Interactive Investor

FTSE 100 pulls back further from 8,000 level

Talk of a record high for the blue-chip index has died down as investors digest both yesterday’s inflation surprise in the US and activity here in the UK today. City writer Graeme Evans rounds up the action.

11th April 2024 13:27

by Graeme Evans from interactive investor

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The retreat of Rolls-Royce Holdings (LSE:RR.) shares to 400p and a results-day hangover for Tesco (LSE:TSCO) were among today’s big moves as traders adjusted to the higher-for-longer rates outlook.

Other heavy fallers included the ex-dividend stocks Lloyds Banking Group (LSE:LLOY) and Aviva (LSE:AV.), as well as easyJet (LSE:EZJ) and International Consolidated Airlines Group SA (LSE:IAG) in a setback for their recent recoveries.

The FTSE 100 index fell 27 points to 7,934 at lunchtime, but that represented another resilient showing after yesterday’s 3.5% US inflation print appeared to derail June interest rate cut hopes.

Concerns over the third consecutive monthly increase in US core prices of 0.4% means Wall Street may have to wait until September for the Federal Reserve’s first move.

The S&P 500 finished 0.9% lower yesterday and was due to stay in the red this afternoon ahead of first-quarter results by JPMorgan Chase & Co (NYSE:JPM), Citigroup Inc (NYSE:C) and Wells Fargo & Co (NYSE:WFC) on Friday.

The inflation pressures also impacted other central bank projections, with the probability of a June cut by the Bank of England now just above 50%, from 74% earlier. That stalled the improvement of rate-sensitive stocks in the property, housebuilding and utility sectors.

The likes of British Land Co (LSE:BLND), Barratt Developments (LSE:BDEV) and National Grid (LSE:NG.) fell by between 1% and 2% in yesterday’s session but their performances were steadier today.

One of the biggest fallers in the top flight was Tesco as the supermarket gave up all the 3% or 9.5p improvement seen after Wednesday’s confidence boosting annual results.

The retreat came despite the upbeat verdict of City analysts, including those at UBS. They noted Tesco’s strong momentum and upside risks to retail earnings in the year ahead, with the potential for increased buybacks following the sale of its banking operations.

The City firm has a target of 315p, which compares with today’s price of 284.6p.

The upward trajectory of Rolls-Royce shares also paused for a third session as the engines giant fell another 8.9p to 399.6p, having gone through the 400p threshold in mid-March.

It peaked at 430p on Monday but the FTSE 100’s best-performing stock of 2023 has since been caught by a weakening of sentiment across the European defence and aerospace sector.

The strong run for British Airways owner IAG was also dealt a setback, down 7.55p to 168p as investors worried about the potential for higher fuel costs and weaker demand should borrowing costs stay high. The shares are still well above the 145p seen in early March.

On a brighter note, B&Q owner Kingfisher (LSE:KGF) rose 7p to 249.1p after HSBC analysts showed their support with a new price target of 305p. Marks & Spencer Group (LSE:MKS) shares were also valued at 330p by JP Morgan, but the retailer’s shares surrendered an initial 3% rise to stand flat at 255.8p.

BP (LSE:BP.) shares continued their strong run, setting a fresh six-month high of 528p thanks to the support of Brent crude at $90 a barrel and this week’s robust first-quarter production update.

Shell (LSE:SHEL) also moved deeper into record territory, consolidating its position as the London market’s most valuable stock by adding 16p to 2885p.

AstraZeneca (LSE:AZN), the next largest stock in the FTSE 100, rose 208p to 10,940p after announcing it planned to increase its 2024 dividend by 7% or 20 US cents a share. As usual, the first interim dividend will be paid in September before the second distribution next March.

The drugs giant disclosed the $3.10 a share award a few hours before its AGM, when controversial proposals for an enhanced pay package for long-serving boss Pascal Soriot were the subject of a shareholder vote.

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