FTSE 100 Live: Markets Scared of Rising US Interest Rates, Next Boosts Profit Forecast
London’s good start to trading in 2022 was halted today as investors react to the prospect of a US interest rate hike as early as March.
Wall Street markets have fallen sharply and the FTSE 100 index is expected to open 100 points lower after the Federal Reserve meeting minutes were released suggesting that rates could rise “relatively soon”.
The massive sell-off overshadowed another strong business performance from Next, with the fashion chain improving its profit forecast on the basis of a strong Christmas sales performance.
Next “Crown Jewel of Main Street”
The following actions have not taken off, despite the retailer’s fifth profit improvement last year.
However, analysts were full of praise, as sales for the eight weeks leading up to Christmas Day exceeded management’s expectations of Â£ 70million and pre-tax profit forecasts for the entire year were raised from Â£ 22million to Â£ 822million.
Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown, said: âFor all the bad news on Main Street, there is a shining gem to be found in the form of Next.
âThere aren’t many traditional retailers that hand out special dividends or improve their advice multiple times. “
The latest upgrade means Next is able to pay another special dividend of 160p per share, on top of the 110p that has already been paid.
RIchard Hunter, Head of Markets at Interactive Investor, said: âThis implies a dividend yield of over 3%, which is remarkable in the current interest rate environment, and which also leaves the potential for more than 3%. gas in the reservoir as the company reverts to the pre-pandemic ordinary dividend cycle, including the possibility of share buybacks if certain obstacles are encountered. “
FTSE 100 drops 1%, Next stocks drop
The FTSE 100 index is down 1% or 74 points to 7,440, although it is still above the 7,384 level where the first flight from London started the year.
British Airways owner IAG gave up its recent gains by falling 3% and the tech-focused Scottish Mortgage Investment Trust fell 2% as the latest rise in US bond yields put pressure on the market. value of holdings, including Tesla and Amazon.
Transatlantic retailer JD Sports Fashion also fell 2% amid fears of a consumer squeeze caused by an impending hike in U.S. interest rates.
The discount chain B&M European Value Retail rose 2% after revising its forecast for the full year upwards following a “Very strong Golden Quarter”, but there was no rally for Next shares. The stock listed on the FTSE 100 was 52p lower at 7986p, despite further improvement in earnings.
Greggs boss Roger Whiteside retires and Roisin Currie becomes CEO
Roger Whiteside, CEO of the Greggs bakery chain, will retire from the company he had been running since 2013 this year.
The boss, who is 63, will step down after Greggs’ annual meeting in May. He will be replaced by Roisin Currie, commercial and real estate director of the firm FTSE 250.
While he was running Greggs, the company’s domain grew from about 1,600 stores to 2,181, with more openings planned.
White side said: âGreggs is a fantastic organization with a very strong team. Roisin is a great leader and has played a key role in the development of the company for many years, most recently in shaping our ambitious plans for future growth.
Next shows other retailers how to do it (again)
Then it is on the rise. Not for the first time. Today it posts another improvement in earnings and another special dividend to shareholders.
Fear of US rates triggers fall of FTSE 100
The FTSE 100 index is expected to open sharply lower after the US Federal Reserve’s final minutes triggered a massive sell off on Wall Street last night.
Comments from the last Fed meeting in December suggested that a rate hike could come “relatively soon”, prompting traders to bet on a hike in March. Some Fed members have also questioned when would be the right time to reduce the size of the central bank’s balance sheet as monetary policy normalizes.
US inflation is currently well above 6% while the central bank also noted that the “very tight” US labor market was a reason to accelerate its policy response.
The outlook for a spring hike in interest rates put upward pressure on US bond yields for the third consecutive session, lessening the attractiveness of high growth companies valued on future cash flows.
The tech-focused Nasdaq closed 3.3% lower and the S&P 500 lost almost 2% of its value, although US futures markets point to a more stable session today.
London’s FTSE 100 index is expected to open more than 100 points lower, having gained ground in the first two sessions of 2022 after closing last night at its highest level since February 2020.
Michael Hewson of CMC Markets said: âWhat seems to have scared the markets are the discussions about reducing the balance sheet.
âThis has caused quite a bit of anxiety, with some members of the Fed talking about the likelihood of when it might be appropriate to reduce the size of the balance sheet, thereby removing liquidity from the market.
“While this may be a valid concern, speculation that the Fed may start doing so seems a bit premature given that it has yet to stop increasing its balance sheet, let alone shrink it.”