The UK's FTSE 100 index experienced a notable decline of 1.36% on Tuesday, primarily driven by a substantial drop in shares of Vistry Group, which plummeted by 22.94% at closing. This downturn was triggered by a downward revision in the company's profit guidance for the full year of 2024. Vistry Group, a prominent British homebuilder, found itself leading the blue-chip index in a retreat following revelations of significant underestimations across nine out of 46 projects within its southern division.
This miscalculation is expected to have a one-off impact, prompting a reassessment of Vistry's adjusted pretax profit forecasts for the years 2024, 2025, and 2026. Investment bank RBC Capital Markets expressed grave concerns about the implications of this profit guidance cut, stating, "This is a big cut, and we expect the price of the shares to fall significantly today.
Investors will be looking to understand how the issue arose, how it is being dealt with, and why and how Vistry is confident that the issue is confined to one division." RBC has rated Vistry as sector perform and has revised its price target for the company down to 10 pounds sterling from a previous 14 pounds.
In a broader context, Tuesday marked a relatively quiet day for economic news in the UK, with investors eagerly anticipating the upcoming release of the country’s gross domestic product figures on Friday, alongside production data from its various industries. The Bank of England's next monetary policy meeting is slated for November, where further clarity on the economic landscape is expected.
Meanwhile, attention across Europe is centering on the forthcoming monetary policy decision from the European Central Bank, scheduled for October 17. Analysts widely forecast that policymakers will announce a reduction in interest rates, with expectations leaning towards a 25-basis-point cut. Ahead of this critical decision, Supervisory Board Vice-Chair Frank Elderson provided insights in Slovenia's national daily newspaper Delo, indicating a downward trend in Eurozone services inflation expected as we approach 2025.
This news comes at a pivotal moment, as both UK and European markets brace for potential shifts in economic policy and performance..