The FTSE 100 and European stocks experienced a downturn on Thursday, despite Rolls-Royce (RR.L) announcing its first dividend in five years, a £1bn ($1.27bn) share buyback, and upgraded mid-term guidance. This positive news for Rolls-Royce comes on the heels of strong 2024 results.
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Rolls-Royce Soars on Dividend and Share Buyback News
The UK engineering firm declared a 6.0p per share dividend following a more than 50% surge in earnings last year. Underlying operating profit reached £2.5bn, up from £1.6bn in 2023. The company also issued optimistic guidance for 2025, projecting underlying operating profit and free cash flow between £2.7bn and £2.9bn. This achievement meets Rolls-Royce’s mid-term targets two years ahead of schedule.
Chief Executive Tufan Erginbilgic emphasized the company’s momentum and ambitious vision, stating that these mid-term targets are merely a stepping stone toward further growth. This confident outlook propelled Rolls-Royce shares up by 15% in London, reaching a historic all-time high.
Market Performance and Upcoming Economic Data
Despite the positive news from Rolls-Royce, the broader market indices showed declines:
- FTSE 100: Down 0.3% in early trading.
- DAX (Germany): Dipped 1.2%.
- CAC (France): Declined 0.8%.
- STOXX 600 (Pan-European): Down 0.7%.
In contrast, US markets are poised for a positive opening, with S&P 500, Dow, and Nasdaq futures all trading in the green. The pound remained stable against the US dollar at 1.2673.
Investors are anticipating key US economic data releases, including weekly initial jobless claims, pending home sales for January, preliminary durable goods orders for January, and the second estimate of Q4 GDP. Furthermore, the European Central Bank (ECB) will release the account of its January meeting, and several Federal Reserve officials are scheduled to speak.
Market Movers and Notable Developments
Several other significant market developments occurred on Thursday:
- Lloyds Banking Group: Barclays analysts issued a bullish prediction, suggesting Lloyds could return nearly half its market value to shareholders by 2027 due to strong fundamentals and capital generation.
- Eli Lilly: Announced plans to build four new manufacturing sites in the US, boosting production of active pharmaceutical ingredients and creating thousands of jobs.
- Elizabeth Line Strikes: Planned strikes were called off after a pay dispute resolution, averting further disruption to London’s transportation system.
- Meta Platforms: Reportedly in talks for a massive $200bn AI data center project, highlighting the growing investment in artificial intelligence. However, Meta denies these reports.
- BP: Scheduled a capital markets presentation, with investors anticipating a strategy reset amid reports of a significant stake acquisition by activist investor Elliott Investment Management.
- Heathrow Airport: Declared its first dividend since the COVID-19 pandemic following a significant rebound in passenger traffic and profits.
Conclusion: Market Volatility Amidst Positive Corporate News
Thursday’s market activity underscores the complex interplay of factors influencing investor sentiment. While positive corporate news from companies like Rolls-Royce and Heathrow provided a boost to specific sectors, broader market indices reflected a more cautious outlook. Investors are keenly awaiting upcoming economic data and central bank announcements to gauge the overall health of the global economy. The coming days will likely provide further clarity on the direction of the market.
