BUSINESS LIVE: Bank of England expects to raise key rates

London-listed shares opened lower this morning, with shares of the London Stock Exchange Group weighing on the FTSE 100 index as investors await the Bank of England’s verdict on interest rates.

London Stock Exchange Group is 3.9 percent lower after profit before tax fell 17.6 percent in the first half of the year.

Smith & Nephew is down 3.2 percent after the medical device maker reported a 5 percent drop in trading profit for the six months to July, beating market expectations.

Also weighing in was BT Group, which fell 5.1 percent as the telecom company’s shares traded ex-dividend.

Director at Edison Group Andy Chambers:

Rolls-Royce looks set to come out on top with a very strong set of half-year results that saw underlying revenue grow 31% to £6.9bn with underlying operating profit more than five times higher at £673m, a margin of 9.7%.

‘With the first results of the performance-enhancing transformation program, all three divisions have made a positive contribution. Civil Aerospace returns to a healthy performance with strong order intake driven by the recovery in the large aircraft engine market and strong growth in business aviation.

Defense also grew strongly with underlying operating profit up 33% on the back of improving demand and a more favorable supply profile. While Power Systems grew more modestly with margins reduced, this is expected to improve in the second half.

Net debt was also reduced by nearly £0.5bn to £2.85bn during the period. Having recently raised guidance for FY23 underlying operating profit to £1.2bn – £1.4bn and free cash flow to £0.9bn – £1.0bn, management expects to raise their mid-term targets term alongside the strategy review on a capital market day on 28 January. November 2023.

“The recovery from the dark days of the pandemic years seems to be going well and investors may now have a more favorable view of Rolls-Royce’s potential.”

The London Stock Exchange Group posted total revenue growth of 11.9 percent year-on-year to £4.2 billion for the first half, with the exchange saying investor earnings will come in at the high end of expectations.

“Data & Analytics is growing faster than in many years, with continued improvements to our offerings and strengthened customer relationships increasingly reflected in financial performance,” said CEO David Schwimmer.

“We are making good progress in the implementation phase of our transformational strategic partnership with Microsoft, with customers starting to see benefits starting next year.”

Aarin Chiekrie, Equity Analyst at Hargreaves Lansdown:

“Next has made a habit of outperforming market expectations on the upside of late, and today’s Q2 trading statement continued the trend.

‘Pre-tax profit guidance for the full year has risen again today and is now expected to be £10m higher at £845m. Online sales were the main driver of this upgrade, with sales in this channel growing by double digits.

End-of-season sales exceeded the group’s expectations for the period, adding to the positive wind Next seems to be catching as of late. The group also still has a strong presence in the high streets and sales are also moving in the right direction here. Next certainly weathers the storm of economic uncertainty admirably and looks well positioned to continue to thrive as the cycle turns.”

Global markets suffered a massive sell-off after the US government’s credit rating was downgraded earlier this year due to a debt ceiling crisis.

Credit rating agency Fitch, one of the industry’s “Big Three” alongside Moody’s and Standard & Poor’s, downgraded its rating for the US to AA+ from AAA as the fight over the country’s credit limit in May affected its ability to pay its bills in May. could endanger.

The company also predicted that the country’s fiscal situation would worsen over the next three years, as increasing polarization between the Democratic and Republican parties was likely to lead to further deadlocks in the future.

Rolls-Royce has told investors it expects to pay out £100 million this year “related to the outcome of a court judgment”.

On other future costs, Rolls said: “We continue to expect a year-on-year headwind of around £200 million related to old Boeing original equipment concessions, an increased negative impact of £150 million from fires at two suppliers and a new expected outflow of around £100m related to the outcome of a court judgment.’

Next has raised its annual profit guidance by £10m to £845m after full-price sales and end-of-season summer sales came in ahead of forecasts.

It comes just six weeks after the retailer’s latest upgrade and shows shoppers continue to brave tough economic conditions.

Next’s forecast of earnings of £845m means they will be 2.9 per cent lower than last year.

Isabel Albarran, Investment Officer at Close Brothers Asset Management:

“Given the recent fall in inflation rates, we expect a rate hike of 25 basis points from the Bank of England today. We believe last month’s surprise double hike was likely an anomaly, an emergency response to the disorderly movements in market prices of rates and inflation, which have normalized to some extent.

But at a time when the Fed has stepped back at every meeting and ECB language suggests the Council is considering taking a similar approach, the Bank of England is an aggressive outlier. When is a break on the horizon for the UK?

The BoE is clearly still concerned about changes in the UK mortgage market and how this will affect the transmission of monetary policy, and the labor market remains tight. However, super-strong wage growth appears to be lagging inflation and broader employment indicators are showing signs of easing. We’ll be watching today’s announcement closely for signs that the end of the walking cycle is near.

“For assets, confirmation that the bank is almost done walking will be a blessing. We’ve already seen this dynamic in the US, where stock sector behavior suggests that investors are already looking past the peak at expected interest rate cuts.”

The Bank of England’s Monetary Policy Committee is expected to raise interest rates later today.

Market prices are currently trending toward a 25 basis point increase to 5.25 percent, but some forecasters predict that the MPC will instead opt for a larger 50 basis point increase to 5.5 percent.