Daily market update: Shell, Vodafone, BT, Compass, Alphabet

The FTSE 100 dipped on decision day for the Bank of England (BoE) as ripples from the Anthropic-driven sell-off continue to be felt.

Markets are currently pricing in a 96% chance of no change to interest rates when the BoE policymakers sit down today, with the next cut not expected until April.

Barring a huge turn up for the books, attention will be centred on the balance of votes and whether this shifts the calculus on the timing and trajectory of rate cuts through the remainder of 2026.

The selling in data and software firms seen as vulnerable to Anthropic’s new suite of AI tools has ceased for now, with share prices in the likes of London Stock Exchange Group, RELX and Experian starting to recover.

However, the impact continues to be felt as the mooted London IPO of software outfit Visma is reportedly pushed back thanks to the turmoil. This would be a blow for a UK market starved both of tech representation and new listings of any scale.

Shell

Shell had already primed the market to expect bad news in its latest quarterly results but even so, this is a pretty ugly set of numbers for the company – with both earnings and revenue coming in appreciably below analysts’ forecasts.

While volatility in commodity prices is a fact of life for energy companies, investors may be more concerned by rising operating expenses – something which should be within Shell’s compass to control.

After an encouraging start to his tenure, with a pivot away from green energy ventures received well by the market, CEO Wael Sawan may come under greater scrutiny as momentum stalls.

The glare of the spotlight on Sawan is only likely to increase in intensity if Shell looks to boost his pay packet. Having dismissed the idea of a blockbuster merger with BP last year, Sawan needs to demonstrate how he can deliver growth for Shell against a difficult market backdrop.

Shell is attempting to keep investors on side with a further increase to the dividend and yet another share buyback but, with debt ticking higher, shareholders will know this isn’t sustainable over the longer term without an improvement in the financial performance.

The sense that Shell is going out on a limb to maintain its generosity to shareholders is reinforced by yesterday’s decision by European rival Equinor to scale back its own buyback programme.

Vodafone

Recent news had given investors hope the problems in Vodafone’s largest market – Germany – were behind it. However, its third-quarter update offered a serving of schadenfreude for its detractors as German growth slipped to a trickle.

This overshadowed a more robust performance elsewhere and raised questions about whether the regulatory-driven issues in the German market were truly behind the company. If November’s first dividend hike in seven years gave a signal that Vodafone’s recovery, following years of stagnation, was finally in motion that signal feels patchier today.

Vodafone may still be on track to deliver full-year profit and cash at the upper end of guidance, and the integration of Three UK may be progressing as planned but after an extended period of regular disappointments, shareholders can be forgiven for being cynical.

BT

BT’s exodus of broadband users is alarming, with a further 210,000 customers heading for the exit in the latest quarter. Any business losing customers at that rate would have alarm bells ringing and the chief executive given marching orders.

In BT’s case, it has put a positive spin on events, predicting the loss of customers on a full-year basis will be slightly less than previously expected. The market is relieved, sending its shares up in early trading.

Competition is growing, both in terms of price and providers, leaving sleepy BT to rely on its brand familiarity to attract new users and inertia to keep as many existing customers as possible. It’s no wonder the business is putting so much effort into cutting costs and improving efficiencies. BT is good at talking up its prospects, but the figures paint a different picture.

Compass

Is Compass next on the block to switch its main stock listing from the UK to the US? The tell-tale sign is the catering group changing the currency of its share price from sterling to US dollars.

Compass says this aligns the trading currency with its reporting currency, but in doing so makes it an outlier among the plethora of multinational companies on the UK stock market who almost all have their shares in sterling.

Admittedly, InterContinental Hotels recently made a similar switch, but these two companies are the exception, not the rule.

It’s common for big companies to be listed on more than one stock exchange, and to have shares quoted in different currencies. Compass is only listed in the UK, yet North America has become the big driver of business, now representing 68% of group revenue.

It makes perfect sense to switch the listing to the States if it wants to immerse itself in the priority operating region and have greater appeal to local or global investors. Having a dollar-denominated share price now would make the transition much easier, should it decide to move later.

Alternatively, there is an argument that UK investors are well versed in buying dollar-denominated shares given the popularity of US tech stocks in ISAs and pensions. They might not have any issue buying a dollar-denominated Compass share if they like the investment case. In this situation, Compass could argue it’s getting the best of both worlds – it stays on the London market and continues to serve UK investors, while the dollar pricing theoretically broadens its appeal to US investors and removes any currency concerns for them.

Alphabet

Intended AI spending of gargantuan proportions has overshadowed decent business progress at Alphabet. Revenues are growing nicely across its services and cloud operations, operating margins are expanding, and the dividend is getting fatter.

On the face of it, there is much to like about Alphabet’s results. What’s left a bitter aftertaste is guidance for a considerable increase in spending, precisely the type of news that investors are finding hard to digest across the tech space.

Investors weren’t sure what to make of it, with the shares slumping in post-market trading immediately after the results announcement but then quickly paring losses.

Alphabet is like Meta in that it can demonstrate the positive impact of spending on AI. That offers some reassurance to investors. Its Gemini AI model has been a big hit and AI is now embedded into its product suite. It is being deployed in search, chatbots, shopping facilities, photo and video features, cybersecurity, and much more. The use-case of AI across Alphabet is strong, hence why management feel justified in ploughing significant sums into strengthening the group’s infrastructure.

Alphabet is a monster cash machine, spitting out dollars faster than you can imagine, and that gives it considerable options. It’s natural for a name of its size and status to reinvest a good chunk of free cash flow back into the business. The big debate is how much of its cash flow should be used to augment AI capacity and whether it should bet the entire house on the technology.