By Patrick Munnelly, Market Strategist, Tickmill
Today, the FTSE 100, the UK’s leading stock index, experienced slight losses of 0.36% as market participants grappled with uncertainty following the indications of additional policy tightening by top central bankers.
FTSE flounders as investors weigh further rate rise uncertainty
The heads of the world’s major central banks reiterated on Wednesday that further interest rate increases would likely be necessary to address persistent high inflation levels. The statements from these central bank officials contributed to a sense of ambiguity in the market, prompting the FTSE 100 to trade marginally lower as investors evaluated the potential implications of future monetary policy actions.
FTSE 100 biggest movers
Citi has conducted an analysis of UK banks to assess the potential impact of further rate hikes on their earnings. Contrary to a bearish view held by some investors, Citi suggests that investors should take advantage of any market weakness and consider buying bank stocks.
Citi’s analyst Andrew Coombs emphasises that despite the negative sentiment expected during the reporting period in the second quarter of 2023, the attractive valuations and high capital return yields make UK bank stocks appealing. Citi’s outlook for interest income in 2023 is generally below consensus, but it holds a positive stance on interest income for 2024 and 2025. Among the UK banks, Citi has buy rating for Barclays LON:BARC which has shown a 2.01% gain during the session, and is positioned on the top spot just ahead of the continuing whipsaw action in Ocado LON:OCDO the online grocer reverses yesterday’s bottom of the table placing to sit second on the table today gaining 1.96% on the session.
On the negative side of the ledger despite a positive trading update, shares in B&M LON:BME have experienced a 6.54% decline. One possible reason for this could be the lack of full-year guidance, which implies that there will be no upgrades to earnings expectations. Additionally, the shares have already seen a strong performance this year, with a gain of over 30%, so some investors may be taking the opportunity to secure profits while the stock price is favourable.
Shore Capital has also maintained a ‘hold’ rating, expressing caution due to challenging year-on-year comparisons expected in the future, an increase in shrinkage, and the potential need for price adjustments to support low-income UK consumers. It is worth noting that B&M shares have seen a significant increase of 43% over the past 12 months, providing investors with a favourable return during this period.
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