Stock Markets

Bank of England keeps rates at 15-year high, gilts rally

Published

11 months ago

November 3, 2023

Bank of England keeps rates at 15-year high, gilts rally

LONDON (Reuters) -The Bank of England held interest rates at a 15-year peak on Thursday, as it kept up its fight against the highest inflation among the world’s big rich economies, and stressed that it did not expect to cut them any time soon.

The Bank Rate was held at 5.25% for the second meeting in a row after 14 back-to-back rate increases and the BoE published forecasts showing the British economy is now skirting close to a recession.

MARKET REACTION:

STOCKS: Britain’s benchmark held onto its earlier gains and was last up 1.26% on the day.

FOREX: Sterling was up around 0.5% at $1.2208. It was trading around 0.35% higher before the BoE decision at $1.2193. It dropped versus the euro, which was 0.37% higher at 87.31 pence.

Bonds: Benchmark 10-year UK bond yields were last down 16 basis points (bps) on the day at 4.33%, extending earlier falls.

MONEY MARKETS: Markets moved to fully price in a 25 basis point BoE rate cut by August 2024, earlier they had seen around a 80% chance.

COMMENTS:

GEOFF YU, SENIOR EMEA MARKET STRATEGIST, BNY MELLON, LONDON:

“The BoE is probably along the path that it expected and probably slightly frustrated that it is not further along.”

“If you want to take just one key phrase from the BoE’s Monetary Policy Report it’s judgement three – ‘Second-round effects in domestic prices and wages are expected to take longer to unwind than they did to emerge’. That means that the path down will be slow.”

“The moves in bond markets yesterday did a lot of work for them already. People are talking about getting back into bonds, including longer dated bonds, and that’s fair enough, the UK is probably in an OKish place there.”

ALTHEA SPINOZZI, SENIOR FIXED INCOME STRATEGIST, SAXO BANK, COPENHAGEN:

“Regarding the Bank of England, the projections paint a picture of stagflation, and signal the next move to be a cut in the base rate rather than a hike. However, investors will need to deal with the fact that inflation will not revert to 2% until 2025. That means that the long part of the yield curve will remain vulnerable to a bull steepening, as the BoE is forced to remain on hold.”

“The risk the BoE is running into is that, if at the next projections there is the need to revise inflation up again, that will need to be brought together with another interest rate hike. That would kill the central bank’s credibility at the cost of sterling.”

ED HUTCHINGS, HEAD OF RATES, AVIVA INVESTORS, LONDON:

“With no change but close to 0.75 (percentage points) of cuts priced for 2024, the BoE seems keen to push back on markets getting carried away with cuts.”

“With the lagged effects of past interest rate hikes still to feed through to the economy, weaker growth should well be expected going forward. This should largely be supportive for the currency, but elsewhere, the direction of travel on gilt yields in the near-term is more unclear.”

DARIO PERKINS, MANAGING DIRECTOR, GLOBAL MACRO, TS LOMBARD, LONDON:

“I think all central banks are sort of desperate to stop. The tightening cycle is basically over as far as I can see. If you look globally, you can see that some central banks have already started to ease so that sort of synchronized tightening that we had, has ended and now it’s just a question of when and if they cut interest rates.”

“I think the Fed is in quite a comfortable position, I’m not sure you can say the same about the Bank of England and the ECB.”

SAMUEL ZIEF, HEAD OF GLOBAL FX STRATEGY, J.P. MORGAN PRIVATE BANK, LONDON:

“The BoE told us that further tightening requires fresh evidence of inflation persistence. Data since the last meeting has not met that threshold.”

“They’ll likely be sitting on ‘Table Mountain’ for a while, but in our view the next move for the BoE will be to lower rates. The BoE evidently doesn’t disagree; its forecasts see inflation returning to target in 2025 if rates remain unchanged into next year and then gradually decline.”

“With the BoE in hand after the Fed yesterday and the ECB last week, all of the major central banks are now on hold in our view. At the same time, growth and inflation – particularly in Europe – are both moving in the same direction: lower. That’s a strong backdrop for fixed income; we like owning European bonds across the curve and funding tactical FX trades out of euro and sterling.”

CHRIS BEAUCHAMP, CHIEF MARKET ANALYST AT IG GROUP, LONDON:

“The BoE has struck a similar tone to the Fed, and today’s 6-3 result shows that caution is spreading to central banks outside the U.S. While it’s still clear that rate cuts are off the table for the foreseeable, it seems the bar for another rate hike has been raised a little today”.

MICHAEL FIELD, SENIOR EQUITY STRATEGIST AT MORNINGSTAR, AMSTERDAM:

“This will come as some small relief for markets, but any positivity coming from this announcement today has been lost in the euphoria on the news that the U.S. Federal Reserve is likely finished with rate increases, which should buoy the global economy.”

