(Alliance News) -Â London stock prices got a boost midday Thursday, while sterling tumbled, after the Bank of England's surprising decision to keep UK interest rates unchanged.
The pound dropped to USD1.3568 following the BoE decision from USD1.3650 just before and USD1.3662 at the London equities close on Wednesday.
The UK central bank's Monetary Policy Committee kept the Bank Rate unchanged at 0.10%. It had been expected to raise the key rate to 0.25%. The MPC also voted by 6 to 3 to maintain its quantitative easing programme as is.
However, the BoE did warn that it will likely be necessary to raise Bank Rate cover the coming months in order to return UK inflation back to its 2% target. It expects inflation to peak at around 5% in April next year.
The FTSE 100 was up 27.63 points, or 0.4%, at 7,276.52 on Thursday at midday, having been only barely in the green just prior to the BoE announcement. The FTSE 250 index was up 1.3%, at 23,406.28. The AIM All-Share index was up 0.5% at 1,232.27.
The Cboe UK 100 index was up 0.4% at 721.06. The Cboe 250 was up 1.3% at 20,898.90, and the Cboe Small Companies up 0.6% at 15,646.23.
In mainland Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt were up 0.4% and 0.5% respectively on Thursday.
In the US on Wednesday, a taper announcement, accompanied by soothing commentary, from the Federal Reserve had set up Asian and European stock markets for gains on Thursday.
"The key point to consider is that the Fed didn't shock anyone. Markets hate surprises and the central bank's statement was as dovish as it can get, which is like a hot water bottle on a cold winter's day from an investor's perspective," said Russ Mould, investment director at AJ Bell.
The Fed on Thursday said it will reduce its purchases of Treasury securities by USD10 billion per month and of mortgage-backed securities by USD5 billion from the total of USD120 billion a month that the Fed currently is buying.
Amid growing concern about rising prices, Fed Chair Jerome Powell stuck to his view that current higher-than-expected inflation levels will come down in the second half of 2022 as the supply bottlenecks are resolved. The US central bank wants to see the labour market in the world's largest economy heal further before increasing the benchmark borrowing rate off zero, he said.
"We think we can be patient," Powell told reporters.
This put investors in a bright mood on Thursday, with European stocks advancing and Wall Street called to largely building on Wednesday's gains. The Dow Jones was pointed to open flat, but the S&P 500 and Nasdaq Composite were indicated to rise 0.1% and 0.4% respectively.
The euro traded at USD1.1550 at midday Thursday in London, down on USD1.1581 late Wednesday, after Germany factory orders improved by less-than-hoped in September.
Destatis said manufacturing new orders rose 1.3% month-on-month in September, bouncing back from an 8.8% slide in August. This undershot consensus, according to FXStreet, for 2% growth.
Further, eurozone business activity expansion was confirmed easing to its lowest in six months on supply chain woes. IHS Markit's composite output index dipped to 54.2 in October from 56.2 in September. The reading was also below October's flash figure of 54.3, but only just.
While the index remains well above the no-change mark of 50.0 which separates expansion from contraction, October's figure was the lowest reading in six months.
Against the yen, the dollar fell to JPY113.89 from JPY114.04.
Gold was quoted at USD1,779.05 an ounce early Thursday, higher than USD1,766.02 on Wednesday. Brent oil was trading at USD83.46 a barrel, up from USD82.02 late Wednesday and strengthening into the latest OPEC meeting.
The 13 members of the Organization of Petroleum Exporting Countries and their 10 allies meet from 1300 GMT onward for their regular monthly meeting via videoconference and are expected to re-confirm their July output decision.
Oil majors in London tracked Brent prices higher. BP was up 0.8% at midday while Royal Dutch Shell 'A' and 'B' shares rose 0.9% and 1.1% respectively.
Their gains were not enough to keep the FTSE 100 trading around its morning highs. The blue-chip index gave back gains as Thursday's session progressed as BoE jitters set in.
Shares in BT rose 5.0%, the telecommunications firm topping the FTSE 100, after confirming its financial outlook for the full year, despite a slight slip in earnings in the first half.
BT reported a 2.7% dip in revenue for the six months to September 30 to GBP10.31 billion and pretax profit slipped 5.0% to GBP1.01 billion, primarily due to higher finance expenses. But BT said it hit its GBP1 billion of gross annualised savings target 18 months earlier than planned, and it has brought forward its 2025 financial year target of achieving GBP2 billion in gross annualised savings to 2024.
Medical devices maker Smith & Nephew rose 3.1% as it said it expected the impact from the Delta-variant wave of coronavirus to lessen in the final quarter.
For the third quarter of 2021, revenue rose 5.5% to USD1.27 billion, and grew 2.3% on an underlying basis. For the first nine months of the year, group revenue growth was up 20%, or 14% on an underlying basis.
Smith & Nephew said it is on track to deliver at the low end of its full-year guidance ranges. For 2021, the underlying revenue growth guided range was 10.0% to 13.0%, and trading profit margin guided range was 18.0% to 19.0%.
Aveva was the worst blue-chip performer after Barclays cut the stock to Equal Weight from Overweight.
J Sainsbury fell 3.6%. The grocer said revenue increased in the first half of its financial year, though warned growth will slow as shoppers are returning to pre-pandemic habits.
Sainsbury's expects "grocery growth to moderate" in the second half, while its Argos non-food arm faces strong comparatives. All of this comes as the supermarket deals with supply chain challenges.
Revenue for the six months that ended September 18 rose 5.3% to GBP15.72 billion from GBP14.93 billion a year ago. The supermarket chain swung to a pretax profit of GBP541 million from a loss of GP137 million.
Currys rallied 7.1% in the FTSE 250 on a GBP75 million share buyback plan. The electricals retailer said sales in its first half were up 15% on a like-for-like basis compared to two years ago, though fell 1% year-on-year..
Currys said it is on track to meet consensus expectations for full year, as it put in place measures to mitigate supply chain disruption and labour shortages.
IMI advanced 6.8% after upgrading its earnings guidance on an improved third quarter performance.
The Birmingham, England-based engineering company said sales and operating profit for the three months to September 30 were higher organically than in the same period in both the prior year and 2019. IMI has now increased its guidance for full-year earnings per share to between 88p and 92p from the 85p to 90p range predicted before. For 2020, EPS totalled 79.7p.
Virgin Money UK shares fell 4.5% as investors clocked the further GBP275 million in restructuring charges the bank expects to take to accelerate its digital shift.
For the year ended September 30, the bank expects to report pretax profit of GBP417 million, swinging from a GBP168 million loss the year before. It took GBP146 million in integration and transformation costs in the year, and expects a further GBP275 million of restructuring costs "to accelerate digital".
On AIM, Purplebricks shares shed 35%. The online estate agent said the six months to October 31 were "more challenging" after recent buoyancy in housing market.
It now expects full-year adjusted earnings before interest, tax, depreciation and amortisation below previous guidance.
"Following a stronger period for instructions last year, supply in the market has fallen as we slowly adjust to a below normal level of activity following a period of successive lockdowns and the end of the stamp duty holiday," said Chief Executive Vic Darvey.
By Lucy Heming;Â lucyheming@alliancenews.com
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