FTSE Surges after-Hours
The FTSE 100 is showing a gain of nearly 1% so far this morning with the building sector rallying after Taylor Wimpey announced a special dividend. Futures markets suggest the majority of the gains for the broad index came after yesterday’s cash close, as US stocks moved firmly higher and saw the index open this morning substantially above where it closed. Elsewhere the latest inflation data released at 09:30 this morning has weighed on sterling as several simultaneous economic releases showed a declining level of inflation in the UK economy.
Builders provide foundations for rally
Shares in Taylor Wimpey have soared by more than 5% so far this morning after the housebuilder announced a special payout to shareholders over the next three years totalling £1.3 billion. Fellow firms in the sector have been buoyed by this signal which is presumably underpinned by strong demand for property, with Berkeley and Barratt Developments also enjoying significant gains in early trade.
Vodafone shares are also near the top of the index in terms of performance despite a decline in revenue and EBITDA. On the whole, these earnings are fairly solid and shouldn't cause any major shocks to long-term shareholders. To a certain extent, the decline in both these closely-viewed metrics can be explained by adverse movements in the exchange rate, with the firm already having announced that it will begin reporting in Euros from 31st March 2017. If the report is viewed on an organic basis the results are more favourable, with this refinement seeing revenue and EBITDA increasing by 2.3% and 2.7% respectively. The company has now concluded its £20 billion "project Spring" investment to improve the network and these latest financial reports show further improvement in performance. Alongside the 2% increase in dividends to 11.45p per share, this will likely give shareholders a more positive outlook going forward.
Latest inflation figures below forecast
The CPI Y/Y number, which showed an increase of 0.3% compared to an expected rise of 0.5%, was the standout print amongst a plethora of inflation indicators released this morning that suggest the economy is still quite some way from being suitable for a move off record low interest rates. The core CPI Y/Y followed suit in missing consensus forecasts of a 1.5% increase, coming in lower at 1.2%. The immediate reaction saw the pound depreciate and whilst weakness in the currency of late has been attributed to the uncertainty surrounding the upcoming EU referendum, it may be actually more a reflection of the underlying economy. This latest data comes after weaker than expected PMIs and employment figures,suggesting that the downside risks facing the pound aren’t exclusively related to a possible Brexit.