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(Alliance News) - Stocks in London are poised for a bearish start on Friday after the "surprising" vote by two members of the Bank of England's Monetary Policy Committee to cut UK interest rates.
In early UK company news, Phoenix Group said a veteran of Aviva, Friends Life and Scottish Widows will replace its outgoing chief executive, while on the earnings front, International Consolidated Airlines Group lowered its capacity guidance.
IG says futures indicate the FTSE 100 index of large-caps to open 23.31 points, 0.3%, lower at 7,383.10 on Friday. The FTSE 100 closed 9.76 points, or 0.1%, higher at 7,406.41 Thursday.
The pound was quoted at USD1.2806 early on Friday, slightly lower compared to USD1.2823 late Thursday.
"The pound lost ground yesterday after it was revealed that Michael Saunders plus Jonathan Haskel both voted to cut interest rates by 0.25%, while the rest of the monetary policy committee voted to keep rates on hold at 0.75%," said CMC Markets UK analyst David Madden. "The votes caught traders by surprise as it begs the question, if the policymakers would lower rates now, what would the central bank do in the event of a disorderly Brexit."
The nine-strong Monetary Policy Committee voted 7-2 to maintain Bank Rate at 0.75%, while voting unanimously to keep the stock of sterling non-financial investment-grade bond purchases at GBP10 billion and the stock of UK government bond purchases at GBP435 billion.
The two members preferred a 25 basis point cut to Bank Rate at the meeting, judging that some extra stimulus was needed to ensure a sustained return of inflation to target.
Though the bank stuck with the current level of interest rates this week, the Bank Rate, according to the path implied by forward market interest rates, is projected at 0.50% in the fourth quarter of 2020. This implies a 25 basis point cut in the coming year.
In early company news Friday, Phoenix Group Chief Executive Clive Bannister will retire on March 10 next year, after nine years with the business, the insurance services provider said.
Bannister will be succeeded by Andy Briggs, who will join the business as CEO-designate at the start of 2020 in order to "effect a smooth handover".
Briggs was the CEO of UK Insurance at Aviva PLC until earlier this year. Prior to that he served as CEO of insurer Friends Life, managing director of Scottish Widows, CEO of the Retirement Income division at Prudential PLC, and chair of the ABI.
International Consolidated Airlines Group said traffic in October, measured in revenue passenger kilometres, increased by 4.8% versus the same period last year.
IAG - which operates British Airways, Air Lingus, Iberia, Vueling and Level - said capacity, measured in available seat kilometres, increased by 2.7% year-on-year.
Looking ahead, IAG said medium-term planning goals for the three years 2020-2022 include operating profit margin of between 12% and 15%, earnings per share growth of more than 10% per annum, and return on invested capital of 15%.
The company, however, lowered its guidance in terms of seat capacity, saying that it now expects growth of 3.4% per annum, compared to 6% per annum for 2019-2023 it estimated previously. Available seat kilometres growth in 2020 is currently planned to be 3.2%, though not adjusted for the British Airways strikes in 2019 and "leap year" in 2020.
Also among London blue-chips, Scottish Mortgage Investment Trust said it underperformed its benchmark in the first half of its current financial year, with net asset value total return of 3.2% compared with 9.9% for the FTSE All-World Index.
The company's NAV per share, meanwhile, rose to 520.4 pence as at the end of September from 504.0p reported on March 31.
"We are emphatically optimistic about the aggregate and underlying progress of our companies and therefore our portfolio. We see no evidence that the dim global economic conditions or the unappealing international political environment are undermining the tectonic shifts and structural advances driven by broadening and accelerating technological progress," said Scottish Mortgage Investment Trust Chair Fiona McBain.
Turning to UK mid-caps, Beazley said gross premiums written increased by 12% to USD2.19 billion in the nine months to the end of September, with premium rates on renewal business rising by 6%.
The insurer said the improved performance was driven by organic growth and rate rises across many lines of business.
Beazley said it continues to diversify its product offerings and in the third quarter it has launched cyber and financial lines products within Italy and a virtual care product in the UK.
Games Workshop said trading to November 3 "has continued well", with sales and profit ahead of prior year. Royalties receivable were also "significantly" ahead year-on-year, driven by the timing of guarantee income on signing new licences.
For the year to December 1, the manufacturer of miniature wargames figurines said it expects sales of not less than GBP140 million and pretax profit of not less than GBP55 million.
In the US on Thursday, Wall Street ended in the green, with the Dow Jones Industrial Average ending up 0.7%, the S&P 500 advancing 0.3% and Nasdaq Composite gaining 0.3%.
"The talk of China and the US removing their respective tariffs drove European and US equity markets higher yesterday," said Madden.
The Chinese Commerce Ministry said the pair have agreed a plan to remove tariffs imposed on two-way goods in stages. But there also has been growing hope that they are close to reaching a mini agreement as part of a wider trade deal.
"The news was seen as big progress because it wasn't long ago that both sides were ramping up the rhetoric," added Madden.
In Asia on Friday, the Japanese Nikkei 225 index closed up 0.3%. In China, however, the Shanghai Composite is down 0.4%, while the Hang Seng index in Hong Kong is down 0.8%.
Japan's household spending surged 9.5% year-on-year in September, official data released Friday showed, as consumers rushed to complete purchases ahead of a sales tax hike in October.
Household spending is closely watched to gauge if Japan is on target to emerge from decades-old deflation.
The economic calendar on Friday has the French trade balance at 0745 GMT. Later in the day, the Michigan consumer sentiment index in the US is due at 1500 GMT.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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