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London open: FTSE nudges up as BoJ hikes rates
London stocks nudged higher in early trade on Tuesday as investors mulled the first rate hike by the Bank of Japan in 17 years and looked ahead to policy announcements from the US Federal Reserve and the Bank of England this week.
At 0830 GMT, the FTSE 100 was up just 0.1% at 7,726.42.
Japan’s central bank raised interest rates earlier, ending an eight-year policy of keeping them in negative territory in an attempt to boost economic growth.
The rise was the first in 17 years as the BoJ said it was lifting its short-term policy rate from -0.1% to between zero and 0.1%.
In 2016, the bank cut the rate below zero in an attempt to stimulate the country’s stagnating economy.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The fight against the risks of deflation in Japan is officially over, with the Bank of Japan ending its policy of negative interest rates. Aimed a conquering falling prices, ultra-loose monetary policy has been in place since 2016 and the Bank of Japan has been ultra-cautious about shifting stance, even though core inflation has been running at 2% over the year.
“But now that Japan’s biggest companies, through a negotiated deal with the largest industrial union, have agreed to raise wages by 5.28%, and consumer price inflation hit 2%, the Bank has finally judged it prudent to make a move. It’s hiked rates, for the first time since 2007 and also brought its yield curve control policy to an end – aimed at keeping a lid on short term and long-term government borrowing costs by buying bonds. But this doesn’t necessarily mark a new era of interest rates shooting higher.
“The bank is stressing the need to keep monetary conditions pretty loose to try and boost growth in the world’s second largest economy, and there are expectations that inflation has slowed.”
Also earlier, the Reserve Bank of Australia left rates unchanged, as expected, but governor Michele Bullock warned that inflation remained at high levels. The Reserve Bank of Australia left its cash rate unchanged for a third meeting in a row at 4.35%.
Still to come this week, policy announcements are due from the Fed on Wednesday and the BoE on Thursday.
In equity markets, Unilever rallied as it announced plans to spin off its ice cream division by the end of 2025, and cut 7,500 jobs across its global operations. The consumer goods giant also said its productivity programme was expected to deliver total cost savings of around €800m over the next three years.
Close Brothers surged as it outlined measures to strengthen its available CET1 capital by around £400m by the end of the 2025 to deal with any potential fallout from the Financial Conduct Authority’s review into mis-sold car loans.
Trustpilot racked up strong gains after saying it swung to a profit in 2023 as revenue jumped 18% and user numbers rose 30%.
Crest Nicholson fell sharply as the housebuilder said it had become aware of build defects on four sites that were completed prior to 2019 that could cost it up to £15m to remediate.
Outside the FTSE 350, DFS slid after the furniture retailer cut its FY24 profit and revenue guidance as it said market demand has weakened “significantly” over the last two months following a solid start to January.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Unilever Plc | +3.65% | +139.00 | 3,950.50 |
| 2 |  |
Legal & General Group Plc | +1.30% | +3.20 | 250.30 |
| 3 |  |
Rightmove Plc | +1.23% | +7.00 | 574.40 |
| 4 |  |
Bhp Group Limited | +1.20% | +26.50 | 2,230.00 |
| 5 |  |
Rio Tinto Plc | +0.92% | +45.00 | 4,931.00 |
| 6 |  |
Johnson Matthey Plc | +0.85% | +14.50 | 1,723.50 |
| 7 |  |
Ashtead Group Plc | +0.77% | +40.00 | 5,240.00 |
| 8 |  |
Standard Chartered Plc | +0.74% | +4.80 | 655.00 |
| 9 |  |
Phoenix Group Holdings Plc | +0.71% | +3.40 | 485.10 |
| 10 |  |
Bae Systems Plc | +0.65% | +8.50 | 1,313.50 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Fresnillo Plc | -2.12% | -9.80 | 451.40 |
| 2 |  |
Carnival Plc | -2.06% | -24.00 | 1,139.50 |
| 3 |  |
Kingfisher Plc | -1.60% | -3.60 | 221.90 |
| 4 |  |
Barratt Developments Plc | -1.40% | -6.60 | 464.90 |
| 5 |  |
Burberry Group Plc | -1.39% | -17.50 | 1,238.50 |
| 6 |  |
Flutter Entertainment Plc | -1.31% | -220.00 | 16,620.00 |
| 7 |  |
Persimmon Plc | -1.28% | -16.50 | 1,273.00 |
| 8 |  |
Vodafone Group Plc | -1.23% | -0.83 | 66.51 |
| 9 |  |
Diageo Plc | -1.15% | -33.00 | 2,835.50 |
| 10 |  |
Astrazeneca Plc | -1.15% | -118.00 | 10,172.00 |
US close: Stocks reclaim some of Friday’s losses
Wall Street stocks closed higher on Monday as major indices clawed back some of the previous session’s losses ahead of tomorrow’s Federal Reserve meeting.
