Image Source: Pexels

On Tuesday, London's FTSE 100 saw a slight increase, supported by Unilever's announcement of plans to spin off its ice cream unit. However, the gains were limited due to cautiousness ahead of the upcoming domestic inflation data and the Federal Reserve's interest rate decision later this week. The blue-chip FTSE 100 saw a minimal 0.1% increase. Investors chose to hold off on making significant investments prior to the release of important domestic inflation data and the Federal Reserve's rate decision, both scheduled for Wednesday. This is to gain clarity on the global monetary policy direction before the Bank of England's rate announcement on Thursday. It is anticipated that the BoE will maintain current interest rates in the upcoming meeting, but attention will be on when the first rate cut will occur.

On the negative side of the ledger Reckitt falls to the bottom of the FTSE 100 again due to the Enfamil cases' impact, as Citigroup reduces its price target. UK consumer goods group Reckitt is down 3.2% at 4,427 pence, making it the top loser on the FTSE 100 index. Citigroup has lowered its target price on the stock by 400p to 5,500p, citing a potential settlement liability of 4 billion pounds in relation to Enfamil baby formula lawsuits. Meanwhile, Barclays estimates a worst-case scenario of 2 billion pounds ($2.53 billion) in legal risk. Barclays believes that the small potential plaintiff pool will limit potential damages compared to other U.S. mass litigations, although clarity will take time. Reckitt's market cap suffered a decline of more than 5 billion pounds after a U.S. judge ordered the company to pay $60 million in a case, causing its shares to trade at more than decade lows. The company stated that numerous cases have been filed against baby formula makers in general, and it is unclear how many are directly related to its unit's Enfamil product. The stock has declined by 18.3% so far this year.

On the positive side of the ledger Unilever's stock is on the rise due to the announcement of their plans to spin off their ice-cream unit and implement a cost-savings plan. The company's shares have surged by 5.6% to reach a near one-month high in early trading on the FTSE 100 index. Unilever aims to save 800 million euros ($869 million) over the next three years by cutting 7,500 jobs. Additionally, the company plans to create a standalone business for its ice-cream unit, which includes popular brands like Ben & Jerry's, in order to streamline its operations. Unilever is open to considering various options to maximise returns for its shareholders, and it also aims to achieve mid-single digit underlying sales growth and improve its margins after the spin-off of the ice-cream unit. This strategic move has been well-received by shareholders and analysts, as it demonstrates proactive decision-making by the company's new leadership team. Despite a 5.8% decline in stock value over the past year, Unilever's recent actions have generated optimism for its future performance.

FTSE Bias: Bullish Above Bearish below 7700

• Below 7590 opens 7550
• Primary support 7635
• Primary objective 7860
• 5 Day VWAP bearish
• 20 Day VWAP bullish

(Click on image to enlarge)

More By This Author: