FTSE 100 closes 63 higher
FTSE 250 up almost 67; US July jobs eyed
Pound falls as Bank of England holds interest rates
Next biggest blue chip riser after results
The FTSE 100 closed higher on Thursday as the big caps benefitted from a weaker sterling triggered by the Bank of England rate decision.
It decided to keep rates on hold, unsurprisingly, in the light of recent economic trends.
The pound lost 0.74% against the Euro and fell 0.66% against the US dollar.
The FTSE 100 finished the day around 63 points ahead, at 7,474, while the FTSE 250 closed almost 67 higher at 19,908.
On Wall Street, shares are currently fairly uninspired on the back of a deluge of earnings but the Dow Jones is managing to convincingly stay above the 22,000 mark.
Traders across the pond are eyeing the key monthly job creation number, which will be released tomorrow.
On Footsie, the biggest gainer was fashion darling Next (LON:NEXT) which rocketed almost 10% higher to 4,401p after its second quarter sales figure proved reassuring.
On the losing front, and in the doghouse, to be FTSE100 biggest loser was Convatec Group (LON:CTEC), which shed 6.38% to 289.30p as the medical products and technologies company posted a fall in first-half profit and earnings.
Notably, Convatec has not yet reached its full first year as a public company, since it was listed by its private equity owners last October with a £4.4bn market cap.
3.00pm: US blue chips retreat; Footsie stays strong
The FTSE 100 index remained buoyant in late afternoon trading despite a fairly unexciting opening performance on Wall Street, with a drop by sterling following today’s pegged Bank of England interest rate decision providing a lift to international stocks.
Around 3pm, the UK benchmark index was ahead almost 65 points at 7,476, just holding off the day’s peak of 7,484.53 hit after the Bank of England left UK rate unchanged once again at a record low of 0.25%.
On currency markets, the pound shed 0.8% versus the dollar, down 0.7% to US$1.3117, and sterling lost 0.9% against the euro at €1.066 after the BoE also trimmed its UK growth forecasts and indicated that any rate hike wasn’t likely until late 2018.
Laith Khalaf, senior analyst, Hargreaves Lansdown said: ‘The UK economy is faltering and consumer purses are under pressure, so it’s no surprise the Bank of England has decided not to upset the applecart by raising interest rates. June also saw a surprise drop in inflation, relieving pressure on the central bank to tighten policy.”
In New York, having closed above the 22,000 level for the first time yesterday, the Dow Jones Industrials slipped 13 points lower in early trading to 22,003, with the broader S&P 500 index and the Nasdaq Composite also both slightly lower.
Investors were happy to pause for breath ahead of tomorrow’s key US non-farm payrolls data, with analysts forecasting that 180,000 or so jobs were added to the economy last month, down on the 222,000 added in June.
The US unemployment rate is expected to remain at near 17-year lows at 4.3% - down from 4.4% in June.
Another batch of corporate earnings also had an impact, with electric cars firm Tesla Inc (NASDAQ:TSLA) a strong gainer following numbers after the close yesterday.
In London, results were also a key focus, with clothing retailer Next Plc (LON:NXT) remaining the top FTSE 100 gainer, up 9% to 4,378p after its second-quarter sales proved reassuring.
Shire Pharma PLC (LON:SHP) was also a blue chip gainer ahead 1.9% at 4,278p after the drugs maker said it is mulling a separate listing for its neuroscience franchise as it revealed the cost savings from the US$32bn takeover of US rival Baxalta were currently ahead of forecast.
Shire updated on the Baxalta integration process alongside second-quarter result which saw its revenues match consensus forecasts – up 55% at US$3.74bn – while operating income was US$1.49bn, while earnings per share were US$3.73, slightly ahead of forecasts.
Elsewhere Royal Bank of Scotland Group PLC (LON:RBS) took on 2.2% at 256.2p ahead of second-quarter results due tomorrow, with the state-owned lender set to being the sector reporting season to a close.
But emerging markets-focused lender Standard Chartered PLC (LON:STAN) was a faller again, down 1.4% to 784.2p after its results disappointed yesterday due to the lack of a dividend resumption, with Deutsche bank cutting its target price and repeating a ‘sell’ rating.
2.00pm: Footsie strong; Dow seen flat
The FTSE 100 index notched up strong gains in early afternoon trading as the pound took a tumble following batch of dovish news from the Bank of England, with little impact for expectations of a flat start in New York today.
