FTSE 100 Zooms Up

London: 6 February 2024 (TraderMade): Forget profits, buybacks rule! The FTSE 100 (UK100) defied expectations, fueled by China's rally and big bets from BP & Co. Even Rolls-Royce soared! But not all stocks flew high. Dive in to see who won and who flopped!

Key Takeaways

• FTSE 100 trades 0.32% higher at 7637.09.
• Investor confidence was boosted by buybacks, China rally, and strong Asia performance.
• Rolls-Royce, Renishaw among top gainers.
• Entain and Pearson fell on analyst downgrades.
• Concerns persist about potential sanctions evasion by Iranian companies in the UK.

FTSE 100 Navigates Choppy Waters in the Last Two Weeks: A Commentary

The FTSE 100 has traversed a volatile path over the past two weeks, reflecting broader market uncertainties and mixed economic signals. Here's a breakdown:

Initial Uptrend: The period kicked off positively, reaching a two-week high of 7682.80 on 29 January. This ascent could be attributed to improved global risk appetite, potential corporate buybacks, and rising commodity prices.

Consolidation and Pullback: The index then entered a consolidation phase, fluctuating between 7600 and 7700. This might reflect profit-taking after the initial rally and caution due to concerns about inflation and interest rate hikes.

Recent Climb and Retreat: A resurgence on 6 February pushed the index to a fresh high of 7709.70, potentially fueled by positive news from China and individual company actions like BP's buyback announcement. However, the live level 7659 suggests a slight pullback, indicating continued market jitters.

Key Observations:

• The overall movement remains within a 200-point range, highlighting the relatively contained volatility compared to historical swings.
• The lack of a decisive directional trend signifies the ongoing tug-of-war between positive and negative factors influencing investor sentiment.
• Upcoming events like economic data releases, central bank pronouncements, and geopolitical developments could provide further direction.

Buckling the Profit Trend

BP's share buyback announcement overshadowed its lower profits, driving its shares up 3%. The broader FTSE 100 benefited from a rally in China's stock market and a strong performance by Asia-focused blue-chips.

Renishaw and Rolls-Royce saw significant gains, while Entain and Pearson dropped on analyst downgrades. Meanwhile, concerns arose about potential sanctions evasion by an Iranian company using UK banks. Stay tuned for further updates as the markets close and more news emerges.

Despite posting lower-than-expected profits, BP saw its shares soar 3% today, fueled by a hefty $1.75 billion buyback announcement. This bold move by the oil giant sent a positive signal to investors and contributed to the FTSE 100's overall gain of 0.32%.

Eastern Sunrise, Western Boost

The rally wasn't limited to oil. The FTSE 100 received a significant boost from the strong performance of Asian markets, particularly China. Measures to stabilize the Chinese markets, including state-backed fund support and a reported meeting between President Xi and regulators, sparked a buying spree in London.

Consequently, blue-chip stocks like Prudential, HSBC, and Rio Tinto, with significant Asian interests, witnessed considerable gains.

Precision Growth and Engine Revival

Beyond the big players, Renishaw, a high-tech engineering firm, impressed investors with improved market conditions and guidance exceeding forecasts. This translated to a 14% surge in its share price.

Rolls-Royce, the jet engine maker, also witnessed a significant comeback, with its shares climbing 8% after a sluggish start to the year.

Downturn and Doubts

Not all stories were positive. Gambling group Entain faced a 2% drop after Barclays downgraded its recommendation. Educational publisher Pearson also felt the sting of a downgrade, leading to a 2% decline in its share price.

Shadowy Transactions

Away from the market movements, concerns arose about potential sanctions evasion by an Iranian company allegedly using UK banks. The Financial Times reported that Iran's state-controlled Petrochemical Commercial Company (PCC) used UK banks to circumvent sanctions, raising questions about financial oversight and potential security risks.

Looking Ahead

While the FTSE 100 progressed the day optimistically, the prospect of delayed interest rate cuts dampened some enthusiasm. Nonetheless, the buybacks, strong Asian performance, and individual company successes like Renishaw and Rolls-Royce provided reasons for hope.

As the markets close and more news unfolds, staying tuned will be crucial to gauge the lasting impact of these developments.