The FTSE 100 rises before the BoE rate decision as Shell posts record earnings.
FTSE 100 advances ahead of BoE rate call, up 35 points
Shell reports record profits, launches US$4bn buy-back.
FTSE 100 pushed higher as investors took heart from a slower pace of rate rises in the US and awaited the latest monetary policy moves in the UK and Europe.
At 8.15am London’s blue-chip index was up 17 points at 7,779 while the FTSE 250 jumped 188 points to 20,086.
The US Federal Reserve increased rates by 25 basis points, as expected, and Fed chair, Jerome Powell “stated “the disinflationary process has started” boosting hopes that rate cuts might be on the menu sooner than expected.
But Powell added the US central bank will need “substantially more evidence” to be confident that inflation is on a sustained downward path in the US, despite “encouraging” recent developments.
Derren Nathan, head of equity research, Hargreaves Lansdown noted: “It is rare to find ourselves in a position where rate rises are seen as good news, but this is a material slowdown following a sustained period of aggressive tightening, with rates now at levels not seen since 2007.”
“But we may not be at the end of this cycle yet” he cautioned.
In the UK and Europe, interest rates are expected to rise by 50bps, but attention will focus, as always, on any signs that central bankers on this side of the pond may follow their US counterparts and signal a slower pace of increases.
Ahead of this, record profits from Shell PLC caught the eye. Annual earnings doubled to US$39.87bn, a record, as the FTSE 100 listed oil major benefited from soaring energy prices inflamed by Russia’s invasion of Ukraine.
The oil major also announced a new US$4bn share buy-back. Shares rose 1.2%.
Stuart Lamont, investment manager at RBC Brewin Dolphin, suggested the “record profit for the year will only intensify calls for more to be done to claw back profits from energy companies in the current environment.”
But BT Group PLC (LON:BT) dipped 3.5% as it reported a fall in third quarter revenues although it is holding full-year guidance.
Charlie Huggins, head of equities at Wealth Club, pointed out “High inflation poses challenges to BT’s business model.”
“Telecoms is a mighty challenging sector. There’s little to differentiate providers and regulators and consumers are always demanding more for less. So, while BT is pushing through price increases, it must be careful not to push too hard” he noted.
“Overall, BT faces an uphill battle in the current inflationary environment and will have to run very hard just to stand still” he said.
FTSE 100 is expected to make a strong start to the day as the Federal Reserve slowed the pace of interest rate increases and the Fed chairman, Jerome Powell, stated “the disinflationary process has started.
FTSE 100 TECHNICAL ANALYSIS
FTSE 100 is currently trading in up channel.
FTSE 100 is currently trading above all SMA
RSI is in buying zone which suggests bullishness and Stochastic is suggesting up trend.
FTSE 100 immediate resistance is at 7818.4 & its immediate support level is 7801.1
HOW TO TRADE FTSE 100 IN THIS WEEK
FTSE 100 is trading in up channel; it will continue to trade upside until any trend reversal so, remain bullish on it.