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(Alliance News) - Stocks in London managed to end higher on Thursday despite a bleak warning from the Bank of England regarding to outlook for the UK economy as it jacked up rates by 50 basis points.
The FTSE 100 index closed up 2.38 points, at 7,448.06. The FTSE 250 ended up 136.92 points, or 0.7%, at 20,155.76. The AIM All-Share closed down 2.41 points, or 0.3%, at 922.72.
The Cboe UK 100 index closed up 0.1% at 743.80. The Cboe 250 rose 0.6% at 17,535.85. The Cboe Small Companies lost 0.5% at 13,882.40.
In mainland Europe, the CAC 40 stock index in Paris closed up 0.6%, while the DAX 40 in Frankfurt ended 0.6% higher.
"It's been another resilient day for European markets with the DAX coming within touching distance of two-month highs, before slipping back," said CMC Markets analyst Michael Hewson.
"Despite the dire outlook painted by the Bank of England, which had a lot of us looking to see what was left in the drink's cabinet, the FTSE 100 has managed to hold up reasonably well, although weakness in the oil price which is back below USD100 a barrel is holding it back," Hewson added.
In the FTSE 100, gambling firms Entain and Flutter Entertainment ended the best performers, up 5.2% and 3.8% respectively, in a positively read-across from US rival MGM Resorts.
MGM Resorts was up 3.5% in New York after it reported strong earnings late Wednesday. The Las Vegas, Nevada-based firm posted diluted earnings per share of USD4.20 in the second quarter compared to USD0.14 in the prior year quarter.
Glencore closed up 2.1% after the commodities house described its first-half financial performance as "exceptional" notwithstanding a "very complex environment" marked by global macroeconomic and geopolitical uncertainty.
For the six months to June 30, pretax profit skyrocketed to USD16.01 billion from USD2.01 billion in the prior year. The Baar, Switzerland-based commodity trader and miner said revenue rose by 43% to USD134.44 billion from USD93.81 billion.
Glencore said it will "top-up" shareholder returns of USD4.5 billion, comprising a USD1.45 billion special distribution, or USD0.11 a share, and a USD3.0 billion share buyback. Total shareholder returns for 2022 amount to USD8.5 billion, including the USD3.4 billion base distribution and USD0.6 billion buyback announced in February.
At the other end of the large-caps, Rolls-Royce ended the worst performer, down 8.5%, after the jet engine maker saw a wild swing to an interim loss.
For the half-year ended June 30, the engineering group reported a pretax loss of GBP1.75 billion, swinging from a profit of GBP114 million a year before. The company said the loss was due to GBP2.1 billion of net financing costs.
Revenue rose 8.5% to GBP5.60 billion from GBP5.15 billion a year earlier.
"For a one-time champion of British engineering, the company is at a pretty low ebb. Today's results demonstrate the size of the task facing the newly appointed chief executive, Tufan Erginbilgic," AJ Bell analyst Russ Mould commented.
"If even a well-regarded figure like Warren East, who will hand over to Erginbilgic at the beginning of next year, can't fix the business, then what hope is there for anyone else?"
Hikma was the second-weakest blue-chip performer, sliding 5.9%.
Hikma said revenue in the first half of 2022 inched down 0.2% year-on-year to USD1.21 billion from USD1.22 billion. Pretax profit fell by a third to USD215 million from USD319 million.
Worse, it cut its forecast for its Generics arm. It now guides for annual revenue there between USD650 million and USD675 million, down from the previous USD710 million to USD750 million range. The unit's core operating margin will land between 15% and 16%, down from 20%.
Hikma blamed this on the "persistent challenges of the US generics market".
Also hurting the FTSE 100, Mondi gave back 4.6%. The paper and packaging firm reported a strong rise in revenue in the first half, but warned inflation could hurt its costs in the second half of 2022.
