FTSE 100 closes in the red
Wall Street shares also down
Sterling rises four-tenths of a cent against the greenback
BoE keeps rates on hold
FTSE 100 closed lower on "Super Thursday" as European shares were lower and Wall Street lagged too.
Earlier in the day, the Bank of England, as had been expected, left its interest rates unchanged. This comes 50 days before the Brexit due date on March 29 this year.
The UK index of leading shares closed down over 79 points to 7,093, while the FTSE 250 lost over 274 points at 18,799.
David Madden, an analyst at CMC Markets, said: "European stock markets are sharply lower this afternoon as the European Commission and the Bank of England cut growth forecasts.
He added; "Brexit is on the horizon and the situation is still very unclear about what the future relationship will look like beyond the 29 March. The EU also have a lot to lose should the
UK leave without a deal, and the deteriorating economic condition could not come at a worse time."
On Wall Street, the Dow Jones Industrial Average is down around 327 points at the time of writing, while the S&P 500 index lost around 35 at 2,695.
3.55pm: Footsie rallies on hopes of Brexit progress
The Footsie was rallying, paring its losses as it entered the last half hour of trading.
The top-shares index was down 24 points at 7,149, while its baby brother, the FTSE 250, was down 209 points at 18,864.
On the foreign exchange markets, sterling perked up to rise 0.39 cents against the US dollar after reports of some progress in round 20,157 of the UK’s Brexit negotiations.
2.45pm: Wall Street benchmarks open about 0.8% lower
As expected, US indices opened lower.
The Dow Jones was off 190 points (0.8%) at 25,201 while the broader-based S&P 500 was 23 points in the hole at 2,709.
On the UK front, the FTSE 100 was down 28 at 7,144, about five points above its low point for the day.
Earlier today, the Bank of England left its interest rates unchanged – regarded as a “nailed-on certainty” by Howard Archer at the EY ITEM Club.
“The Bank of England is significantly more dovish on the extent to which interest rates will need to rise over the next three years, although it maintains the view that they will likely have to rise gradually and to a limited extent. The forecasts contained in the Quarterly Inflation Report are based on prevailing market expectations that it is touch and go whether there will be one 25 basis point interest rate hike in 2019, while one-two 25 basis point hikes in total are seen by the first quarter of 2022,” said the chief economic advisor to the EY ITEM Club.
Rain Newton Smith – he’s the CBI’s chief economist, not a weather forecast – reckon it is now “crunch time” in the Brexit saga.
“A no-deal scenario must be taken off the table because the economy is seizing up from uncertainty. The Bank’s forecasts, when put together with recent business surveys, illustrate the harmful impact on the economy the longer that this goes on.
“Brexit uncertainty has kept interest rates on hold this month, and the near-term outlook for the UK economy is also weaker; however, in the event of a smooth Brexit, the Bank expects a lift to economic growth and business investment further ahead, as greater clarity unlocks pent-up demand,” he added.
The shares were off 12.1% at 2,606p.
1.00pm: Blue-chips slide as futures markets point to a lower start on Wall Street
The FTSE 100 has drifted lower in the afternoon session, anticipation of a soft start on Wall Street.
The FTSE 100 was down 20 at 7,154 as pundits continued to consider the implications of the Bank of England’s revised growth forecasts (see below).
“Markets got a very clear message from the Bank of England; that they should expect slower growth in the UK economy even if we get a smooth Brexit,” declared market.com’s Neil Wilson.
“Slowing global economic trade winds mean the bias is more bearish even if we get a soft Brexit. That might not be how it pans out for the UK – it may be that pent-up demand points to upside risks should Brexit go well. The Bank has set the bar rather low, which broadly seems sensible as it puts it closer to where it might need to be if there is a no deal,” he added.
Keeping up the cheerful mode, ING Economics said: “there’s plenty of short-term negativity in the Bank of England’s latest predictions”.
The Dutch group has identified “the subtlest of hints that they’d still like to tighten policy further if they can”.
“That says to us that a 2019 rate hike shouldn’t be ruled out just yet, although as ever it all depends on Brexit,” it added.
The reduction in the growth forecast for 2019, to 1.2% from 1.7%, was much sharper than ING had been expecting.
“This partly reflects the weaker global backdrop, but we suspect it may also reflect the growing risk that the Brexit deadline could need to be extended, prolonging the uncertainty well beyond March. We agree that there is a real risk that business investment stays subdued for some time, as firms remain awake to the ‘no deal’ risk,” it added.
