Housebuilding and retail stocks have fallen sharply amid the fallout from yesterday’s tax-raising Budget.
The prospect of higher-for-longer borrowing costs on both sides of the Atlantic means the FTSE 100 is down for a third straight session.
Smith & Nephew shares have slumped after a profit warning but Shell impressed with forecast-beating results.
FTSE 100 Live Thursday
- Shell results beat expectations
- Microsoft outlook hits shares
- Smith & Nephew hit by China headwinds
Market update: Builders and retailers fall in Budget aftermath, Shell higher
10:22Fears over higher-for-longer borrowing costs on both sides of the Atlantic today caused the FTSE 100 index to reverse for a third session in a row.
The top flight fell another 0.7% or 60.33 points to 8099.30, in line with trends in Europe after US markets scaled back estimates on US interest rate cuts.
Housebuilders and retail stocks were among the biggest fallers in London amid speculation that yesterday’s Budget has dented the outlook for looser Bank of England monetary policy.
AJ Bell investment director Russ Mould said: “Gilt yields have jumped after the market cottoned on to a big increase in government borrowing over the next five fiscal years and that extra tax income from changes announced in the Budget won’t appear overnight.
“That means interest rates could stay higher for longer which is not good for housebuilders and retailers hoping for reduced pressures on household finances.”
On the FTSE 100 fallers board, Persimmon shares fell 3% or 55.5p to 1530p, Taylor Wimpey lost 4.65p to 152.15p and B&Q owner Kingfisher retreated 9p to 299p.
Next also reversed 349p to 9836p, despite yesterday’s upgraded profit guidance.
Smith & Nephew posted the biggest fall in the FTSE 100 after the medical devices firm highlighted the impact of tough conditions in China.
Shares slumped 13% or 144.4p to 953.6p after forecasting 2024 revenue growth of around 4.5%, compared with previous guidance in the range of 5%-6%.
Consumer healthcare firm Haleon, whose brands include Sensodyne and Voltaren, also fell 9.9p to 363.5p after it reported a slight fall in third quarter revenues. The FTSE 100 stock still expects to meet full-year targets.
A shortened risers board included Shell, which lifted 1% or 32p to 2522.5p after a 4% decline in third quarter earnings to $6 billion came in well ahead of forecasts. The oil giant also unveiled a new $3.5 billion buyback.
The FTSE 250 index fell 199.74 points to 20,494.38, having traded higher in the aftermath of yesterday’s Budget.
Big fallers included IT services firm Kainos, which slid 13% or 108p to 747p after trimming the City’s full-year expectations. It said Budget uncertainty had delayed decision-making by public sector clients.
Bellway and Dunelm shares also fell more than 3%, but Burberry rose 5.8p to 766p after HSBC raised its price target to 1000p.
Gilt yield up in Budget aftermath
09:41 , Graeme EvansMarket speculation that the Budget has dented the outlook for Bank of England interest rate cuts today sustained the recent spike in 10-year gilt yield.
The borrowing benchmark edged up to 4.44% this morning, having closed yesterday at a five-month high of 4.37%.
Hargreaves Lansdown said this morning: “Investors are re-assessing where UK interest rates might end up, given that the investment plan for growth is likely to add inflationary pressures into the economy.”
The pound, meanwhile, traded at $1.296 this morning.
Brewers under pressure amid China slowdown
08:59 , Graeme EvansBrewers AB InBev and Carlsberg have revealed lower sales volumes amid weaker demand in China.
Budweiser and Stella Artois-maker AB InBev said volumes fell by 2.4% over the third quarter compared with a year earlier.
Danish rival Carlsberg revealed that organic sales volumes dipped by 0.2% over the period.
It said the “tough” quarter was largely dented by trading in Asia, where sales volumes slumped 5.2% amid the consumer downturn in China.
Shares in Guinness owner Diageo fell 1.5% or 36.5p to 2413.5p today.
Shell earnings beat forecasts, shares rise
08:43 , Graeme EvansShell’s 4% decline in adjusted earnings to $6 billion compares with market forecasts for a third quarter figure of $5.4 billion.
The performance was driven by Upstream operations, where earnings of $2.4 billion came in above the forecast £2 billion, and by the Integrated Gas unit.
In contrast, the weaker oil price and economic conditions impacted refining margins.
Strong cash generation means net debt is down to $35.2 billion, while the dividend is unchanged and another $3.5 billion of share buybacks in the pipeline.
Shares rose 1% in a weaker FTSE 100 index today.
Richard Hunter, head of markets at Interactive Investor, said: “Shell remains a core investment play, with the sheer scale and size of its operation continuing to underpin its strength.”
Shell makes progress in weaker FTSE 100, Smith & Nephew down 10%
08:15 , Graeme EvansShell shares have risen 1% or 33.5p to 2524p after the oil giant’s third quarter results beat expectations and it unveiled a new $3.5 billion buyback.
