Must read: FTSE 100, interest rates, Meta, Nvidia, Next, Shell

GLOBAL MARKETS 

The FTSE 100 is in the green, bucking broader weakness across Europe, fuelled by strong earnings reports. Rolls-Royce Holdings (LSE:RR.) has hit an all-time high after raising its profit guidance and reinstating its dividend. Next (LSE:NXT) shares are also soaring thanks to its upgraded profit outlook. 

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After the Federal Reserve kept rates on hold but opened the door to a September rate cut, all eyes turn to the Bank of England’s policy decision at lunchtime. Markets are pricing in around a 65% chance that the monetary policy committee will cut rates from their 16-year highs of 5.25% today. 

Data out today from Nationwide revealed that UK house prices rose by 2.1% annually in July and 0.3% on a monthly basis, both beating expectations. Prices rose at their fastest pace since December 2022. 

Over in the United States, shares in Meta Platforms Inc Class A (NASDAQ:META) surged by more than 7% after hours when it reported quarterly revenue up 22% and its fourth straight quarter of profit growth above 20%, both beating expectations. It also issued better-than-expected guidance for the current quarter. Facebook’s parent company is investing heavily in artificial intelligence and virtual reality. The stock is already up by more than a third so far this year, more than double the gains enjoyed by the tech-heavy Nasdaq. 

Meanwhile, semiconductor firms surged on Wednesday with NVIDIA Corp (NASDAQ:NVDA) jumping almost 13% while Advanced Micro Devices Inc (NASDAQ:AMD) and ARM Holdings ADR (NASDAQ:ARM) rallied by 4% and 8% respectively. The chip rally helped to reverse some of the previous session’s weakness and was fuelled by comments from Microsoft Corp (NASDAQ:MSFT), suggesting the tech behemoth has major plans for further AI investment.

NEXT  

Next has upped its full-year profit guidance after second-quarter full-price sales rose by 3.2%, sharply outpacing analysts’ expectations. It now expects to deliver underlying profit before tax of £980 million, up 6.7% year-on-year and an increase from its previous guidance of £960 million. 

Despite headwinds from the disappointing weather conditions in the second quarter, the high street retailer has delivered forecast topping sales with particular strength in demand from overseas. The tough economic backdrop with cost-of-living pressures and elevated interest rates have created a two-speed retail environment, separating the winners from the losers. True to form, Next has managed to land itself in the former category thanks to its attractive price point, impressive reach and alluring online presence which has allowed the company to reach a much larger potential overseas customer base.

Next has also engaged in some accretive acquisitions in recent years, snapping up struggling UK retail brands which have helped to broaden its offering. Despite the macro pressures, it has been able to retain a strong reputation for affordability and reliability across everything from homeware to school uniforms. 

Investors are lapping up today’s update, with shares surging by over 8%, extending Next’s year-to-date gain to more than 20%. It has sharply outperformed the FTSE 100 so far this year with the index up by around 8.5%.

SHELL 

Keith Bowman, Investment Analyst at interactive investor says: “Oil giant Shell (LSE:SHEL) announced second quarter profit that beat City forecasts. Adjusted profit of $6.29 billion is up from $5.07 billion a year ago, aided by cost reductions now totalling $1.7 billion since 2022. That’s ahead of analyst estimates for adjusted profit of $5.98 billion. 

A newly announced $3.5 billion share buyback program comes with a quarterly dividend payment of $0.344 per share, unchanged from the first quarter, but up from $0.331 in Q2 2023. Net debt of $38.3 billion leaves gearing at 17%, down from $40.3 billion at the same stage in 2023 when gearing was 17.3%. 

A shaky economic outlook, particularly for China, continues to offer uncertainty regarding future energy demand. Geopolitical tensions and the speed with which the West’s relationship with Russia changed should not be forgotten. Windfall taxes introduced in reaction to higher energy prices and the war in Ukraine persist, while Shell’s own dialling back of investments in climate friendly operations does not sit comfortably with all investors.  

To the upside, a diversity of operations across oil, gas, chemicals, and alternatives regularly allows one area of strength to counter another of weakness. Uncertainty of supply, focused on a possible widening of the Israeli conflict, currently offers support to the oil price. Expected interest rate cuts this year could boost demand for energy, while Shell’s net debt, swollen during the pandemic, has slowly reduced.

For now, and while climate change concerns hang heavy over the oil sector broadly, Shell’s focus on shareholder returns including share buybacks and a dividend yield of over 3.5%, underpin current City consensus opinion of the shares as a buy.”