April 25, 2024

FTSE 100 Ends Flat As Commodity Gains Offset By Banks And Retail

On Tuesday, the top share index in the United Kingdom remained subdued because of concerns about an energy crisis in the continent.

In addition, the gains recorded in commodity-linked stocks were also offset by losses in British banking and retail stocks, overshadowing Unilever’s upbeat sales forecast as well.

FTSE 100 flat

The commodity-heavy FTSE 100 index remained flat for the day, after early trading saw it record gains of as much as 0.8%. The top boosts came from oil majors like Glencore and Shell, as a softening dollar gave commodity prices a lift.

There was a 2.9% gain in the shares of Unilever, which took them to their highest value seen in the last seven months.

The consumer giant hiked its prices to combat rising costs and raised its sales guidance for the full year, which gave its share price a boost.

The market analysts said that with the cost of living crisis, consumers are forced to choose where they should spend their money. The majority would obviously be spending it on the basics.

Russia’s announcement of cutting gas supplies to Europe from Wednesday onwards stoked fears of an energy supply crisis, with investors already worried about the economy going into recession.

Individual stocks

The blue-chip index was further weighed down by a 5.2% drop in Vodafone after JPMorgan and UBS cut the target price of the telecom operator.

There was a 0.8% drop in banking stocks, with most losses recorded in Barclays after the bank announced a buyback of securities worth $17.6 billion that were sold in violation of US regulations.

There was also a 1.2% drop in the midcap FTSE 250 index, which is laden with companies with exposure to the domestic economy.

Retail sector

There was an 18.0% decline in the shares of Wickes, which brought the home improvement retailer to a record low after its full-year forecast turned out to be below market expectations.

Moreover, the company also flagged signs of weakening in recent weeks in the do-it-for-me (DIFM) and do-it-yourself (DIY) markets.

Overnight, leading US retailer Walmart Inc. also slashed its profit forecast for the full year, as rising prices of food and fuel pushed customers into reducing their discretionary purchases.

There was a 4.9% drop in the retail index in the UK. The biggest seller of building materials in Britain, Travis Perkins also saw losses of 6.0%, while an 8.5% drop was seen in its rival Kingfisher.

Markets are now awaiting interest rate hikes from central banks, with the US Federal Reserve scheduled for announcing a rate hike on Wednesday. This is expected to be around 75 basis points.

As for the Bank of England, it has its monetary policy meeting scheduled for August 4th and will announce its rate hike. However, predictions of a 50 basis points increase have gone down recently and analysts have predicted that a 25 basis points hike is more likely.

This is because the British economy’s outlook is already darkening and a larger-than-expected hike would only worsen the situation.

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