- FTSE 100 opens higher boosted by strong showing in the US
- AB Foods tumbles after profits warning
- Thomas Bravo scraps plans to bid for Darktrace (LON:DARK)
The strong showing in the US continued to underpin the FTSE 100 in early trading although a profits warning from Associated British Foods PLC (LON:ABF) saw its share plunge.
By 8.50am the lead index was trading 28.59 points higher at 7,266.42 with the broader FTSE 250 index up 49.71 at 18,861.19.
Victoria Scholar, head of investment, interactive investor said “European markets have opened higher ahead of the ECB’s rate decision with expectations for a potential 50 or even more aggressive 75 basis point increase."
"The FTSE 100 is trading up by almost 0.5% but Associated British Foods has slumped to the bottom of the UK index after a profit warning, dragging other retailers like Next and B&M down too."
"Stateside, Wall Street enjoyed a strong rebound with the Nasdaq up more than 2% while the Nikkei in Japan also outperformed.”
Ocado Group PLC (LON:OCDO) received a boost today as Barclays (LON:BARC) upgraded its rating on the company seeing the risks as more evenly balanced now.
Moving its rating to equal weight from underweight Barclays said “with retail sales set to improve, balance sheet concerns reduced for the time being and customer fulfilment centre deal flow expectations tempered, we think the balance of upside and downside risks is now more evenly poised.”
Barclays has a 775p per share valuation on Ocado.
Shares were trading 1.1% higher.
8.15am: FTSE 100 opens higher, AB Foods drops on profits warning
Trading in London made a bright start following strong gains in the US overnight with investors awaiting the unveiling of the UK energy support package and the European Central Bank (ECB) interest rate decision later in the day.
At 8.10 the FTSE 100 was trading up 25.32 points at 7,262.05 with the broader FTSE 250 up 88.51 points at 18,899.99.
Shares in Associated British Foods PLC (LSE:ABF) fell sharply after the group warned that adjusted operating profits and adjusted earnings per share will be lower in the next financial year despite expectations for strong sales growth in the year ahead.
“As a result of the timing of the recent movements in currency and energy prices, and the commercial decision to limit further price increases next year, we now expect Primark's profit margin for next year to be lower than the operating profit margin of 8.0% expected for the second half of this financial year” AB Foods said.
The company said Primark has already been managing the challenges of supply chain disruption, inflation in raw material and energy costs and in labour rates, alongside the higher purchasing costs which have resulted from the strengthening of the US dollar over this financial year against sterling and the euro.
To mitigate these pressures, in addition to the price increases mentioned above, there are also plans to improve store labour efficiency and deliver lower operating costs, it added.
7.45am: Thomas Bravo pulls out of Darktrace talks
Investment firm Thomas Bravo has pulled out of the running to bid for Darktrace PLC (LSE:DARK).
The two companies said last month that talks were at a preliminary stage but the US private equity firm has decided not to push ahead with an offer for the cybersecurity group.
Darktrace also unveiled results today and said it was “very confident in the company's future prospects .”
The Cambridge based firm said annual recurring revenue (ARR) rose 7.9% year on year driven by both new and existing customer activity, with the average ARR of new contracts increasing by more than 13%.
7.15am: ECB rate call later today
The European Central Bank is set to make its latest call on interest rates today with commentators divided as to whether it will increase rates by 50bps or 75bps.
Michael Hewson chief market analyst at CMC Markets UK said “Up until a couple of weeks ago it had seemed certain that we would see the European Central Bank raise rates by 50bps this week, pushing the headline rate into positive territory for the first time since 2014.”
But he added “The last few days has seen this narrative shift after several governing council hawks got a lot louder in their pronouncements for much more aggressive rate moves, arguing the case for a 75bps rate move, after headline inflation pushed up to 9.1% at the beginning of the month.”
“It is clear that there are a wide range of views on the governing council about whether to hike by 50bps or 75bps today, with some talk that President Lagarde is leaning towards the smaller of the two options of 50bps.”
“An overly aggressive move today does present huge risks for the ECB, given that the latest staff projections are likely to see growth downgrades, and upgrades to inflation targets” Hewson cautioned adding “It also runs the risk of pushing yields sharply higher, particularly those of Italy which saw the 10-year yield briefly push above 4% earlier this week.“
“On the other hand, if the ECB were to go down the more cautious 50bps route the euro could drop back down towards its recent lows, unless the ECB signalled that it was prepared to go in 50bps increments in subsequent months if inflation remained high.”
6.55am: FTSE 100 set to make cautious early progress
Equity markets in London are set to make cautious early progress following strong gains in the US overnight although investors will be awaiting the unveiling of the UK energy support package and the European Central Bank (ECB) interest rate decision later in the day.
Spread betting companies are calling the lead index up by around 20 points.
The ECB will announce its interest rate decision later today and the bank is set to carry out just its second interest rate hike in over 10 years.
Markets are somewhat divided about whether the ECB will announce another 50 basis point hike, or dig deeper with a 75bp lift.
US markets closed sharply higher on Wednesday as oil prices fell cooling concerns about continued high inflation.
At the close the Dow Jones Industrial Average was up 1.40% or by 436.35 points at 31,581.65, the S&P 500 was up 1.83% or 71.69 points at 3,979.87 while the Nasdaq Composite was up 2.14%, or 246.99 points at 11,791.90.