FTSE 100 close: London markets flat as WPP shares slide on tumbling profits
FTSE 100 was flat on Friday ending the week in subdued fashion, as advertising giant WPP’s tumbling profits led to its share price sliding.
London’s flagship index was hovering between being up and dipping into the red throughout the day, and finished up at the close by almost half of one per cent.
Meanwhile the more domestically focussed FTSE 250 remained around half a percent up most of the day despite contractor Capita’s saying recent cyber attacks cost it £25m.
While the world’s biggest advertising firm sought to reassure investors that it was resilient, its shift towards AI plans hit the company hard.
This comes after the Bank of England raised interest rates for the 14th consecutive time on Thursday, as it seeks to get a grip on out-of-control inflation.
The biggest risers across FTSE was Rolls-Royce, up more than six per cent. Investors were buoyed after the engine maker’s rebound yesterday, with five-fold profits announced off the back of the aviation industry.
Across the pond, Amazon’s shares were up around nine per cent on Wall Street, following better-than-expected results, with sales surging to t $134.4 billion (£105.3 billion) in the second quarter.
The firm said it had seen “market conditions become more challenging over recent months with economic uncertainty resulting in clients and new business opportunities deferring hiring decisions.
Its share price dropped more than three per cent at the open, as the firm told investors it is “expecting first half revenue to be 10 per lower than that achieved in the second half of 2022.”.
Government contractor Capita, listed on the FTSE 250 index, also swung to a loss as it emerged its cyber attack will cost the firm £25m.
On the news, its share price plummeted by more than 11 per cent, eventually finishing at 16 per cent down.
“Markets have started to stabilise after a chaotic week led by the US debt downgrade and further interest rate hikes in the UK,” says Dan Coatsworth, stock market analyst at AJ Bell.
“The FTSE 100 was flat on Friday morning, while parts of mainland Europe including France and Spain saw small gains. Asia moved higher across the key markets in Hong Kong, mainland China, Japan and India.
“Pre-market indicative prices suggest US markets will also move higher. Non-farm payrolls numbers in the US released later today are expected to show a robust jobs market.
“Amazon’s better than expected second quarter results have put investors in a better mood. Its cloud computing problems aren’t getting worse, costs are being lowered in its fulfilment network and retail customers are getting their orders faster than ever.
“Sadly, the positive sentiment didn’t extend to all parts of the market, with the UK seeing several big downward movements. Capita slumped 11 per cent after flagging up to £25 million of costs associated with its recent cyber-attack. WPP was close behind with a 7 per cent decline after a nasty profit warning linked to US tech clients spending less on advertising.”
Investors also looked towards the latest monthly non-farm payrolls report in the States, which were out at 1.30pm BST, following the debt downgrade earlier in the week.
The figures showed America’s job market as steady, with firms adding 187,000 jobs, while the jobless rate dipped to 3.5 per cent from 3.6 per cent in the prior month, the Labor Department said.
David Henry, investment manager at Quilter Cheviot said “the US jobs market continues to remain remarkably resilient in the face of the highest Fed Funds Rate in a generation, while simultaneously offering signs that the Federal Reserve’s fight against inflation is making progress. 187,000 jobs were added in July, lower than expectations but still a relatively robust figure, marking a fall from 209,000 in June and the lowest level seen since 2020. The unemployment rate also saw a minor downtick to 3.5%.
“While the labour market is slowly cooling as rate rises have some impact, at the moment there still seems to be enough momentum in the economy to avoid recession. Whisper it, but the fabled ‘soft landing’ may just be achieved, although a lot can still happen before the Fed declares “job done”. The economy’s robustness may mean that the Fed feels comfortable continuing to raise rates, but it has repeatedly stated that these decisions will remain dependant on the data and there are a number of data points due before the next meeting – not least next week’s inflation number.
“The US remains the powerhouse of the global economy, with significant opportunities for investors. With labour market growth slowing but still strong, economic growth holding up and consumer spending still high, the region remains very attractive.”