Meanwhile, in the US, the main benchmarks are expected to take a dive at the outset.
“Following yesterday’s lacklustre session, Wall Street slumped after the closing bell last night and index futures are pointing towards some modest losses at the open. That’s despite the upbeat narrative emerging from the US Treasury over the idea that a deal can be struck with China to resolve the ongoing trade dispute, although such an accord could well fuel a bout of risk-taking across the board, giving ample justification for reducing exposure to blue-chip stocks,” said James Hughes, the chief market analyst at Axi Trader.
12.05pm: BoE leaves rates unchanged; pares growth forecasts
All nine members of the Bank of England’s Monetary Policy Committee voted in favour of leaving the key lending rate unchanged at 0.75%.
The decision was not a surprise and attention focused more on the central bank’s growth forecasts for the UK economy, which have been trimmed.
The bank now expects gross domestic product (GDP) to increase by just 1.2% this year, compared to its previous forecast of 1.7%.
In 2020, the UK economy is tipped to grow by 1.5%, down from the previous forecast of 1.7%.
The FTSE 100 was down 2 points at 7,171.
“The Bank of England set a neutral tone today, as it announced an entirely expected unanimous no-chance decision. Nobody thought for a minute that interest rates would change, so any intrigue was always going to come from the accompanying minutes and forecasts. The minutes noted the Bank still sees the need for higher interest rates in the coming years, but its growth forecasts were cut to 1.2% this year (from 1.7%) and to 1.5% next year (1.7%),” commented Ben Brettell, the senior economist at Hargreaves Lansdown.
“We’re already seeing a real economic impact from Brexit concerns, with weaker-than-expected January PMI readings released this week, and news today that house prices cooled again last month. This sent sterling to a two week low around $1.29 ahead of today’s announcement from the BoE, and it fell a further third of a cent in the immediate aftermath,” Brettell continued.
“Where we go from here is highly uncertain, to the point that betting markets think there’s only a 30% chance we’ll actually leave the EU next month. If and when we do leave, an orderly Brexit could see the Bank refocus on wage growth and raise rates later this year, though markets currently price this as a 50/50 chance. A no-deal scenario would likely see sterling fall 5-10%, causing a spike in inflation, but I’d expect the Bank to look through this and cut rates to support the economy,” he added.
10.30am: House price growth slows
The Footsie continued in see-saw fashion in mid-morning trade.
Marketing and advertising giant WPP PLC (LON:WPP) slumped 7.5% to 808.13p as its perennial rival, Publicis, issued a lacklustre trading update yesterday.
Housebuilders were off the pace after the release of the Halifax Home Price Index.
The Halifax reported that house prices fell 2.9% month-on-month in January, which was the second largest monthly drop (after April 2018) since September 2010.
The year-on-year increase narrowed to 0.8% in the three months to January after rising back up to 1.3% in the three months to December.
“January’s sharp drop was partly a correction after house prices had surprisingly spiked 2.5% month-on-month in December (the largest monthly increase since March 2016). Further volatile month movements had seen prices drop 1.2% in November after an increase of 0.7% in October and a drop of 1.3% in September,” observed Howard Archer, the chief economic advisor to the EY ITEM Club.
$FTSE Halifax HPI m/m (UK home price index)— Steve (@LarryLivinston) February 7, 2019
Actual -2.9% vs -0.6% forecast vs 2.2% prior
2nd worst reading in the last 8 years$DAX $CAC $ES_F $NQ_F $SPY $SPX $CMG $CL_F $GC_F $ZB_F $TLT $BOBL $GILT $EWG $EWU
“The latest data from the Bank of England shows that mortgage approvals for house purchases edged down further in December after a drop in November to be at an eight-month low of 63,793,” Dr Archer continued.
“This was down from 63,952 in November and a nine-month high of 67,029 in October. Mortgage approvals had previously improved to October’s high from a 2018-low of 63,394 in March (which had also been the second lowest level after December 2017 since August 2016),” he added.
Property listings website, Rightmove PLC (LON:RMV) joined the housebuilders in the doghouse, shedding 0.2% at 470.7p on the back of the latest data, while among the mid-caps, Bellway PLC (LON:BWY) was down 1.3% at 2,853p after finding the market hard to please with its trading update.
9.30am: The only way is sideways for the Footsie
Like a lot of us of a morning, the FTSE 100 was having trouble getting started on Thursday.
