FTSE 100 edges into the green despite Fitch moving UK credit rating outlook from stable to negative

Imperial Brands PLC (LON:IMB ) is leading the FTSE 100 risers after an upbeat trading statement and news of a £1bn share buyback.

Its shares are up 3.88%, and Richard Hunter at interactive investor, said: “Having reduced net debt and further strengthened its balance sheet to its own acceptable levels, Imperial Brands has accelerated shareholder returns.

"The announcement of a share buyback programme to the tune of £1 billion should lend further to the share price and the key metrics such as earnings per share in particular. In addition, a dividend yield which currently stands at a punchy 7.4% is an attraction to income-seeking investors in its own right...

"In terms of outlook, the group is maintaining expectations for full-year trading to be in line. Net revenues and adjusted operating profit are both expected to benefit by 1% due to currency tailwinds, while overall capital expenditure to drive future growth will be between £300 million and £350 million per annum."

A handful of companies have gone ex-dividend and seen their shares slip accordingly.

These include DS Smith PLC (LSE:SMDS), down 3.6%, Centrica PLC (LON:CNA), off 1.4% and Kingfisher PLC (LON:KGF), 0.67% lower.

Meanwhile Shell PLC continues to be weak after it warned on third quarter profits, down 2.99%.

Overall the FTSE 100 is just about still in positive territory but has lost much of its early gains. It is now up just 3.35 points at 7055.97.

8.25am: Fitch warns of rise in UK deficit, IFS says tax cuts will not benefit households

The decision by Fitch to move the outlook for the UK's credit rating from stable to negative is largely driven by the fact that the government has not yet announced how it will fund its tax-cutting package.

Despite earlier suggestions, there is still no sign that the costing statement will be brought forward from 23 November, although there is still pressure for this to happen.

Fitch said: "The large and unfunded fiscal package announced as part of the new government's growth plan could lead to a significant increase in fiscal deficits over the medium term.

"We consider that statements by the chancellor hinting at the possibility of additional tax cuts and the likely modification of fiscal rules legislated in January reduce the predictability of fiscal policy."

Fitch was not the only one to come out with its verdict on the mini budget.

The Institute for Fiscal Studies said that by 2025-26, the cuts will not only put a considerable strain on public finances but it will not benefit households either.

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It said the freeze on thresholds for income tax and benefits will take away £2 for every £1 given through the cuts.

8.12am: Footsie up, Shell down

Leading shares are edging higher as investors shrugged off news that another ratings agency - Fitch - had followed Moody's in putting the UK's credit rating on negative watch.

The FTSE 100 is up 16.86 points at 7069.48 in early trading after falling 33 points on Wednesday as prime minister Liz Truss pointedly stuck to her controversial economic plans in a speech to the Tory party conference.

The tentative rise today also comes despite a drop on Wall Street following its surge earlier in the week, as investors wondered if they had been too optimistic about the US Federal Reserve turning more dovish.

Jim Reid at Deutsche Bank (ETR:DBKGn) said: "After an astonishing rally at the beginning of the fourth quarter, markets reversed course yesterday as investors became much more sceptical that we’ll actually get a dovish pivot from central banks after all. The idea of a pivot has been a prominent theme over recent days, particularly after the financial turmoil during the last couple of weeks, thus sparking the biggest 2-day rally in the S&P 500 since April 2020 as the week began.

"But over the last 24 hours, solid US data releases have created a pushback against that narrative, since they were seen as giving the Fed more space to keep hiking rates over the coming months. And if markets had any further doubt about the Fed’s intentions, San Francisco Fed President Daly explicitly said yesterday that she didn’t expect there to be rate cuts next year, in direct contrast to futures that are still pricing in rate cuts from the second quarter."

All eyes now will be on the US non-farm payroll report to see if the market continues to treat good news as bad and vice versa.

Markets had also been rattled by news that OPEC+ unveiled a 2mln barrel a day cut in oil production, more than had been expected.

Back in the UK, chancellor Kwasi Kwarteng is due to meet bank bosses to discuss the mortgage market, which has been disrupted by the turmoil following the mini-budget.

The average rate of a new two year fixed mortgage is now above 6%, the highest level since 2008.

This follows lenders removing hundreds of mortgage products in the wake of soaring bond yields last week.

Elsewhere Shell PLC is down 3% after it said its third quarter results, due for release on 27 October, would be hit by a sharp fall in refining margins while results from its Integrated Gas business were expected to be significantly lower compared to the second quarter.

7.00am: FTSE set for a bright start

FTSE 100 is set to open higher on Thursday despite another hit resulting from the chancellor’s mini budget.

Spread betting companies are calling the lead index up by around 50 points.

Sterling was higher in Asian trading at $1.1363 despite a downgraded outlook for the credit rating of UK government debt as Fitch lowered the outlook for the debt to negative from stable while leaving the rating itself unchanged at "AA-".

In the US markets ended down, but off earlier lows, consolidating some of the strong gains of the past two days.

By the close The Dow Jones Industrial Average was down 42 points to 30,275, the S&P 500 lost 7 points to 3,784 and the Nasdaq Composite slipped 28 points to 11,149.

“It’s a moment of pause for the market to reflect on how durable the rally the past two days actually could turn out to be,” said Yung-Yu Ma, chief investment strategist for BMO Wealth Management.

In the UK, results from mining firm Ferrexpo and a trading statement from tobacco firm Imperial Brands are due.

In the economic calendar, there is the UK construction PMI reading while US jobless claims are due this afternoon.

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