London’s FTSE 100 closed Thursday’s session 1.25% higher at 7,260.61, the blue chip benchmark taking the Bank of England’s surprise interest rate hike from 0.1% to 0.25% in its stride, despite sterling gaining as a result.
Around 70% of the FTSE’s constituents earn in foreign currencies so a rising pound is negative for them.
The central bank was widely expected to keep rates on hold due to the uncertainty created by the Omicron variant. However, it has acted now due to concerns about rising inflation, ending the longest period with no rate change, going back as far as the 70s, with the nation having being stuck at 0.1% for just shy of a year and nine months.
Banking stocks were the key beneficiaries with HSBC (HSBA) bid up 3.7% to 448.25p, Lloyds (LLOY) moving 4.6% higher to 46.4p, Barclays (BARC) rising 3.2% to 182.1p, NatWest (NWG) trading 2.9% to the good at 223.6p and Virgin Money (VM.) advancing almost 4% to 169.4p.
‘Last month we were all geared up for a rate rise party, only for the punchbowl to be whisked away at the last moment,’ commented Laura Suter, head of personal finance at AJ Bell.
‘Fast forward a month and there was minimal expectation of an increase, only for the Bank of England to whip out a Christmas surprise for everyone with a hike.’
Suter explained: ‘Rising inflation is the real reason behind this fast switch, with new figures out yesterday clearly causing a lot of concern at Threadneedle Street. While Omicron is still a worry for the Bank, rampant inflation is clearly an even bigger concern.’
CORPORATE NEWS
Online fashion retailer Boohoo (BOO:AIM) slumped 23% to 106.2p after it reduced earnings guidance for 2021-22 citing disruption to international deliveries and pandemic-related cost inflation.
Guidance for adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margin has been reduced to 6% to 7%. Previously the market had been guided to a figure of 9% to 9.5%. This equates to an adjusted EBITDA figure of between £117 million and £139 million.
Management now anticipate net sales growth to be 12% to 14%, compared to previous expectations of 20% to 25%.
Shares in Domino’s Pizza (DOM) rallied 22.3% to 423.2p after announcing it had resolved a long-running dispute with its franchisees. This will enable more store openings and the implementation of new technology.
Management has also indicated that trading in the current year will be in line with expectations. In 2022 it anticipates an acceleration in sales growth. Over the medium term the company believes it will hit the upper end of its £1.6 billion-to-£1.9 billion sales forecast.
AROUND THE MARKET
Fund manager Schroders (SDR) confirmed that it is in advanced talks with Greencoat Capital, a renewables infrastructure manager, about taking a significant stake in the business. The shares edged 2.3% higher to £34.69.
Shares in recruitment firm Robert Walters (RWA) moved 4.2% higher to 790p after it lifted its full-year expectations. This followed a strong trading in the fourth quarter.
The group now expects pre-tax profit for the year to the end of December 2021 to be ‘comfortably ahead’ of current market expectations.
Shares in unbranded consumer goods maker McBride (MCB) fell 8.8% to 54p as it warned rising costs would result in losses 70% higher than it was guiding for two months ago.
Hyve (HYVE) buzzed up 3.7% to 88p as the exhibitions and conferences organiser returned to profit for the year to September 2021, with its second half recovery supported by the return of in-person events in all major markets.
And healthcare service provider Totally (TLY:AIM) ticked up 2.2% to 34.25p as investors applauded its acquisition of workplace wellbeing platform Energy Fit-Pro.
Disclaimer: The author owns shares in AJ Bell Limited, owner and publisher of Shares magazine