The blue-chip index was up 6 points at 7,179, having traded throughout the morning in a narrow range spanning from 7,155 to 7,173.
Not even the pound losing ground on foreign exchange markets was enough to engender enthusiastic buying of the Footsie’s many big dollar earners.
“Sterling opened on the back foot, falling to a fresh two-week low, as Brexit risks heighten and the Bank of England looks set to stand pat on rates,” noted Neil Wilson at markets.com.
“The Bank of England may well lower inflation and growth forecasts. This is not just about Brexit risks – in fact, the current indecision would tend to support the central bank staying put and not changing anything until there is more clarity. No instead it’s the clear softening in the eco data that we have seen in recent days, combined with the broader global economic conditions, that would suggest the economy could be set for a tougher time. Albeit rising wages should start to call for a tightening bias, the Bank seems for now at the mercy of near-term geopolitical events,” Wilson added.
Artificial hips and knees maker Smith & Nephew PLC (LON:SN.) did its best to encourage the Footsie to dance the quick-step, rising 3.1% to 1,506.5p following the publication of its full-year results.
The contract caterer lifted its full-year growth expectations after an "excellent" start to the year.
The shares were up 4.3% at 73p.
8.35am: Dull start for Footsie
FTSE 100 made a sluggish start to proceedings as traders kept their powder dry ahead of the Bank of England’s 'Super Thursday' triple bill.
While the Bank is widely expected to keep the base rate on hold, the City will assess the minutes from the monthly set-piece alongside the quarterly inflation report, which also goes out a midday today.
For good measure, BoE governor Mark Carney will give a press conference. Previously, all of the above was released piecemeal over a two-week period.
Carney’s message on Brexit – or perhaps lack of one – has the potential to impact the markets, particularly forex trading, economists said.
Ahead of the fun and games, equity trading volumes in the Square Mile were light as the Footsie drifted 7 points lower to 7,165.84.
Thomas Cook (LON:TCG) was flying 15% higher in early trade after it said it was considering offloading its airline rather than coming cap in hand to the market with a deeply discounted and dilutive rights issue.
By contrast, its larger travel rival TUI (LON:TUI) slumped 13% after it sounded the earnings alarm late Wednesday.
Proactive news headlines:
United Oil & Gas Plc (LON:UOG) announced gas reserve figures for its 20% owned Selva gas field, onshore Italy, with 13.3bn cubic feet of gas upgraded from a prior designation as contingent resources. The upgrade comes as the project moves towards first gas production in 2020, following the award of a production concession last month. A year earlier the Podere Maiar well was successfully drilled and tested at Selva.
Kromek Group PLC (LON:KMK) has announced a share placing to raise funds for the expansion of its business. The detection technology firm proposed a conditional firm placing and an open offer to raise £21mln through the issue of around 84mln shares at a price of 25p each.
Accesso Technology Group PLC (LON:ACSO) traded broadly in line with market expectations in 2018. The group also announced that executive chairman, Tom Burnet, will move to a non-executive role at the beginning of March.
OptiBiotix Health plc (LON:OPTI) has inked a three-year supply agreement for its cholesterol and blood pressure reducing LPLDL bacteria strain. The non-exclusive deal with Biolat covers Estonia, Latvia and Lithuania.
SDX Energy Inc (CVE:SDX, TSX:SDX) has expanded its footprint in Morocco, landing the Moulay Bouchta Ouest and Lalla Mimouna Sud licenses. Moulay Bouta Ouest spans some 458 Square kilometres and the licence award comes with commitments to reprocess seismic data and to drill one exploration well within the initial three and a half year licence period.
Anglo Asian Mining PLC (LON:AAZ) expects to produce 82-86,000 gold equivalent ounces in 2019, which would be a new record for the junior at the top of the forecast. Increased copper production will boost output said the Azerbaijani miner, with between 3,100 and 3,300 tonnes forecast or double 2018’s total.
Tlou Energy Limited (LON:TLOU) has said it believes there’s a significant likelihood that it will secure investment in the near term. The coal bed methane firm, in a stock market statement, confirmed that it is in discussion with parties considering investment into the company either via equity or debt provision.
IXICO PLC has announced the appointment of Grant Nash, currently finance director of the UK Biobank - a national and international health research data resource - as the company's chief financial officer. The AIM-listed neuroscience data analytics company said Grant will join the company on 29 April 2019 and it is anticipated that he will join the board in due course.
