FTSE 100 Live: Budget fears hit housebuilding and retail stocks, Shell tops forecasts
Shares in the housing and retail sectors have dropped significantly following the impact of yesterday's tax-increasing budget.
The possibility of prolonged high borrowing costs in both Europe and the US has caused the FTSE 100 to decline for the third consecutive day.
Shares of Smith & Nephew have declined following a warning about their profits, while Shell delivered impressive results that surpassed expectations.
Market Update: Builders And Retailers Drop, Shell Up
Concerns about prolonged high borrowing costs on both sides of the Atlantic led to the FTSE 100 index declining for the third consecutive day.
The leading stock index decreased by 0.7%, dropping 60.33 points to reach 8099.30. This movement aligns with trends observed in Europe, following the US markets' lowered expectations for interest rate reductions in the United States.
In London, shares of housebuilders and retail companies took a significant hit as rumors suggested that yesterday's Budget has negatively impacted expectations for a more relaxed monetary policy from the Bank of England.
AJ Bell's investment director, Russ Mould, stated that gilt yields have risen significantly since investors recognized the substantial rise in government borrowing expected over the next five years. He also noted that the additional tax revenue from the measures introduced in the Budget won't be realized immediately.
"This suggests that interest rates might remain elevated for an extended period, which isn’t favorable for homebuilders and retailers who are looking for relief on household budgets."
On the FTSE 100 losers list, shares of Persimmon dropped by 3%, losing 55.5p to reach 1530p. Taylor Wimpey saw a decline of 4.65p, bringing its value down to 152.15p, while Kingfisher, the parent company of B&Q, decreased by 9p, settling at 299p.
Next also saw its stock price drop from 349p to 9836p, even after the improved profit forecast announced yesterday.
Smith & Nephew experienced the largest decline on the FTSE 100 index after the medical device company pointed out the challenges it is facing in China.
The company's shares fell by 13%, dropping 144.4p to 953.6p, after they projected a revenue increase of roughly 4.5% for 2024. This is lower than their earlier forecast, which estimated growth between 5% and 6%.
Consumer healthcare company Haleon, which owns well-known brands like Sensodyne and Voltaren, saw its shares drop by 9.9p to 363.5p following a small decline in revenues for the third quarter. However, the company remains optimistic about achieving its full-year goals.
A trimmed-down list of top performers featured Shell, which rose by 1% or 32p, reaching 2522.5p. This increase followed a 4% drop in earnings for the third quarter, amounting to $6 billion, which was significantly better than expected. Additionally, the oil giant announced a new buyback program worth $3.5 billion.
The FTSE 250 index dropped by 199.74 points, closing at 20,494.38, after initially rising following yesterday's Budget announcement.
Notable declines were seen in the IT services company Kainos, which dropped 13%, losing 108p to settle at 747p. The company revised its full-year outlook downward, citing that uncertainty surrounding the budget has caused public sector clients to postpone their decision-making processes.
Shares of Bellway and Dunelm dropped over 3%, while Burberry saw an increase of 5.8p, bringing its price to 766p after HSBC updated its price target to 1000p.
Gilt Yields Rise After Budget Impact
Market speculation suggesting that the Budget has negatively impacted expectations for interest rate cuts by the Bank of England has continued to drive up the yield on 10-year gilts.
The borrowing rate increased slightly to 4.44% this morning, after finishing yesterday at its highest point in five months, which was 4.37%.
Hargreaves Lansdown stated today: "Investors are reconsidering the potential future of UK interest rates, as the growth investment strategy is expected to contribute to inflationary pressures within the economy."
This morning, the pound was valued at $1.296.
Brewers Face Pressure From China’s Slowdown
Brewers AB InBev and Carlsberg have reported a decline in sales due to reduced demand in China.
AB InBev, the company behind Budweiser and Stella Artois, reported a 2.4% decline in sales volume during the third quarter compared to the same period last year.
Danish competitor Carlsberg announced that their organic sales volumes fell by 0.2% during that time.
It stated that the challenging quarter was mainly impacted by trading in Asia, where sales volumes dropped by 5.2% due to a decline in consumer spending in China.
Today, shares of Diageo, the company that owns Guinness, dropped by 1.5%, which is a decrease of 36.5p, bringing the price down to 2413.5p.
Shell Earnings Surpass Expectations, Shares Up
Shell's adjusted earnings fell by 4% to $6 billion, which is higher than the market expectation of $5.4 billion for the third quarter.
The strong performance was largely due to Upstream operations, which generated $2.4 billion in earnings, exceeding the predicted £2 billion. The Integrated Gas division also contributed significantly to these results.
On the other hand, lower oil prices and challenging economic conditions affected refining profits.
Robust cash flow has led to a reduction in net debt, now standing at $35.2 billion. The dividend remains the same, and an additional $3.5 billion in share repurchases is planned.
Today, stocks climbed by 1% despite a decline in the FTSE 100 index.
