LONDON MARKET MIDDAY: BoE Holds UK Interest Rates With 7-2 MPC Vote

Thu, 19th Dec 2019 12:07

(Alliance News) - London stocks continued to trade in a lacklustre fashion at midday on Thursday, while the pound rose after the Bank of England decided in its final policy-making meeting of the year to keep UK interest rates unchanged.

The Monetary Policy Committee voted with an unchanged split of 7-2 to keep the UK Bank Rate at 0.75%. The two dissenting votes were to cut rates and by the same two MPC members as in November. However, minutes of the meeting revealed that members continue to believe limited, gradual tightening of monetary policy "may be needed".

Bank of England Governor Mark Carney will not give a post-decision press conference Thursday.

The pound was quoted at USD1.3118 at midday Thursday following the BoE decision, up from USD1.3070 at the equities close on Wednesday.

On the London Stock Exchange, the FTSE 100 index was up 9.15 points, or 0.1%, at 7,549.90. The FTSE 250 was up just 1.05 points at 21,664.18, and the AIM All-Share was 0.1% higher at 935.77.

The Cboe UK 100 was flat at 12,805.44, the Cboe UK 250 was unmoved at 19,576.24, and the Cboe Small Companies up 0.1% at 11,958.03.

In European equities on Thursday, the CAC 40 index in Paris was flat, while the DAX 30 in Frankfurt was down 0.3%.

Markets are "quiet" on Thursday, said IG chief market analyst Chris Beauchamp.

"Overall the week has not quite been one of blockbuster bullishness, despite the apparent progress made in two major issues last week, namely Brexit and trade wars. This would be a classic case of 'buy the rumour, sell the fact', or perhaps more accurately, 'buy the rumour, hold the fact', since downside has been relatively limited," said Beauchamp.

Stocks in New York were called higher, with the Dow Jones, S&P 500 and Nasdaq Composite all pointed up 0.1%.

In forex, both the euro and yen were trading flat again the dollar, with the greenback's reaction to US President Donald Trump's impeachment limited.

By a 230 to 197 vote in the Democratic-majority House, the 45th US president became just the third occupant of the White House in American history to be impeached on Wednesday. Trump will now stand trial in the Senate, where his Republicans hold a solid majority and are expected to exonerate him.

The euro stood at USD1.1127 at midday Thursday, against USD1.1125 on Wednesday. Against the yen, the dollar was trading at JPY109.51, flat compared to JPY109.52 late Wednesday.

Before the BoE decision, official data showed a very disappointing result for UK retailers in November.

For the month of November alone, seasonally adjusted sales fell by 0.6% month-on-month, though rose 1.0% year-on-year. Consensus, according to FXStreet, was for monthly growth of 0.3% and annual growth of 2.1%. In October, sales had risen 3.1% annually and were flat on a monthly basis.

Pantheon Macroeconomics said the poor figures are likely to be explained by Black Friday.

"In theory, the ONS has accounted for the impact of this timing shift this year with its seasonally adjusted data. But we know from past years that these adjustments have been too small when Black Friday has been included, with initial estimates of sales growth in November being too high," said Samuel Tombs, chief UK economist at Pantheon.

"As a result, we suspect that the seasonal factors used to downweight sales data this November, when Black Friday has not been included, are too large," he continued. "If so, the seasonally adjusted data should rebound in December."

In London, TUI was down 2.5% after Berenberg cut the Anglo-German travel operator to Hold from Buy.

There were also ratings downgrades knocking mid-cap stocks, with JD Wetherspoon down 5.1% after being cut to Hold from Buy by HSBC. Capita, down 4.6%, was reduced to Sell from Hold by Deutsche Bank.

Burberry, down 1.8%, and United Utilities, down 1.0%, were both lower as they went ex-dividend, meaning new buyers no longer qualify for the latest payouts.

NMC Health was down 13% amid a volatile week for the UAE-focused healthcare stock. NMC Health shares have shed 39% in the week so far after a short seller alleged "rot" at the FTSE 100 constituent, with NMC Health hitting back at the "baseless" claims.

Elsewhere in London, shares in Goodwin were down 17% after reporting a fall in interim profit.

Goodwin's pretax profit for the six months to October 31 slipped 5.1% to GBP7.4 million, despite revenue increasing by 3.8% to GBP70.1 million.

"This is a feature of the disruption caused by the commotions in our parliamentary system over the past six months where the uncertainty has temporarily stalled projects," said Chair Timothy Goodwin.

Looking to the second half of its financial year, the mechanical and refractory engineering firm believes profitability levels will be similar to the first half.

In commodities, Brent oil was quoted at USD66.22 a barrel midday Thursday, flat with USD66.12 late Wednesday. Gold was quoted at USD1,473.53 an ounce against USD1,475.70 at the equities close on Wednesday.

Gold is "still struggling to break and hold above USD1,480, despite breaching the level on a couple of occasions. When markets are as quiet as they are though, it's difficult to read too much into these moves as there isn't anything of real substance driving them. If a trade deal and an impeachment can't spur the yellow metal to life, what will?" questioned Craig Erlam at Oanda.

By Lucy Heming; lucyheming@alliancenews.com

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