At the close, the Dow Jones Industrial Average was up 0.20% at 38,790.43, while the S&P 500 advanced 0.63% to 5,149.42 and the Nasdaq Composite saw out the session 0.82% firmer at 16,103.45.
The Dow closed 75.66 points higher on Monday, reclaiming some of Friday’s losses that came as investors continued to come to terms with hotter-than-expected core and wholesale inflation readings.
Traders were mostly looking ahead to tomorrow’s Federal Open Markets Committee’s monetary policy meeting on Monday, with the central bank widely expected to keep benchmark interest rates unchanged. Elsewhere, the expectation of a rate cut taking place in June has also been dialled back in recent days.
On the macro front, the National Association of Housebuilders‘ housing market index increased to 51 in March, up from 48 in February and beating forecasts for a flat month-on-month reading. March’s index showed the strongest confidence level in eight months, with a lack of existing inventory continuing to drive buyers to new home construction, while demand also increased after mortgage rates fell below last autumn’s cycle peak.
“With the Federal Reserve expected to announce future rate cuts in the second half of 2024, lower financing costs will draw many prospective buyers into the market. However, as home building activity picks up, builders will likely grapple with rising material prices, particularly for lumber”, said NAHB chief economist Robert Dietz
In the corporate space, Nvidia traded as it held its GTC Conference, while Super Micro Computer shares advanced on the stock’s first trading day on the S&P 500.
Tuesday newspaper round-up: P&O Ferries, National Grid, Heathrow, Mike Lynch
P&O Ferries, which controversially sacked about 800 workers in 2022, has paid some crew members less than half the UK minimum wage thanks to an ongoing legal loophole the British government promised to close two years ago. Agency workers at the company, which is owned by the Dubai-based DP World, have in some cases been earning about £4.87 an hour – even lower than the £5.15 an hour the company suggested was its lowest pay rate – an analysis of recent payslips conducted by the Guardian and ITV News suggests. – Guardian
A £58bn plan to rewire Great Britain’s electricity grid to connect up new windfarms off the coast of Scotland is expected to trigger tensions with communities along the route. National Grid’s electricity system operator (ESO) has mapped out power “motorways” across Great Britain to allow for the biggest investment since the 1960s. – Guardian
Heathrow’s inability to expand means it has lost its status as a global transport hub, the boss of Dubai Airports has said. Paul Griffiths, formerly managing director of Gatwick Airport before he moved to the Middle East, said Heathrow is suffering from a shortage of capacity amid an ongoing debate over a prospective third runway. – Telegraph
Mike Lynch has been accused of masterminding a “multiyear, multilayered fraud” at Autonomy that tricked HP into massively overpaying for the business. On the first day of Mr Lynch’s criminal trial in San Francisco on Monday, the court heard accusations that the tech entrepreneur “spun a fabulous tale” to lure HP into paying $11bn (£8.6bn) for Autonomy. – Telegraph
Britain’s car industry has insisted that an unprecedented 2,000% increase in vehicle exports to Azerbaijan has nothing to with Russia and is explained by the fact that the former Soviet state is a “flourishing market in its own right”. Sky analysis has found that the British car sector sent another £40m worth of cars to Azerbaijan in the first month of this year, raising fresh questions about whether those cars were being sent there to circumvent sanctions on Russia. – Sky News
