London stocks succumbed to selling pressure and ended Thursday lower, after investors were spooked by the Bank of England’s decision not to cut interest rates.
The central bank, already holding rates at a 300-year low of 0.5% since 2009, decided that more data was necessary post-Brexit to assess whether a rate cut was necessary. Meanwhile, some strategists argued that to cut would have smacked of panic and with sterling on the slide for three weeks that was stimulus enough for the economy.
A rate cut could follow in August, however, and the Bank also warned again that house prices were set for a “sizeable fall” following the UK’s referendum vote to quit the European Union.
But in a sign that normality in foreign affairs was returning after weeks of bickering, both Wolfgang Schauble, the German finance minister, and Jack Lew, the US Treasury Secretary, sent conciliatory messages to London calling for constructive relations after the Brexit vote.
Speaking at a joint press conference in Berlin, they said the world economy would be best served by the development of good ties between the UK and the rest of the EU.
The clue-chip FTSE100 had started higher as markets greeted the political stability that might come with Theresa May appointing her first cabinet, although the Bank of England’s hold decision later sent stocks south. The FTSE100 ended down 0.24% at 6,654. The FTE250 mid-cap ticker, however, managed to gain 0.22% to close at 16,788.
But that wasn’t the trend elsewhere. The FTSE AIM 100 Index ended down 0.4% at 3,452 while the FTSE AIM All-Share Index shed 0.2% to 723.
London’s gainers were 33% of the market, with 27% of stocks falling and 40% unchanged.
The top gainer was Polemos (LON:PLMO), up 46.7% to 0.055p, whose only news was a TR-1 notification on share voting rights.
The biggest faller was IronRidge Resources Ltd (LON:IRR), down 40.6% to 4.75p on Thursday after it said it is taking a cautious approach to its current asset portfolio.
The company said in a statement: “The current state of the global iron ore market and the outlook for prices in the next five years is not currently conducive to extensive iron ore exploration and development. Accordingly, IronRidge is taking a conservative approach to the investigation of its iron ore projects in Gabon until the iron ore price returns to a level which would underpin a likely project development.”
Midsession
The FTSE 100 Index pared gains on Thursday after the Bank of England kept interest rates on hold, although takeover talk around Ocado Group PLC (LON:OCDO) provided interest.
But the bank issued a warning on the potential impact of the UK's decision to leave the EU, reportedly saying it expected "sizeable falls in house prices".
The Bank indicated that monetary policy may loosen in August, once it has had more time to assess the impact of the vote on activity.
Many analysts had expected a rate cut, but others forecast a hold, saying the falling pound would provide any monetary easing necessary.
Markets welcomed increased political stability in the UK - or at least a semblance of it - after Prime Minister Theresa May began putting a new government together.
The FTSE 100 Index fell back to stand 9.8 points ahead at 6680.23.
May appointed former Foreign Secretary Philip Hammond as Chancellor, spelling the end of George Osborne's time in Number 11, and Boris Johnson as his replacement at the Foreign Office.
The top blue-chip riser was miner Anglo American PLC (LON:AAL) with a 4.2% advance to 846.6p.
The biggest Footsie faller was upmarket fashion house Burberry Group PLC (LON:BRBY), down 2.27% to 1250p.
Meanwhile, shares in Ocado continued to rise amid idle and unconfirmed market gossip that unidentified US tech-focused private equity groups were eyeing it for a potential takeover.
The groups are rumoured to be interested in the online grocery distributor's technology intellectual property, which it has been trying to use to strike partnerships with overseas retailers.
Another attraction is thought to be the relative cheapness of the stock, which has nearly halved from about 471p in July last year.
But the shares have ralllied in the last few days, to 255.28p at lunchtime from about 215p on July 6.
In the small-cap arena, Anglo Asian Mining Plc (LON:AAZ) boosted production substantially in its second quarter as it continued to cut costs at its Azerbaijan operations. Shares rose 12.3% to 19.38p.
Shares in gold recovery specialist Goldplat Plc (LON:GDP) gleamed 7% to 5.75p after it agreed to farm out a majority of its Anumso gold project in Ghana.
But Gulf Keystone Petroleum Ltd (LON:GKP) leaked 30.85% of its value to 3.25p on news that it had done a deal with most of its creditors for a capital restructuring and open offer.
Non-executive director Keith Lough also replaced Andrew Simon as non-executive chairman.
Shares in digital marketing group Digital Globe Services Ltd (LON:DGS) sank 22.9% to 59p as it forecast lower-than-expected annual earnings of about US$3.1mln.
Back among bigger stocks, convenience store chain McColl's Retail Group PLC (LON:MCLS) rang up 18.6% to 156p after buying 298 smaller shops from the Co-op for £117mln.
Price comparison site Moneysupermarket PLC (LON :MONY) was 4.6% richer at 283.1p as it forecast "solid" half-year results with revenues expected to rise 10% to £158mln.
Preview at 6.55am
The FTSE 100 is set for what looks like a relatively quiet start ahead of a decision on interest rates by the Bank of England.
It is widely expected the Bank will cut the base rate to 0.25% later today.
The only other question is whether it will then pull the lever on a round of quantitative easing in a bid to stave off recession post-Brexit.
Either way investors are sanguine about the prospect with the spread betting firms predicting a two point fall in the index of blue-chip shares to 6,668.40.
The early reaction to Prime Minister Theresa May’s fledgling cabinet, meanwhile, has been one of guarded positivity.
Overnight, Wall Street made, though they were marginal as US equity markets paused for breath after a roller coaster couple of weeks.
In Asia, the picture is a mixed one with the Nikkei 225 up 0.8%, with the weaker yen driving the export stocks higher. Australia’s ASX advanced 0.2%, with shares in financial companies in demand.
Elsewhere, the markets were flat or marginally lower.
Back here in the UK, it appears to be a reasonably busy day for scheduled corporate news. Updates from Halfords, Moneysupermarket, Hays and Experian are published at 7am alongside financial results from the clothing retailer Super Group.
*Brent crude trading 1.2% higher at US$46.81 a barrel.
*Gold US$3.70 lower at us$1,339.90 per ounce.
*Pound trading at US$1.3196.
City Pages
*Royal Dutch Shell is bracing for strike action on seven of its North Sea platforms in the biggest industrial dispute to hit U.K. oilfields for a decade – FT.
*The Bank of England and Treasury have come under fire again for their strong advocacy of remaining in the European Union and have been warned not to “talk down” the economy – Times.
*Dozens of companies are set to submit bids this week for one of the world’s biggest energy storage projects, supplying back-up power for the National Grid – Times.
*The number of people wanting to buy a house has fallen to the lowest level since mid-2008 amid post-referendum uncertainty, according to the Royal Institution of Chartered Surveyors – Telegraph.
*Whitbread is to pull its Premier Inn business out of India and South East Asia in what marks the company’s first major change of strategy under its new boss, Alison Brittain – Telegraph.