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BP helps pull the FTSE 100 to another record high

FTSE100 chart on a mobile device

It’s been another day of record highs for the FTSE 100, as this often-unloved index starts to come back onto investor radars. 

Europe

In this new era of rising interest rates, the likes of the UK blue-chip has come back into favour not only for its more defensive qualities, but also for the ability of the companies contained within it to generate an income for shareholders.

There’s been no better example of that than the oil and gas sector these past 12 months, with BP once again pushing higher to its highest levels since July 2019, after the yesterday’s announcement it was slowing its plans to cut oil and gas production from 40%, to 25% by 2030. Over in France TotalEnergies also reported record profits of $36.2bn, as did Norway’s Equinor who posted record profits of $74.2bn.

Barratt Developments' H1 results have seen the housebuilder report a 6.9% rise in completions to 8,626, and a 23.9% rise in revenues to £2.78bn. Barratt has said it's cautiously optimistic that the pickup in demand in January compared to December will continue, and have revised their full-year completions to between 16,500 to 17,000.This more optimistic update has also acted as a pick-me-up to the wider sector, with Persimmon and Taylor Wimpey also higher. 

On the downside, packaging company Smurfit Kappa has slipped back despite announcing full-year results that came in ahead of expectations. Full-year revenues rose by 27% to €12.8bn, while profits before tax increased to €1.29bn, an increase of 42%. The company also increased its dividend by 12%. The increase in revenues came despite a decline of 2% in box volumes due to higher prices. The prevalence of higher prices is starting to see a more sustained slowdown, particularly in Europe, which looks set to be a headwind going forward, and helps explain why the shares are down on the day, dragging its sector peer Mondi along with it. 

US

US markets opened slightly lower, as the exuberance of yesterday’s move higher gave way to a little bit of reflection in the  wake of comments from Fed chairman Jay Powell. Today it’s the turn of another six Federal Reserve policymakers, including Fed vice-chair John Williams, as well as other who are voting members on the FOMC when it comes to rate-setting policy. New York Fed  president John Williams has indicated he sees the potential for further hikes due to high demand from services and a tight labour market, and that a 5.25% upper bound for rates seems a reasonable view. He went on to say that rates might need to remain restrictive for a few years, which comes across as a slight departure from recent comments from other Fed policymakers. 

The story around job losses in tech took another twist yesterday as Zoom became the latest company to announce job losses, saying it would be cutting 1,300 jobs which is 15% of its workforce, and that the move would cost between $50m and $68m. eBay, the digital marketplace has also gone done a similar path, announcing it's cutting 500 positions, or 4% of its workforce, in response to a slowdown in advertising.

Having posted an encouraging set of revenue numbers in Q3, Uber has managed to outperform in Q4 as well, recording $8.6bn in revenues, an increase of 49%, on gross bookings of $30.7bn, which was a record quarter, pushing the shares sharply higher. Q4 net income came in at $595m, however annual losses were still an eye watering $9.14bn, due to large H1 write-downs in its investments into Grab, Aurora and Didi. Mobility continues to the main driver of its revenue at $4.1bn, however delivery is quickly playing catchup at $2.9bn, and freight at $1.54bn. On a full year basis bookings were up 28% at $115.5bn, with annual revenues of $31.87bn a rise of 83%. On guidance Uber was also optimistic projecting gross bookings of $31bn to $32bn

Microsoft’s bid for Activision Blizzard has suffered a setback after the UK Competition and Markets Authority said that the $69bn deal could result in substantially fewer choices and less innovation for UK gamers. The deal will now be referred to a further investigation which could take until September to conclude but ultimately Microsoft may well have to offer certain binding assurances, or sell the part of the business that owns the “ Call of Duty” franchise, if it wants the deal to go ahead. Despite this setback Microsoft shares are higher after yesterday’s reports it would use AI to help to enhance its search engine Bing. This announcement appears to have put the skids under Google owner Alphabet’s shares which have slipped back sharply.

FX

The US dollar has slipped back today on the back of yesterday’s remarks by Fed chairman Jay Powell, where he expressed his confidence that inflation would continue to fall back rapidly over the coming months. He did go on to say that it could take well over 12 months for inflation to fall back to target, but it appears that markets are glossing over this, preferring to focus on the narrative that suits them best.     

Commodities

Crude oil prices saw a big jump yesterday in the wake of Fed chair Jay Powell’s comments, while a surprise 2.2m fall in US API inventories also helped to underpin prices, with the prospect that we could see a third successive daily gain. Oil markets appear to be continuing to be hanging their hats on a strong rebound in demand as China’s economy reopens. 

Gold prices have continued to edge off the lows we saw at the end of last week as a slightly softer US dollar, prompts a squeeze back towards the $1,895 area. The continued references to disinflation by Fed policymakers are helping to create this squeeze however evidence that inflation may not come down as quickly as expected could act to limit the upside in this rebound.

Volatility

Two of the bigger stock specific movers yesterday were Walt Disney and Alphabet. The former found support ahead of optimism over today’s earnings release, whilst the latter is due to hold a live event in the coming hours, something that is hotly tipped to include more details of the company’s AI release known as Bard. Both these companies hold meaningful weight in CMC’s proprietary basket of streaming stocks, where the underlying had a rather active session. One day vol for the basket printed 64.31% against 48.51% for the month.

Disappointing retail sales data hit sterling early in the session before bargain hunter moved in. Cable traded down to one-month lows under 1.20 before a rally emerged, adding almost a full cent at one point. Daily vol on the pair sat at 12.62% against 11.04% for the month.

Low Sulphur Gas Oil continues its rebound from lows seen at the start of the week, despite the resumption of oil flows from Iraq to Turkey. The distillate is tracking crude oil higher but continues to post higher levels of price activity. One day vol sat at 57.17% against 44.4% for the month.

Finally, it's been a turbulent day for Wall Street’s equity indices, as traders' attempts to price in the latest comments from the Fed left the NASDAQ as the most active index in the asset class. One-day volatility here moved out to 31.85% against 24.55% on the month. 


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