Daily market update: Diageo, BT, Auto Trader, Hikma, Smith & Nephew

The FTSE 100 slipped on a negative reaction to corporate updates despite gains in Asia and the US overnight.

Could there be fireworks a day late at the Bank of England? The interest rate decision is hard to call ahead of today’s vote, with several observers expecting a rate cut even if the market is pricing in no change.

Recent signs of easing inflation and a softer labour market would give the Bank some cover for a cut and the downbeat tone to Chancellor Rachel Reeves’ speech this week may encourage Governor Andrew Bailey and his colleagues to act ahead of the Budget later this month.

It all boils down to whether the Bank feels it needs to get one step ahead of any Budget-related economic setback. The central bank has form in being reactive rather than proactive, so the likely outcome still seems to be that it waits until December before making the next move.

A reading implying an improved jobs market in the US proved helpful to sentiment on financial markets, as did a suggestion the US Supreme Court is sceptical about the legality of the Trump administration’s sweeping tariffs.

Diageo

Shareholders in Diageo have been left drowning their sorrows again as the drinks giant served up another disappointment in a year littered with them.

This latest update increases the pressure on the Diageo hierarchy to fill the leadership vacuum created by the departure of CEO Debra Crew in July and halt the sense of drift which is pervading the business. The weak outlook for 2026 reflects poor spirit sales in China and a weaker US consumer environment.

The fear for markets will be that Diageo’s performance reflects more than just the ups and downs associated with fluctuations in the economy and instead hints at shifting drinking habits and/or the diminished appeal of Diageo’s key brands. The weak Chinese business also suggests one of Diageo’s key levers of growth – selling more to an expanding middle class in emerging markets – has broken down.

Diageo has been struggling since the passing of the late CEO Ivan Menezes in 2023, and its travails may lead to pressure for more dramatic action to turn around the company’s fortunes, including a potential spin-off of Guinness to create a business with a distilled focus on spirits.

BT

It may be losing broadband customers to rivals in a competitive market, but BT still managed to dial up some enthusiasm among investors with evidence it is ploughing ahead with its turnaround plan. A further 5,000 jobs have gone as the company looks to streamline operations under CEO Allison Kirkby.

Despite the relatively indifferent first-half performance, BT is sticking with full-year guidance and, more significantly, its medium-term cash flow targets. The response to the numbers shows that if investors can see a clear path to improvement, they will allow for some speed bumps along the way.

There is no mention of reports that the company might be entering the low-cost mobile market, where it has been left behind by operators like Lebara and Lyca Mobile.

Auto Trader

Car listings site Auto Trader motored higher on first-half numbers. Despite difficult market conditions, the company has achieved meaningful increases in profit and revenue.

Perhaps inevitably in 2025, Auto Trader is extolling the contribution AI is making to the business in terms of boosting efficiency in the buying and selling process on its platform.

Being the market leader creates a virtuous circle for Auto Trader. Its site has the most listings and is therefore the one which prospective car buyers will go to when looking for their next vehicle. This reinforces its position as a must-have product for dealerships and equips it with significant pricing power when it comes to securing subscriptions.

Hikma Pharmaceuticals

The FTSE 100-listed generic medicine maker Hikma has delivered a dose of bad news to the market, leaving its share price looking unwell. Medium-term profit growth expectations have been downgraded, making the company a less appealing investment prospect.

With so much attention being placed on the cost of drugs around the world, generic producers should be in full bloom as they offer a cheaper alternative to branded drugs.

However, competition is fierce, and Hikma has various challenges of its own, including delays to a new UK manufacturing facility and supply chain issues. The business is certainly not broken; it is just finding obstacles in the way that slowdown progress.

Smith & Nephew

A slight miss to expected revenue growth amid weakness in its US knee implants business has put Smith & Nephew in the hospital ward. An 8% share price slump is the market’s way of saying it is displeased with performance, and it puts an end to the share price rally that’s been in place since April.

Smith & Nephew is a turnaround story, and it was finally gaining traction after a long wait. However, today’s update might leave investors worried the recovery efforts are running out of steam.

ITV

Chancellor Rachel Reeves can take the blame for ITV’s share price slipping on better-than-expected results, at least as far as the UK broadcast network is concerned.

Businesses are fed up with uncertainty around the Budget and the lack of clear guidance over whether taxes will go up or not. This is having a negative impact on money spent internally such as delaying decisions on hiring or holding off from expanding facilities. Companies are reluctant to spend money if they suddenly find their cost base changes once again.

That uncertainty has spread to promoting products – businesses recognise the outlook for consumers is also cloudy, and so they’re being more cautious about spending on advertising until the Budget happens. Naturally, that’s terrible news for ITV, which has guided for weaker advertising demand in the fourth quarter, citing the Budget as the key factor.