Travel group INTOSOL Holdings PLC (LON:INTO) has listed its shares on the Frankfurt Stock Exchange in addition to London’s standard market. "Given that the Company’s core operations are located in Europe, the Board believes that a Frankfurt listing will benefit existing shareholders by making the company’s shares more accessible to European investors," said the statement.
6.45am: FTSE 100 set to make a subdued start
The FTSE 100 is expected to open lower Thursday morning as investors await the latest interest rate decision and inflation data from the Bank of England.
Spread-betting firm IG expects the FTSE 100 to open 15 points lower after closing down 4 points yesterday at 7,173.
Jasper Lawler, head of research at London Capital Group, said that the bank was expected to lower its “already lacklustre” growth forecasts given the impending Brexit headline.
“Given that there is no transition deal in the bag, the BoE’s options are limited. The direction of the UK economy and monetary policy depends firmly on what type of Brexit the UK achieves, an orderly exit or disorderly.”
“With Brexit clouds limiting the BoE’s vision and therefore options, anything other than a wait and see approach is not viable.”
However, the BoE’s cautionary picture wasn’t consistent around the world, with the Reserve Bank of Australia indicating that it may cut interest rates if unemployment keeps rising and the country doesn’t achieve its inflation targets.
It was a similar picture on Wall Street yesterday with all the main indices closing lower after Trump’s state of the union address offered few details on economic policy and investors began to price in the potential impact of the US-China trade dispute on corporate earnings.
The Dow Jones Industrial Average closed 21 points lower at 25,390, while the S&P 500 was down 6 points at 2,731 and the Nasdaq was down 26 points at 7,375.
In Asia today, the Japanese Nikkei 225 dropped 122 points to 20,751 on the back of US-China trade concerns, with US Treasury Secretary Stephen Mnuchin saying he would lead a delegation to Beijing next week for the next round of trade talks. Other Asian markets are still closed for the Chinese New Year holiday.
On the currency markets, the pound was relatively flat against the dollar at US$1.293 and against the euro at €1.138, although Lawler said the BoE’s quarterly inflation report due out today could cause movement in sterling given the small likelihood of a rate change.
“The pound has slumped below support at US$1.30 as Brexit hits sentiment from all sides. There, is no solution to Brexit in sight, the UK economy is suffering under the strain of Brexit and there is talk of extending the uncertainty. A dovish Carney adding to the pound’s woes could send it tumbling towards US$1.28.”
Brexit uncertainty expected to dampen first “Super Thursday”
The Bank of England’s first “Super Thursday” of 2019 and a big batch of blue-chip corporate updates will provide plenty for investors to get their teeth in to on the day ahead.
Super Thursday is expected to be a bit of a damp squib, with the Bank of England unlikely to change monetary policy given the uncertainties over Brexit, which also makes the forecasts in the central bank’s quarterly inflation report opaque.
Lee Wild, Head of Market Strategy at interactive investor commented: “The trend for hyping up a day of sporting events has spilled over into the world of finance, and perhaps even the Bank of England was surprised when it too got its own ‘Super Thursday’.
“Britain’s central bankers will announce both their latest decision on UK interest rates and quarterly inflation report at midday on the 7th. Of course, each of these has implications whatever is decided, but the Brexit debacle and its impact on economic growth has taken a rate hike off the table.
“Weak consumer spending and a pullback in oil prices should also deliver a benign outcome on inflation near to the 2% target. While interest rate policy will do nothing to underpin sterling, a soft Brexit, or no Brexit at all, will.”
Significant events expected today:
Bank of England monetary policy decision/inflation report
Finals: Smith & Nephew PLC (LON:SN.), Beazley PLC (LON:BZY)
Economic data: Halifax UK house prices; US weekly jobless claims
Around the markets:
- Sterling: US$1.283, up 0.01%
- Brent crude: US$62.4 a barrel, down 0.45%
- Gold: US$1,305.5 per ounce, down 0.1%
- Bitcoin: US$3,368.6, down 0.03%
- Financial Times: Interserve’s rescue deal with banks ran into trouble on Wednesday as its largest shareholder Coltrane attempted to derail the proposal and demanded the ousting of the board.
- The Daily Telegraph: Theresa May is planning to postpone a second vote on her deal until the end of February, a month before Brexit, in a move which ministers believe means an extension of Article 50 is now inevitable.
- The Guardian: Newham council is suing Royal Bank of Scotland over the terms of about £150 million in complex bank loans.