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(Alliance News) - Stocks in London ended Thursday in the red, with uninspiring updates from the US Federal Reserve and the Bank of England denting sentiment.
"Cooling their losses slightly, the markets still couldn't shake the niggling feeling that the Fed let them down on Wednesday night," SpreadEx analyst Connor Campbell said.
He continued: "Echoing the Federal Reserve by keeping interest rates near zero, the Bank of England warned of an 'unusually uncertain' recovery during the month's MPC meeting, prompting analysts to speculate the QE programme could be expanded in November if the UK's comeback starts to slow down. This did little for the FTSE or pound, however."
The FTSE 100 index closed down 28.56 points, or 0.5%, at 6,049.92 on Thursday. The mid-cap FTSE 250 index ended down 57.54 points, or 0.3%, at 17,737.72. The AIM All-Share index closed down 0.4% at 969.94.
The Cboe UK 100 index closed down 0.4% at 603.28. The Cboe 250 ended down 0.2% at 15,153.21, and the Cboe Small Companies ended 0.3% lower at 9,473.54.
In mainland Europe, the CAC 40 in Paris ended down 0.7%, while the DAX 30 in Frankfurt lost 0.4% Thursday.
The US Federal Reserve on Wednesday kept interest rates unchanged but stressed it is committed to using its full range of tools to support the US economy.
The policy-setting Federal Open Market Committee left its benchmark rate unchanged in the range of 0% to 0.25%, as widely expected, and intends to keep the benchmark lending rate low until maximum employment is achieved even if inflation rises above 2%.
IG Senior Market Analyst Johsua Mahony said: "What is clear is that we are unlikely to see any form of monetary contraction in the near future, with the Fed laying out plans to keep rock-bottom rates until 2023.
"However, with bloated market valuations coming off the back of a historic drive for higher debt and easy money, that incessant desire for more stimulus is now having a toll on market sentiment. In any case, while markets are turning lower once again, this crisis has shown us that any meaningful decline in stocks will inevitably result in another bout of stimulus to steady the ship."
Wall Street was red at the equities close in London on Thursday, in the wake of the Fed decision, with the Dow Jones down 0.1%, the S&P 500 down 0.6% and the Nasdaq 1.0% lower.
The Bank of England on Thursday kept interest rates on hold, as expected, and said it is looking with regulators into how pushing Bank Rate into negative territory could be implemented if needed.
The nine-strong Monetary Policy Committee voted unanimously to maintain Bank Rate at 0.1%, while also voting to maintain the target for bond purchases at GBP745 billion.
The pound was struggling as the Bank of England pondered negative rates. The pound was quoted at USD1.2955 on Thursday, lower than USD1.2996 at the London equities close on Wednesday.
Oanda's Edward Moya said: "The British pound plunged after the BoE kept rates steady and held discussions over the effectiveness of negative rates. Money markets are pricing in a rate cut for May and possibly another one in November. While the Fed is tapping the breaks, the BoE is signalling they are getting closer to do more. Sterling could have been a lot lower if PM Johnson did not secure an agreement with Conservative Party supporters of a rebel amendment to his Internal Market Bill."
The euro traded at USD1.1821, lower than USD1.1843 late Wednesday. Versus the yen, the dollar was a touch lower at JPY104.79 versus JPY104.85.
In London, the talk of negative rates in the UK has seen blue chip banks struggle, with NatWest giving back 3.0%, Barclays 2.4%, Standard Chartered 2.4%, HSBC 2.0% and Lloyds 1.2%.
Elsewhere, Next ended the best blue chip performer, gaining 4.4%.
"Having seen decent trading updates from the likes of H&M and Inditex earlier this week, expectations were high that Next would be able to follow suit when they reported on their latest first half numbers today, and they haven't disappointed," said Michael Hewson, chief market analyst at CMC Markets.
For the six months ended July 25, Next posted a pretax loss of GBP16.5 million, swinging from a profit of GBP327.4 million the year prior. This was as revenue dropped 26% to GBP1.29 billion from GBP2.01 billion.
Excluding the impact of IFRS 16, an accounting rule related to leases, Next posted a pretax profit of GBP9.0 million, dropping from GBP319.6 million a year prior.
Full price sales were down a third on last year, though Next highlighted that sales in the last seven weeks have been up 4% on a year ago. In the last thirteen weeks, since stores reopened, brand full price sales have "been much better" than anticipated, down 2% on last year.
For the rest of the year, full price sales are expected to be down 12%. Pretax profit is guided for GBP300 million, up from GBP195 million given in July's trading statement.
At the other end of the FTSE 100, Polymetal International lost 3.5%, despite reporting a reserve estimate has reaffirmed that the Prognoz deposit in Russia is "one of the best silver development projects globally".
The initial JORC-compliant open-pit ore reserve estimate for the Prognoz deposit comprises 7.9 million tonnes of ore with an average silver grade of 560 grams per tonne containing 142 million ounces of silver, the Russian miner said.
The estimate is based on US15 per ounce of silver price, with silver representing approximately 90% of value contained at this price level.
Gold was quoted at USD1,946.60 an ounce on Thursday, down from USD1,969.00 on Wednesday.
IG Group topped the FTSE 250, advancing 6.0% on an "outstanding" first-quarter performance.
Net trading revenue of GBP209 million in the three months to August 31 was up 62% on GBP129.1 million a year ago, the company said, driven by continued high levels of trading activity from existing clients and a 50% rise in total active clients to 201,500.
Trainline gained 3.6% after the train and coach ticketing platform reported an improvement in sales as the second quarter progressed.
The company recorded revenue of GBP31 million for the six months to August 31, just 24% of the prior year's level. By division, the core UK unit generated GBP25 million in revenue, down 78% year-on-year, while the International unit saw a 57% revenue slump to GBP6 million.
Trainline noted a tough first quarter, which saw net ticket sales at just 9% of the same period a year ago, but this stepped up to 30% in the second quarter and exited in August at 42%. Overall, net ticket sales for the first half amounted to GBP358 million, just 19% of the prior year's level.
Over the first half of the year, Trainline said it outperformed its expectations for operating cost savings.
Brent oil was trading at USD43.22 a barrel, higher against USD41.90 late Wednesday.
Friday's international economics events calendar has a Japan consumer price index print overnight, with UK retail sales and German producer price index at 0700 BST, followed by US Michigan consumer sentiment index at 1500 BST.
The UK corporate calendar on Friday will be headlined by half-year results from Irish petrol filling station operator Applegreen and a trading statement from financial services firm Investec.
By Paul McGowan; paulmcgowan@alliancenews.com
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