The UK stock market soared, pushing the FTSE 100 index to new heights on Friday after the Bank of England (BOE) decided to keep interest rates unchanged at 5.25%. In the last six months, the FTSE 100 index has gained nearly 14%, reaching an all-time high of 8,442.41 last week. As a result, the UK has emerged as the top performer among European stock markets so far in 2024.
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This indicates investors’ positive response after a long dry spell, largely driven by optimism surrounding the potential reduction in borrowing costs. However, the BOE’s governor, Andrew Bailey, emphasized that the conditions aren’t yet ripe for a rate cut, despite promising signs.
UK-based financial services company Hargreaves Lansdown PLC (GB:HL) believes that the market is showing signs of renewed vitality. However, it acknowledges that there is still a significant amount of ground to cover.
Likewise, UBS has placed the UK as the “most preferred,” up from the “least preferred” under its global strategy for equities. Meanwhile, Deutsche Bank reiterated that the FTSE 100 remains its “favourite index in Europe” and maintains a preference for European stocks compared to their U.S. counterparts.
Rolls-Royce Leads the Way
UK-based aerospace and defence company Rolls Royce Holdings PLC (GB:RR) stands out as the top-performing stock on the FTSE 100 index. Following RR were private equity firms Intermediate Capital Group (GB:ICG), which gained 22%, and 3i Group PLC (GB:III), which saw an 18% increase in the last three months.
RR stock has experienced a remarkable journey in recent years, driven by the rebound of the aviation sector and a successful turnaround strategy. In the past three months, RR stock has surged by over 30%, contributing to an impressive 82% gain over the last six months.
In 2024, Rolls Royce expects its underlying operating profit to be between £1.7 billion and £2.0 billion, a rise from £1.6 billion in 2023. Additionally, free cash flow is projected in the range of £1.7 billion to £1.9 billion, up from £1.3 billion reported in 2023.
Is Rolls-Royce a Good Stock to Buy?
Overall, analysts maintain a bullish outlook on Rolls Royce stock, considering its dominant market share and further recovery in its operations. According to TipRanks, RR stock has received a Strong Buy rating based on 11 recommendations, of which 10 are Buys. The Rolls-Royce share price forecast is 501.44p, which is 19% above the current level.