Around 2pm, the UK blue chip index was up nearly 67 points at 7,480, just easing off the session peak of 7,484.53 hit after the Bank of England left UK rate unchanged once again at a record low of 0.25%.
On currency markets, the pound was under pressure, reversing a big chunk of its recent gains versus the dollar, down 0.7% to US$1.3130, and shed 0.9% against the euro at €1.0.60.
Adrian Lowcock, investment director, Architas said: “Given the weaker economic data that has been coming out of the UK in recent months rates were largely expected to remain unchanged this month.
“What is more interesting is the outlook for inflation. The Bank believe that inflation will peak in October, at around 3%, before falling back. As the higher inflation led to a more sluggish UK economy as consumers withheld spending, the Bank of England expect growth to resume once it falls back.”
He added: “As such interest rates look set to remain at current low levels for the rest of the year, but the Bank of England did suggest that it wouldn’t take much more growth for them to reconsider further rate rises in the future
With the BoE’s ‘Super Thursday’ announcements out of the way, the focus switched to across the Atlantic, with the Dow Jones expected to open around break-even having closed at record levels above the 22,000 level for the first time ever yesterday.
Another batch of US corporate earnings were the main focus, notably numbers after-hours on Thursday from electric cars firm Tesla Inc (NASDAQ:TSLA), although tomorrow’s US July jobs report was also eyed.
Data today showed US Initial jobless claims in the week to July 29 fell by 5,000 to 240,000, although they remained near a 44-year low.
12.30 pm: Commentators on BoE decision
The Footsie remained stronger and the pound weaker after the BoE rate decision and growth rate cuts today, although commentators were fairly sanguine after the announcements.
Matthew Brittain, Investment Analyst at Sanlam UK, said: “This marginally more dovish sentiment has no doubt been helped by the departure of long-time hawk Kristin Forbes, and puts the BoE firmly back on track to its ‘slow and steady’ normalisation approach. “
He added: “Coming into this meeting the pound appeared to hold up well on the surface, but against a broader trading basket – and, in particular, the euro – it has been weak, already reflecting expectations for a more dovish outcome.
“We expect the BoE to remain dovish as the impact of the weaker pound becomes fully reflected in inflation data over the course of the next 12 months, allowing it to naturally drift back in line with global averages.”
Meanwhile, Shilen Shah, bond strategist at Investec Wealth & Investment, said: “As expected, the Bank of England left interest rates unchanged with two dissenters in the committee voting for a rate hike. The central bank cut its GDP forecast as uncertainty created by Brexit hits output, despite the boost from the weaker currency and the upturn in global growth.
“The central bank’s forecast is that the UK will exit the EU smoothly, despite some indications that the Government’s position is currently not clear. Given the relatively tight labour market and weak productivity growth, the central bank continues to assume that the output gap will be closed within three years even though Brexit continues to be the elephant in the room.”
12.15pm: Footsie boost after BoE decision
The FTSE 100 index bounded higher just after midday as the pound dropped back following the Bank of England decision to once more UK interest rates unchanged.
At 12.10pm, The UK blue chip index reached up to session highs, adding over 33 points at 7,444, while sterling reversed a chunk of its recent gains versus the dollar, losing 0.5% to US$1.3161 but stayed flat against the euro at €1.1119.
The Bank of England today kept interest rates at a record low of 0.25% once again and trimmed its forecasts for growth in 2017 and 2018 as the impact of Brexit weighed on households' spending power.
Faced with uncertainty about the impact of Brexit on the world's fifth-biggest economy, the BoE said its rate-setters voted 6-2 to keep rates unchanged.
A few weeks ago, investors had begun to price in the chance that the BoE might raise interest rates for the first time in a decade this month.
The speculation was triggered by an unexpectedly close 5-3 vote at the Monetary Policy Committee's last meeting in June when it kept rates on hold.
Since then one of the dissenters, Kristin Forbes, has left the central bank. At the August meeting, only Michael Saunders and Ian McCafferty voted again for a 25 basis point increase in rates.
The bank also published its latest quarterly economic forecasts today, with the message similar to its last inflation report in May although it trilled growth forecasts,.
The BoE said it now expected Britain's economy to grow by 1.7% this year, down from its May forecast of 1.9%.
It also shaved its growth forecast for next year to 1.6% from 1.7% but kept 2019 at 1.8%.
11.45 am: Next remains top FTSE gainer
Next Plc (LON:NXT) remained the biggest FTSE 100 gainer approaching midday, up 9% to 4,378p after the retailer’s latest results.
