highly competitive landscape. Disney’s parks remain highly popular, and a way to make the most of its immense back catalogue of favourite characters. The foray though into gaming, with the $1.5 billion equity stake in Epic Games, arguably offers more exciting revenue streams going forward, but investors will want to see more detail about how Disney’s hits can be integrated into this strategy.”
Energy giant BP has partly blamed lower oil and gas prices for a 40% dip in profits compared to the same period a year earlier. Its results come amid a dip in the oil price to $83 away from highs above $90 a barrel reached last month as fears intensified that conflict would take a dangerous new turn in the Middle East. Although there remains confusion surrounding the acceptance of a truce by Hamas, oil prices have edged lower. It’s still unclear what Israel’s next move will be, however, there remain hopes that a fresh breakthrough could be secured. This is helping calm supply concerns emanating from the region amid the conflict. With more on BP’s results, here’s my colleague Derren Nathan:
Derren Nathan, head of equity research, Hargreaves Lansdown: “BP’s proving it can splash the cash to shareholders even in a lower pricing environment. Underlying profit is down across all divisions, but the first half buy back target of $3.5bn remains, with a $1.75bn tranche announced today. Commodity prices are out of BP’s control but where it can make a difference it is. There’s a new plan to deliver cost savings of at least $2bn by the end of 2026 and some of the effects of lower prices have been offset by increased production. There’s new production on stream in the Caspian Sea as well as onshore United States in the Permian basin. There’s also development activity in the North Sea and exploration in Africa. This may disappoint environmentalists but there’s also progress in the low-carbon space. It’s upped its ownership of key wind projects in the US, and closer to home its JV Net Zero Teesside Power, which aims to be one of the world’s first commercial scale gas-fired power stations with carbon capture, is investing big with infrastructure contracts of around $5bn awarded. BP is investing in the future with $16bn still planned for both this year and next, but there are some pressures on current trading. Its refining margins are feeling the squeeze from higher input costs and at the pump the same dynamics are playing out in its fuels business.”
