By Barbara Kollmeyer
The FTSE 100, one of few global stock indexes that has managed gains in a so-far turbulent 2022, continued to rise on Thursday as banks gained following a Federal Reserve meeting that laid the groundwork for interest rate hikes.
The U.K. index /zigman2/quotes/210598409/delayed UK:UKX +0.93% rose 0.5% to 7,501.96, while the British pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.6884% dropped 0.5% to $1.3393, as the U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.95% surged more than 1%. Investors were getting the first chance to react to the outcome of the two-day Federal Reserve meeting that wrapped up on Wednesday.
“The only thing we can really take from the Fed’s latest meeting is that interest rates are almost certainly going to go up in March,” said Russ Mould, investment director at AJ Bell, in a note to clients. And that view has been a boost for the FTSE 100, up 1.7% so far this year against losses for Wall Street and elsewhere.
“For once, investors are eager to own the FTSE’s ‘old economy’ companies in banking, tobacco and oil, as these are value stocks which are once again in fashion,” he said. Heavily weighted HSBC /zigman2/quotes/208272822/composite HSBC +0.75% /zigman2/quotes/203901799/delayed UK:HSBA +0.51% was shining with a 3% gain, along with a 4% gain for Standard Chartered /zigman2/quotes/200125072/delayed UK:STAN +0.75% /zigman2/quotes/202369078/delayed HK:2888 +0.61% . BP /zigman2/quotes/207305210/composite BP +0.81% /zigman2/quotes/202286639/delayed UK:BP +2.40% and Shell saw modest gains, along with tobacco giant Imperial Brands /zigman2/quotes/208789104/delayed UK:IMB -0.95% .
Diageo /zigman2/quotes/208129584/composite DEO +1.48% /zigman2/quotes/205611832/delayed UK:DGE +0.92% stock rose 0.6% after the drinks maker reported higher net profit in the first half of fiscal 2022, thanks to strong sales volumes and premium brands growth.
“With investor questions around the sustainability of consumer offtake and premiumisation trends increasing against a backdrop of an inflation-squeezed consumer and Diageo’s upgraded medium-to-long-run guidance well-known, any short-term bounce in the stock may be limited,” said analysts Simon Hales and Ravi Sharma at Citi, in a note to clients.
On the FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX +1.33% , Dr Martens /zigman2/quotes/224328095/delayed UK:DOCS +0.90% shares tumbled 12% after the classic bootmaker’s third-quarter trading update showed weak sales growth.
“The shares have continued to weaken since the recent PE [private equity] placing and now trade on 15x PE at the current share price (280p), down over 12% this morning. We believe that is a great entry point, although the shares appear increasingly wary of the remaining 36% PE stake to come, noting the current lock-up expires in two months’ time,” said John Stevenson and Jonathan Pritchard, analysts at Peel Hunt, in a note to clients.