“That the Bank (of England) could also be finished with rate rises, and may even start cutting early next year, is something to be celebrated, both by businesses and cash-strapped mortgage holders. But at the same time, it is easy to forget how quickly and strongly rates rose. At 5.25%, base rates stand at their highest level since before the financial crisis.”

JEREMY BATSTONE-CARR, STRATEGIST, RAYMOND JAMES, FRANCE:

“Soft economic activity and inflationary pressures persist, but the fact that these are no worse than forecast contributed to today’s conclusion to hold the rate steady. The rise in longer dated government bond yields, in large part the consequence of global factors, has served to tighten financial conditions and done a share of the MPC’s (Monetary Policy Committee) work for it.”

“The question going forward is how long this standstill will last for – with financial markets expecting it to be a considerable period of smooth sailing. The door for future rate hikes still sits ajar, and the MPC will likely remain vigilant for further fluctuations and risks in the months ahead.”

PETER DOHERTY, DIRECTOR, HEAD OF INVESTMENT RESEARCH, ARBUTHNOT LATHAM, LONDON:

“Of all the major central banks, the BoE has the toughest path forward. Economic data is cooling, the labour market is tight, but inflation is still sticky.”

“In the short to medium term the ability of the (U.S.) Federal Reserve to hike relative to the BoE constrains the pound against the dollar.”

“When you look back a couple of months, what was priced in was continued hikes from the BoE and cuts next year from the Fed. What might turn out could be very much the opposite of that.”

GEORGINA TAYLOR, FUND MANAGER AND HEAD OF MULTI-ASSET STRATEGIES, INVESCO, LONDON:

“Given we are probably at peak rates, we have to line up the central banks in terms of who might move to cuts and we think probably the Bank of England will need to be the one major central bank that moves first. They need to focus on the growth-inflation mix and the fact the economy is deteriorating.”

“Across bond markets, gilts are the place where there is probably most value coming through so we have added some exposure.”

Stock Markets

Sterling Construction stock soars to all-time high of $137.93

Published

18 hours ago

September 19, 2024

Sterling Construction Company, Inc. (NASDAQ:) has reached an impressive milestone, with its stock price soaring to an all-time high of $137.93. This peak represents a significant achievement for the company, reflecting a robust performance and investor confidence. Over the past year, Sterling Construction has witnessed a remarkable 84.48% increase in its stock value, underscoring the company’s strong market presence and the positive reception of its strategic initiatives. Investors and market analysts alike are closely monitoring STRL’s progress, as it continues to build on its momentum in the construction sector.

In other recent news, Sterling Infrastructure, Inc. announced two key changes in its leadership. The company revealed the upcoming retirement of board member Charles R. Patton, effective from September 1, 2024. Patton, who has been a part of Sterling’s Board since 2013, will step down after over a decade of service, during which he contributed to the Corporate Governance & Nominating Committee and the Compensation Committee.

In parallel, Sterling Infrastructure named Dan Govin as its new Chief Operating Officer. Govin, who brings over three decades of experience in the energy infrastructure industry, is set to lead the company’s strategic and operational initiatives. His past roles include Regional President at Quanta Services (NYSE:) and Senior Vice President of Operations.

In related developments, Sterling Real Estate Trust, a North Dakota-based real estate investment trust, recently held its annual shareholders’ meeting. During the meeting, eight trustees were elected, including Gregory P. Hammes, Timothy L. Haugen, and Michelle L. Korsmo, among others. Additionally, the appointment of RSM US, LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2024, was ratified by the shareholders. These are among the latest developments at Sterling Infrastructure, Inc. and Sterling Real Estate Trust.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Stock Markets

CRH stock soars to all-time high, reaching $91.22

Published

18 hours ago

September 19, 2024

CRH (NYSE:) PLC, a global leader in building materials, has reached an all-time high, with its stock price soaring to $91.22. This significant milestone underscores the company’s robust performance and investor confidence in its growth trajectory. Over the past year, CRH has seen an impressive 66.73% increase in its stock value, reflecting strong market demand and the successful execution of its strategic initiatives. The company’s ability to achieve this record price level amidst a dynamic economic environment speaks volumes about its resilience and the positive outlook shared by its stakeholders.

In other recent news, CRH Plc has seen a series of positive developments. Stifel, a financial services firm, has increased its EBITDA projections for the company by 4% for the years 2024 and 2025, following a positive outlook on CRH’s earnings. This includes the expected contributions from the newly acquired Adbri, which is predicted to add an additional 1% and 2% to the EBITDA in 2024 and 2025, respectively.

In addition, Deutsche Bank has raised its price target for CRH, maintaining a Buy rating on the stock, following the company’s acquisition of a majority stake in Adbri. This move is anticipated to enhance CRH’s materials solutions offerings in Europe.

Furthermore, CRH has appointed Lauren Schulz as its new Chief Communications Officer, a move expected to enhance the company’s global communications strategy.

Additionally, CRH has filed a notification regarding transactions by persons discharging managerial responsibilities, providing transparency into the dealings of the company’s management.