In the six months to June 30, pretax profit surged to EUR933 million from EUR354 million, as revenue jumped 37% to EUR4.51 billion from EUR3.28 billion.
Looking ahead, however, Chief Executive Andrew King said: "Pricing remains strong going into the second half, although we do anticipate continued inflationary pressures on our cost base and ongoing supply chain challenges."
Boosting the FTSE 250s, ConvaTec jumped 6.3%, as the wound dressings maker reported weaker first-half profit but backed annual guidance as revenue trended upward.
In the first half of the year, the Reading, England-based medical products and technologies company's pretax profit fell 59% to USD46.1 million from USD112.1 million a year before. This was as its gross margin fell to 53.1% from 55.1%, and the operating margin dropped to 8.3% from 13.4%.
Revenue edged up by 3.6% to USD1.05 billion from USD1.01 billion.
ConvaTec said it is on track to report organic revenue growth of 4.0% to 5.5% for the full year.
The pound was quoted at USD1.2115 at the London equities close, firm from USD1.2110 at the close Wednesday, in the wake of the Bank of England's biggest rate hike since 1995.
Sterling dropped as low as USD1.2065 following the BoE interest rate decision. It had traded as high as USD1.2195 just before the bank rate hike.
BoE Governor Andrew Bailey on Thursday insisted controlling rampant inflation is the "absolute priority" as policymakers delivered the biggest hike in interest rates for 27 years and warned over the longest recession since the financial crisis.
The benchmark bank rate has been increased by half a percentage point to 1.75% from 1.25%. It is the biggest rate rise since 1995. Eight members supported the hike, while Silvana Tenreyro preferred the BoE to extend its streak of smaller 25 basis point rate rises instead.
However, the BoE flagged accelerating inflation is coming at the expense of economic growth, and the central bank expects the UK to enter into recession later this year.
It has lifted its consumer price inflation outlook to "just over 13%" in the fourth quarter of 2022, compared to its 9.4% forecast in its May report.
Inflation will "remain at very elevated levels throughout much of 2023, before falling to the 2% target two years ahead".
According to its projections, CPI will only return to the 2% target in the third quarter of 2024.
While inflation is accelerating, economic growth is slowing and gross domestic product will decline. It projects the UK to enter recession "from the fourth quarter of this year".
Turning to its economic projections, the BoE expects a 3.5% rise in GDP in 2022, lowered from an expected 3.8% rise in its May forecast.
The BoE also forecast that rocketing energy prices will push the economy into a five-quarter recession - GDP shrinking in the fourth quarter of this year and in each quarter throughout 2023.
Bailey also said the BoE took "forceful policy action" now to help avoid bigger hikes further down the line.
The euro stood at USD1.0220 at the European equities close, up from USD1.0125 late Wednesday.
On the economic front, the eurozone's construction sector suffered its worst contraction since February 2021, a survey showed, with new orders declining once again in July.
The S&P Global eurozone construction purchasing managers' index weakened to 45.7 points in July, from 47.0 in June. The figure slid further below the 50.0 mark, which separates growth from contraction, suggesting the sector declined at a faster pace in July. It was a third-successive fall in the PMI, which sunk to its lowest level since February 2021.
Against the yen, the dollar was trading at JPY133.30, down from JPY134.30 late Wednesday.
Stocks in New York were lower at the London equities close. The DJIA was down 0.2%, the S&P 500 index down 0.2% and the Nasdaq Composite down 0.3%.
Brent oil was quoted at USD94.65 a barrel at the equities close, down from USD98.50 at the close Wednesday.
Gold stood at USD1,785.66 an ounce at the London equities close, higher against USD1,757.20 late Wednesday.
The economic events calendar on Friday has UK Halifax house price index readings at 0700 BST and the US jobs report for July at 1330 BST.
The UK corporate calendar on Friday has annual results from fund supermarket Hargreaves Lansdown. There are also interim results from ad agency WPP and London Stock Exchange Group.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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