Neil Wilson, senior market analyst at ETX Capital, commented: “On the face of it, not a lot different today from Next - sales are still wobbly but the company is still strongly cash generative and can keep up the dividends as promised.”
But he added: “Today investors cheered as the company declared a third special dividend of 45p and looks well placed to deliver more. Next said it now expects to deliver £307m of surplus cash this year, having guided that to be £255m in May. The leap in surplus cash has investors eyeing up more dividends.”
Wilson continued: “The story is also one we see everywhere as shoppers go online – Retail sales are down more than 7% this year, while Directory sales are up more than 7%. Directory had a blockbuster quarter, with sales up 11.4%.
“Profit guidance is unchanged and it can cover the planned dividends with £50m to spare, which can either be used for more dividends or share buybacks. Either way, the market likes the results and the shares are flying. Fundamentally the business remains strongly cash generative even if it’s not expanding rapidly and is able to maintain solid returns to investors.”
11.15am: Modest gains held
The FTSE 100 index held its nerve ahead of the key announcements due at midday from the Bank of England despite some chatter about a possible rate hike, although the pound turned flat as most commentators remain sceptical.
Around 45 mints ahead of the BoE rate decision, the UK blue chip index was up 8 points at 7,419, while the pound was unchanged against both the euro and dollar, having lost earlier gains.
Joshua Mahony, Market Analyst at IG said: “The pound’s ascent has been one of the key determinants of recent FTSE underperformance, and with the BoE due to announce their latest rate decision today, there is reason to believe we will see both the pound and FTSE take centre stage once more.”
He added: “Today is likely to be dominated by the latest appearance from Mark Carney at the Bank of England, with so-called Super Thursday providing us with a whole host of economic forecasts alongside the usual rate decision.
“The hawkish nature of the June meeting has helped boost the pound, gaining over 3% since. However, there is reason to believe that the last meeting could be the pinnacle of hawkish influence at the BoE for some time yet, given the subsequent shift in voting members (hawkish Forbes is no longer allowed to vote), alongside the drifting inflation rate since.
“With both headline and core inflation falling back significantly since the last meeting, there is reason to believe this month will be significantly less hawkish than June, which could spark a sterling sell-off and subsequent FTSE rally.”
9.45am: Cautious ahead of BoE
The Footsie eased back in early morning trade on ‘Super Thursday’ as investors cautiously awaited the latest bank of England interest rate decision, MPC meeting minutes, and quarterly inflation report.
Around 9.45am, the FTSE 100 index was down about 11 points at 7,399, above the early low of 7,384.22 but slipping back from an opening peak of 7,417.40.
On currency markets, sterling pushed higher despite the BoE uncertainties, gaining another 0.2% versus the dollar at US$1.3254, and adding 0.3% against the euro at €1.1189.
The pound got a slight boost from news that the UK’s dominant services sector saw growth in July,, with the IHS Markit/CIPS services Purchasing Managers' Index rising to 53.8 in July, up from June's four-month low of 53.4, and slightly above economists' forecasts.
The services PMI follows more upbeat PMI numbers on Tuesday from the UK manufacturing sector, but weak construction figures yesterday.
Taken together, Chris Williamson, IHS Markit's chief business economist said, the data suggest the UK economy is growing at a "steady but sluggish" quarterly rate of 0.3%, the same as in the three months to June.
Samuel Tombs chief UK economist at Pantheon Macroeconomics commented: “The services PMI remains consistent with sub-par growth, despite its modest improvement in July, suggesting that the economy still isn’t strong enough to warrant higher interest rates.”
On the corporate front, investors had another batch of blue chip results to digest as they awaited the BoE announcements.
Clothing retailer Next Plc (LON:NXT) was by far the strongest FTSE 100 performer, up nearly 7% to 4,290p after its second-quarter sales beat expectations with a 0.7% increase, boosted by an 11.4% jump from its Directory catalogue and internet business.
High street peer Marks & Spencer Group PLC (LON:MKS) benewfited
Miner Randgold Resources PLC (LON:RRS) was also a riser after strong second-quarter results, ahead 3% at 7,215p, and insurer Aviva PLC (LON:AV.) added 0.6% at 541p after its latest numbers.
Proactive news headlines:
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Marketing and media analytics specialist Ebiquity plc (LON:EBQ) is on track to hit full-year market expectations after a solid first half performance. Total revenues for the six months to 30 June grew