Richard Hunter, the head of markets at Interactive Investor, stated, “Shell is still a fundamental investment opportunity, as its vast operations continue to support its stability and strength.”
Shell Advances While FTSE 100 Falters; Smith & Nephew Falls 10%
Shell's stock has increased by 1%, gaining 33.5p to reach 2524p, following the company's third quarter results that surpassed predictions. Additionally, they announced a new $3.5 billion share buyback plan.
The increase occurred despite a struggling FTSE 100 index, which dropped by 43.65 points to reach 8115.98.
Smith & Nephew's stock has fallen by 10%, dropping 112.8 pence to a current price of 985.2 pence. This decline follows the company's decision to lower its 2024 expectations because of challenges in the Chinese market.
Consumer healthcare company Haleon saw a decline of 5.3 pence, bringing its share price down to 368.1 pence, despite maintaining its full-year forecast in the latest update for the third quarter.
In the FTSE 250, Kainos saw its shares fall by 8%, down 71.6p to 783.4p, after announcing that uncertainty surrounding the Budget has caused public sector clients to postpone their decision-making.
Microsoft Revenue Surpasses Expectations, Shares Drop
Last night, technology powerhouse Microsoft announced impressive quarterly results, achieving a 16% increase in revenue, reaching $65.6 billion (£50.6 billion), surpassing the predictions of Wall Street analysts.
The performance showcased a 33% increase for Azure, as the cloud computing service capitalizes on the rising demand for AI technology.
Stocks dropped 4% in after-hours trading, with Hargreaves Lansdown analyst Matt Britzman indicating that this was a careful response to the company's forecasts.
He mentioned that profit margins are likely to face challenges in the upcoming quarter due to increased expenses from AI investments. Additionally, with a projected growth rate of 31-32% for Azure, we can expect a slower growth compared to the previous quarter.
He remarked, "While there may be some uncertainty in the near future, it shouldn't overshadow the broader outlook. Microsoft has positioned itself as a leader in the industry, and with opportunities for AI integration ranging from infrastructure to software, it's likely to maintain that position for a considerable period."
Kainos Uncovers Effects Of Budget Uncertainty
IT services company Kainos announced today that its revenue for the year ending in March is likely to fall slightly short of what the market currently expects.
It mentioned that holdups in making decisions have affected its Digital Services division as public sector clients are looking for more information on the spending priorities of the new government.
Kainos, which is listed on the FTSE 250, stated, "We've noticed these delays have become more noticeable in recent weeks as everyone awaits the release of the new budget."
"While we expect increased activity in the coming weeks, we rely on certain decisions being made prior to the main mobilization phases for these contracts."
The company's other segment, Workday Products, is also seeing growth, having achieved a "very impressive" performance during the first half of the year.
Kainos stated that it continues to identify significant growth prospects across all its sectors.
Smith & Nephew Faces Challenges In China Market
Smith & Nephew has lowered its forecasts because of challenging market conditions in China.
The medical devices company is now expecting its revenue to grow by about 4.5% in 2024, down from earlier projections of 5% to 6%.
The profit margin is projected to increase by as much as 0.5% from last year's 17.5%, with an initial goal set at 18% or higher.
The FTSE 100 firm anticipates that its trading profit margin will grow to between 19% and 20% by 2025, thanks to its 12-step performance strategy.
Deepak Nath, the CEO, stated: "Although the updated forecast acknowledges the challenges we’re facing in our surgical divisions in China, we firmly believe that our shift towards becoming a company with greater growth potential, capable of improving profitability, is heading in the right direction."
Ocado Appoints Tech Chief As New Chair
Grocery warehouse technology company Ocado has appointed Adam Warby as its new chairman.
He will be joining the board tomorrow, and then on December 1st, he will take over the position that Rick Haythornthwaite currently occupies.
Warby serves as the chairperson of Heidrick & Struggles International, a leadership consulting and talent firm that is publicly traded on Nasdaq.
He was the CEO of IT consulting and services firm Avanade Corporation for 11 years, after working for 10 years at Microsoft.
Tim Steiner, the CEO of Ocado, stated, “Adam's skills and experience in global technology and consulting will greatly benefit the board and the leadership team.”
Shell Announces $3.5B Buyback Amid Earnings Drop
Shell has announced that it is increasing its share repurchase program by an additional $3.5 billion.
The strategy for the upcoming three months represents the twelfth straight quarter in which the company has declared buybacks of $3 billion or more. The dividend remains the same.
The oil major reported adjusted profits of $6 billion (£4.6 billion) for the quarter, which is a 4% decline compared to the previous quarter.
The results were impacted by declining crude oil prices and reduced refining profits, but these were balanced out by solid results in integrated gas, upstream operations, and marketing.
CEO Wael Sawan commented, "Shell posted another impressive performance."
"We are committed to providing greater value while reducing our emissions and strengthening the stability of our finances."
