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(Alliance News) - Some hawkish comments from a US Federal Reserve official were enough to make investors cautious on Thursday ahead of an interest rate decision from the Bank of England at midday in London and the US jobs report on Friday.
Analysts expect the UK central bank's policy-setting committee will unanimously back leaving interest rates at the current record low levels, but there could be minor dissent over its asset purchasing programme.
Sterling was quoted at USD1.3884 ahead of the BoE decision, lower than USD1.3905 at the London equities close on Wednesday.
The FTSE 100 index was down 5.60 points, or 0.1%, at 7,118.26 early Thursday. The mid-cap FTSE 250 index was marginally lower, down just 5.65 points at 23,342.08. The AIM All-Share index was down 0.2% at 1,256.91.
The Cboe UK 100 index was flat at 709.12. The Cboe 250 was up 0.1% at 21,074.41, and the Cboe Small Companies down 0.2% at 15,270.03.
In mainland Europe, the CAC 40 in Paris was up 0.4%, while the DAX 30 in Frankfurt was 0.1% higher early Thursday.
Keeping stocks subdued were comments by Federal Reserve Vice Chair Richard Clarida on Wednesday, who raised the prospect of the US central bank scaling back its huge bond-buying programme and lifting interest rates as soon as 2023.
"There are risks to any outlook, and I believe that the risks to my outlook for inflation are to the upside," said Clarida.
Wall Street ended lower on Wednesday after mulling the remarks. The Dow Jones Industrial Average lost 0.9% and the S&P 500 0.5%, but the Nasdaq Composite closed up 0.1%.
In Asia on Thursday, the picture was more mixed as the Nikkei 225 index in Tokyo closed up 0.5%, but the Shanghai Composite ended down 0.3%, while the Hang Seng index in Hong Kong shed 0.8%. The S&P/ASX 200 in Sydney closed up 0.1%.
Topping the FTSE 100 was WPP, up 3.0% after the ad agency hailed a return to pre-virus trading levels a year ahead of plan.
Revenue for the first half of 2021 rose 9.8% to GBP6.13 billion, while WPP swung to a pretax profit of GBP394 million from a loss of GBP3.18 billion a year ago. Revenue less pass-through costs rose 16% on a like-for-like basis, and the firm noted the second-quarter growth of 19% was its highest on record.
"We have returned to 2019 levels in 2021, a year ahead of our plan, with good momentum into 2022," said Chief Executive Mark Read.
Full-year like-for-like revenue less pass-through costs growth is now expected to be around 9% to 10%, returning to 2019 levels a year ahead of plan.
WPP declared an interim dividend of 12.5 pence, up 25% from 10p a year ago. It added that it has GBP350 million in share buybacks planned for the second half after GBP248 million was completed in the first.
Mondi rose 2.4% as it posted half-year revenue of EUR3.63 billion, up from EUR3.45 billion a year ago, and lifted its interim dividend to 20.00 cents from 19.00.
"While macroeconomic uncertainties remain, trading is positive. In the second half, we expect to see the full impact of the price increases implemented to date and the continued contribution from our capital investment projects. We also expect the impact of planned maintenance shuts and ongoing input cost pressures, which we aim to mitigate by our relentless focus on cost control," the packaging firm said.
Rolls-Royce gained 1.3% as it unveiled a swing back to profit and said it is on track to turn free cash flow positive in the second half after a "good" start to the year
Revenue for the first half of 2021 fell to GBP5.16 billion from GBP5.67 billion a year ago, but the jet engine maker swung to a pretax profit of GBP114 million from a loss of GBP5.21 billion.
Rolls-Royce reported negative free cash flow of GBP1.15 billion for the period, an improvement on the outflow of GBP2.80 billion recorded a year ago. It is targeting turning free cash flow positive during the second half 2021, and aims to improve the full-year figure to negative GBP2.0 billion from negative GBP4.2 billion in 2020.
"This leaner cost base together with a strong liquidity position gives us confidence in our ability to withstand uncertainties around the pace of recovery in international travel and benefit from the eventual rebound," said Chief Executive Warren East.
Lloyds Banking fell 3.1% after Goldman Sachs downgraded the retail and business lender to Sell from Neutral.
Savills was the standout performer in the FTSE 250, gaining 5.8% as the estate agent reported a "record" performance in the first half of 2021 and expects full-year performance to be "meaningfully ahead" of expectations.
Pretax profit for the six months that ended June 30 was GBP63.8 million, widened year-on-year from GBP7.7 million. Assuming no new material disruption, Savills expects the performance for the year as a whole to be "meaningfully" ahead of its previous expectations.
Frasers Group fell 1.0%. The retailer said its founder, Mike Ashley, will be stepping aside as CEO to an executive director role, paving the way for future son-in-law Michael Murray to become the company's new boss.
The House of Fraser and Sports Direct owner said it is in talks over transitioning the CEO role from Asley to Murray over the course of the 2022 financial year. It is currently proposed that Murray will assume the role on May 1 next year and that Ashley would step down as CEO but remain on the board as an executive director.
Murray is currently Frasers's 'head of elevation', meaning upgrading stores.
"The group's elevation strategy is transforming the business and receiving positive feedback from consumers and our brand partners, especially on projects such as the new Oxford Street Sports Direct which opened in June 2021," Frasers said, adding: "The board consider it appropriate that Michael leads us forward on this increasingly successful elevation journey."
Also on Thursday, Frasers reported a huge drop in full-year profit, down to GBP8.5 million in the 52 weeks to April 25 from GBP143.5 million the year before. This was on revenue that fell 8.4% to GBP3.63 billion.
"We are a resilient business, but the Covid-19 pandemic has resulted in some significant non-cash accounting impairments to our asset base," Frasers explained.
Outside of the Bank of England at noon, the economic events calendar on Thursday has a UK construction PMI reading at 0930 BST and the latest US jobless claims figures at 1330 BST.
The euro traded at USD1.1846 early Thursday, up on USD1.1835 late Wednesday. Against the yen, the dollar was flat at JPY109.65.
Gold was quoted at USD1,812.48 an ounce early Thursday, firm on USD1,808.00 on Wednesday. Brent oil was trading at USD70.29 a barrel, lower than USD71.22.
By Lucy Heming; lucyheming@alliancenews.com
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