Lastly, CRH has reported strong growth in adjusted EBITDA and margin for the second quarter of 2024, and has raised its full-year adjusted EBITDA guidance to a range of $6.82 billion to $7.02 billion. These recent developments demonstrate the company’s resilience and strategic approach in a competitive market.

InvestingPro Insights

The ascent of CRH PLC in the stock market is not just a reflection of past performance but also a beacon for future potential, as suggested by InvestingPro data and insights. With a market capitalization of $60.88 billion and a forward-looking P/E ratio of 17.69, CRH is positioned competitively within the Construction Materials industry. Its commitment to shareholder returns is evident through a consistent dividend growth, having raised its dividend for the last four years, and a dividend yield of 1.39% as of the last twelve months leading up to Q2 2024. These financial gestures indicate management’s confidence in the company’s profitability, which is further supported by a strong gross profit margin of 34.85%.

In addition to its financial health, CRH’s operational efficiency is highlighted by an EBITDA growth of 13.63% in the same period. Notably, analysts have revised their earnings upwards for the upcoming period, signaling potential for continued growth. For investors seeking more detailed analysis, there are additional InvestingPro Tips available, including insights into CRH’s share buyback strategy and its performance relative to industry peers. These tips, accessible through the InvestingPro platform, offer a comprehensive view of the company’s strengths and investment potential.

For those monitoring CRH’s trajectory, the stock is trading near its 52-week high, at 99.14% of its peak, with a previous close at $89.27. The company’s next earnings date is set for November 7, 2024, which will provide further clarity on its performance and outlook. With a fair value estimate of $101 by analysts and an InvestingPro fair value of $74.35, investors are presented with a nuanced picture of CRH’s valuation. As the market anticipates CRH’s next financial disclosures, the InvestingPro platform remains a valuable resource for real-time data and expert analysis.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Stock Markets

Nelnet stock soars to all-time high of $115.64 amid robust growth

Published

18 hours ago

September 19, 2024

In a remarkable display of market confidence, Nelnet Inc (NYSE:) stock has achieved an all-time high, reaching a price level of $115.64. This milestone underscores a period of significant growth for the company, which has seen its stock value surge by 27.28% over the past year. Investors have rallied behind Nelnet’s strong performance, propelling the stock to new heights and reflecting optimism in the company’s future prospects. The all-time high represents not just a peak for the year but an unprecedented value in the company’s trading history, marking a momentous occasion for both Nelnet and its shareholders.

In other recent news, Nelnet Inc. has been under the spotlight following strong Q2 earnings and subsequent adjustments by TD Cowen. The firm increased Nelnet’s price target to $98.00, up from $96.00, while maintaining a Hold rating on the stock. This follows Nelnet’s Q2 2024 earnings report, which highlighted an EPS of $1.44, surpassing TD Cowen’s estimate of $1.33. The improved earnings were largely due to reduced operating expenses and a lower provision for losses. However, these gains were slightly offset by a decrease in fee income and a lower net interest income.

In recent developments, Nelnet disclosed its quarterly financial results to the Federal Deposit Insurance Corporation (FDIC). The report provides a snapshot of the financial health of Nelnet Bank, its wholly-owned subsidiary, and includes critical data such as assets, liabilities, and income. This commitment to transparency and regulatory compliance allows investors to gauge Nelnet’s financial stability and growth prospects.

Furthermore, Nelnet’s bank subsidiary, Nelnet Bank, also disclosed its quarterly financials. The report, known as the Call Report, is a significant indicator of the subsidiary’s contribution to Nelnet’s overall financial status. This routine disclosure aligns with the requirements of the Securities Exchange Act of 1934, providing a clear view of Nelnet Bank’s financial standing as of the last quarter.

InvestingPro Insights

In light of Nelnet Inc’s (NNI) recent achievement of an all-time high stock price, several InvestingPro Tips and real-time data points provide further context to the company’s financial health and market performance. Notably, Nelnet has demonstrated a robust track record by raising its dividend for 9 consecutive years and maintaining dividend payments for 18 consecutive years, which signals a strong commitment to shareholder returns. Additionally, analysts remain optimistic about the company’s profitability, expecting net income to grow this year.

From a data standpoint, Nelnet’s current market capitalization stands at $4.15 billion with a price-to-earnings (P/E) ratio of 26.88, which adjusts to a lower ratio of 22.02 when considering the last twelve months as of Q2 2024, reflecting a more favorable valuation for investors. The company’s revenue growth has been modest at 0.7% over the last twelve months, yet it experienced a more significant quarterly surge of 12.82% as of Q2 2024. Importantly, Nelnet’s stock is trading near its 52-week high, at 99.06% of this peak, and has seen a large price uptick of 31% over the last six months. These figures underscore the company’s strong market presence and potential for continued growth.

For those interested in deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/NNI, which can provide investors with more nuanced insights into Nelnet’s performance and future outlook.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.