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(Correcting the German industrial production figures are for March, not April.)
(Alliance News) -Â The FTSE 100 got off to a good start to Thursday's session even as the pound strengthened after the Bank of England's latest policy decision and shares in BT dropped on news of a dividend suspension and cut.
The FTSE 100 index was up 19.50 points, or 0.3%, at 5,873.26 early Thursday. The mid-cap FTSE 250 index was up 101.55 points, or 0.6%, at 16,084.02. The AIM All-Share index was up 0.5% at 811.47.
The Cboe UK 100 index was up 0.3% at 9,932.16. The Cboe 250 was up 0.4% at 13,763.20, and the Cboe Small Companies up 0.2% at 8,913.86.
Sterling was quoted at USD1.2412 early Thursday, up from USD1.2349 at the London equities close on Wednesday.
The pound rose in early dealings after the Bank of England kept interest rates on hold and voted to maintain its total stock of asset purchases at GBP645 billion, even though two Monetary Policy Committee members voted for a boost to the bank's quantitative easing programme.
Two members preferred to increase the target for the stock of asset purchases by an additional GBP100 billion at this meeting, the BoE said.
Looking to the UK economy, the BoE said the spread of Covid-19 and the measures to contain it are having a "significant impact". Both in the UK and around the world, activity has fallen sharply since the beginning of the year and unemployment has risen.
An "illustrative scenario" for the UK's economic outlook models a "very sharp fall" in UK gross domestic product in the first half of 2020. Under this model, UK GDP falls 14% in 2020.
Fiona Cincotta at City Index said: "Given such dire projection, more QE is almost a given, its just a matter of time."
The euro traded at USD1.0808 early Thursday, flat on USD1.0799 late Wednesday.
German industrial production sank in March due to the Covid-19 pandemic, Destatis reported. Production was down 9.2% month-on-month and down 12% on a year ago.
This was the largest decline since the beginning of the series in 1991.
"During the midst of the financial crisis, industrial production shrank by a cumulative 20%. Today's data illustrates how an open economy like Germany has been hit severely by the lockdown measures both at home and abroad. Contrary to the financial crisis and the important role of Asian countries in the swift recovery of the German industry, there currently is no savior in sight to quickly boost external demand," said Carsten Brzeski at ING.
In mainland Europe, the CAC 40 in Paris was 0.5% higher while the DAX 30 in Frankfurt was up 0.6% early Thursday.
Against the yen, the dollar was quoted at JPY106.32, higher versus JPY106.05.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 0.3%, with the Tokyo market reopening for the first time since last week after three days of holidays. In China, the Shanghai Composite ended down 0.2%, while the Hang Seng index in Hong Kong is down 0.4% in late trade.
RSA Insurance was the top blue-chip performer in London, up 3.8%. The insurer said it is performing "resiliently" in the second quarter after a strong start to the year.
Group net written premiums of GBP1.52 billion were down 1% in the first quarter. Operating profit was up by "double digit" percentages with an improved combined ratio and slightly lower investment income.
For the month of April claims frequency was down in a range of 20% to 55% across its three regions, mostly reflecting the impact of Covid-19 on activity.
RSA estimates receiving a total of 25,000 Covid-19 related claims by the end of April, of which 23,000 were travel claims that have coverage and will pay out at an estimated cost of GBP25 million net of reinsurance.
At the bottom of the FTSE 100 was BT, down 9.6% as it unveiled plans to suspend and then rebase its dividend.
Revenue slipped 2% to GBP22.91 billion in the year that ended March 31, while pretax profit fell 12% to GBP2.35 billion from GBP2.67 billion.
Given uncertainty due to Covid-19, BT said it will not provide a financial outlook for the year ahead. It also has decided to suspend payment of its final dividend.
"In order to deal with the potential consequences of Covid-19, allow us to invest in FTTP and 5G, and to fund the major 5-year modernisation programme, we have also taken the difficult decision to suspend the dividend until 2022 and re-base thereafter," said Chief Executive Philip Jansen.
BT plans to resume dividends in the 2022 financial year at an annual rate of 7.7p. For the 2019 financial year, BT paid out 15.40p.
In the FTSE 250, TUI was down 7.6% after being cut to Underweight from Equal Weight by Morgan Stanley.
Gold was priced at USD1,689.50 an ounce early Thursday, flat on USD1,685.00 on Wednesday. Brent oil was trading at USD29.33 a barrel early Thursday, firm on USD29.41 late Wednesday.
By Lucy Heming;Â lucyheming@alliancenews.com
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