FTSE 100 dips, sterling slips as Andrew Bailey signals Bank may become ‘more aggressive’ with interest rate cuts, yen eases as new PM dampens rate hike speculation and Tesco unveils bumper dividend increase as it gains share

“The FTSE 100 dipped on Thursday morning having held up better than many of its counterparts thanks to its strong energy weighting so far this week,” says AJ Bell Investment Director Russ Mould.

“The sluggish start for the index was particularly notable because it normally gets a boost when the pound is under pressure due to its dominant overseas earnings. Sterling was on the back foot after comments from Bank of England governor Andrew Bailey that rate cuts could become ‘more aggressive’.

“While oil prices have moved higher as the situation in the Middle East has escalated this week, threatening to once again stoke inflationary pressures, crude has eased from its highs in the wake of Iran’s missile strikes on Israel and the move is not yet comparable with that seen a year ago.

“Overnight the yen fell as new prime minister Shigeru Ishiba dampened recent speculation about an interest rate hike from the Bank of Japan. This helped give other Asian markets a lift.”

Tesco

“For a company in such a competitive market and with an already dominant market position to be taking share is quite the feat and that’s something Tesco has achieved in the first half of its financial year.

“The supermarket also demonstrated its confidence in its future prospects heading into the crucial Christmas trading period with a healthy increase in the dividend. This is underpinned by strong cash generation, which is also enabling Tesco to invest in the business and compete effectively on price.

“Its focus on value is clearly getting customers through the doors and the tills ringing and, alongside measures like its Clubcard discounted prices, should help to engender loyalty. A fairly astonishing 23 million households now have a Clubcard membership.

“This is why the report on CMA findings into supermarkets’ loyalty pricing practices will be closely monitored by Tesco and its shareholders when it comes out next month. Though the noises to date suggest this shouldn’t pose a major threat.

“The challenge put forward by the German discounters hasn’t gone away, but Tesco has managed to absorb it in a way which other mid-market groceries outfits like Asda and Morrisons have found more difficult. The growing appetite for its Finest range also suggests it may be starting to appeal to shoppers who previously would have frequented higher end rivals.”

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