The uplift came in a downbeat FTSE 100 index, which fell 43.65 points to 8115.98.
Smith & Nephew shares are down 10% or 112.8p to 985.2p after it cut 2024 guidance due to trading headwinds in China.
Consumer healthcare group Haleon also fell 5.3p to 368.1p, even though its third quarter update reiterated full-year guidance.
In the FTSE 250, Kainos shares slumped 8% or 71.6p to 783.4p as it said Budget uncertainty had delayed decision-making by public sector clients.
Microsoft revenues beat forecasts, shares fall
08:00 , Graeme EvansTech giant Microsoft last night reported strong quarterly results, with 16% revenues growth to $65.6 billion (£50.6 billion) ahead of Wall Street expectations.
The performance included 33% growth for Azure as the cloud computing platform benefits from the new AI demand cycle.
Shares fell 4% in after-hours dealings, which Hargreaves Lansdown analyst Matt Britzman said reflected a cautious reaction to the company’s guidance.
He said: “Margins are expected to come under pressure next quarter as the ramp-up in AI spending hits the cost line, and with Azure growth expected at 31-32%, that would mark a slowdown quarter-on-quarter.
He added: “Short-term uncertainty shouldn’t detract from the long-term picture and Microsoft has placed itself at the top of the food chain, and with AI integration opportunities across the stack from infrastructure to software, it’s likely to stay there for some time.”
IT firm Kainos reveals impact of Budget uncertainty
07:49 , Graeme EvansIT services firm Kainos today warned that revenues for the year to March will be moderately below the current market consensus
It said delays around decision-making as public sector clients await clarity on the new government's spending priorities had impacted its Digital Services division.
FTSE 250-listed Kainos said: “These delays have been more pronounced in the last few weeks in anticipation of the publication of the new budget.
“Although we anticipate heightened levels of activity in the weeks ahead, we are dependent on decisions being made before the main mobilisation phases for these contracts.”
The company’s other division of Workday Products continues to deliver growth, with a “very strong” performance recorded in the first half of the year.
Kainos said it continues to see “substantial growth opportunities” in all its divisions.
Smith & Nephew outlook hit by China headwinds
07:41 , Graeme EvansSmith & Nephew today downgraded expectations due to tough trading conditions in China.
The medical devices firm now sees revenue growth in 2024 of around 4.5%, compared with previous guidance in the range of 5%-6%.
The profit margin is expected to grow by up to half a percentage point from last year's 17.5%, having previously targeted a figure of at least 18%.
The FTSE 100 company expects the 2025 trading profit margin to expand to between 19% and 20%, driven by its 12-point performance plan.
Chief executive Deepak Nath said: “While the revised outlook reflects the headwinds across our surgical businesses in China, we remain convinced that our transformation to a higher growth company, with the ability to drive operating leverage through to the bottom line, is on the right course."
Ocado names tech boss as new chair
07:23Grocery warehouse technology business Ocado today announced Adam Warby as its new chair.
He joins the board tomorrow before taking on the role currentlly held by Rick Haythornthwaite on 1 December.
Warby is chair of Heidrick & Struggles International, a leadership advisory and talent business listed on Nasdaq.
He served as chief executive of IT consulting and services company Avanade Corporation for 11 years, having previously spent a decade at Microsoft.
Ocado chief executive Tim Steiner said: “Adam's expertise as a leader in global technology and consulting will be a valuable asset to the board and leadership team.”
Shell unveils new $3.5bn buyback, earnings fall
07:10 , Graeme EvansShell today extended its shares buyback programme by another $3.5 billion.
The plan for the next three months marks the 12th consecutive quarter in which it has announced $3 billion or more in buybacks. The dividend is unchanged,.
The oil giant recorded adjusted earnings of $6 billion (£4.6 billion) for the quarter, down 4% on the previous three months.
The performance reflected lower crude prices and weaker refining margins, offset by a strong performance in integrated gas, upstream and marketing.
Chief executive Wael Sawan said: "Shell delivered another set of strong results.
“We continue to deliver more value with less emissions, whilst enhancing the resilience of our balance sheet.”
FTSE 100 seen lower, US tech giants fall after results
07:00 , Graeme EvansThe poor week for the FTSE 100 index is set to continue, with futures trading pointing to a fresh fall of 26 points to 8134.
London’s top flight lost 0.7% in yesterday’s session, in line with the weaker performance of benchmarks in Paris and Frankfurt.
On Wall Street, the Dow Jones Industrial Average finished 0.2% lower while the S&P 500 index lost 0.3%.
In dealings after the publication of their latest trading updates, shares in the $3 trillion-valued Microsoft fell by 4% and Meta Platforms by 3%.
The UK’s benchmark 10-year gilt yield starts the session at a five-month high of 4.36%, with the pound at $1.297 after yesterday’s Budget.
