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LONDON MARKET MIDDAY: BoE notes temporary price pressures, pound dips

Thu, 24th Jun 2021 12:14

(Alliance News) - Blue-chip stock prices in Europe were higher midday Thursday, as the Bank of England stood pat on monetary policy and said it believes above-target inflation will prove temporary.

The central bank kept Bank Rate at 0.1% and maintained its QE policy at the GBP895 billion level, as expected. Outgoing member Andy Haldane was, again, the only rate-setter to vote in favour of reducing the QE package.

"The committee's central expectation is that the economy will experience a temporary period of strong GDP growth and above-target CPI inflation, after which growth and inflation will fall back," the BoE said.

The pound was quoted at USD1.3917 just after midday on Thursday in London, down on USD1.3965 at the equities close on Wednesday. Just before the release, the pound fetched USD1.3976.

The BoE's decision comes following a hawkish tilt from the Federal Reserve last week, with the US central bank moving up its timeframe for lifting interest rates to 2023.

Meanwhile, equities in New York are set for a strong open following reports a bipartisan deal on a US infrastructure package has been agreed.

The FTSE 100 index was up 39.07 points, or 0.6%, at 7,113.13 midday Thursday after the BoE decision. The mid-cap FTSE 250 index was down 77.24 points, or 0.3%, at 22,582.18. The AIM All-Share index was up 0.3% at 1,234.84.

The Cboe UK 100 index was up 0.2% at 706.86. The Cboe 250 was down 0.5% at 20,276.19, and the Cboe Small Companies fell marginally to 15,400.20.

In Paris, the CAC 40 was up 1.1%, while Frankfurt's DAX 30 rose 0.7%.

"The German DAX closed 1.1% lower on Wednesday at 15,450. However, the index is rebounding today, having found its mojo as business confidence soars," OANDA analyst Sophie Griffiths commented.

Business conditions in Germany improved markedly June, with the Munich-based Ifo Institute for Economic Research noting optimism has grown sharply as the country bounces back from the coronavirus crisis.

The ifo business climate index rose to 101.8 points in June from 99.2 points in May.

The euro stood at USD1.1944 on Thursday afternoon, down slightly against USD1.1947 at the European equities close on Wednesday. Against the yen, the dollar was trading at JPY110.83, depreciating from JPY110.85.

"Mining, industrials and financials were the key sectors catching investors' attention on the UK market," AJ Bell Investment Director Russ Mould noted.

Lender NatWest was up 1.5%, miner Anglo American climbed 1.4% and building materials firm CRH rose 1.1%.

Housebuilders were also higher. Berkeley Group was up 2.4% and MJ Gleeson rose 2.6%. Crest Nicholson climbed 4.6%.

Crest Nicholson posted revenue growth of 35% to GBP324.5 million in the six months to April 30, from GBP240.0 million a year earlier. It swung to a pretax profit of GBP36.3 million from a GBP51.2 million loss.

It also noted an inventory impairment provision release of GBP7.6 million, swinging from a GBP43.2 million exceptional hit a year earlier, "reflecting confidence in market conditions".

Crest declared a 4.1 pence per share payout, having not released a first half dividend last year.

The company also lifted its profit guidance. For the full year, adjusted pretax profit is now expected to be at least GBP100.0 million, so more than double the GBP45.9 million in financial 2020.

Chrysalis Investments rose 4.5%, the best performer among London's mid-cap stocks. It has invested a further GBP35 million in Starling Bank, in a funding round valuing the challenger bank at GBP1.3 billion.

The investment is connected to Starling's Series D funding round in April when it raised GBP322 million, Chrysalis said.

London-listed carriers had mixed fortunes as UK holidaymakers await the government's travel list review. Ryanair was up 1.6% and easyJet rose 0.2%, though British Airways parent International Consolidated Airlines Group lost 0.8%.

An update of the lists which determine the quarantine and testing requirements for people arriving in the UK could see Malta and the Balearic Islands added to the green list, according to reports.

People arriving in the UK from green list destinations are not required to self-isolate, but there are currently no viable major tourist destinations in that tier.

However, Malta and the Balearic Islands, with its popular destinations of Mallorca and Ibiza, are among a "handful" of places being considered for addition to the green list, according to the Times.

"Meanwhile, German Chancellor Merkel said that all EU countries should make British travellers quarantine on arrival to slow the spread of the Covid Delta variant," analysts at Lloyds Bank added.

New York futures were higher. The Dow Jones Industrial Average and Nasdaq Composite are called up 0.6%, while the S&P 500 is called up 0.5%.

The White House has a reached a possible bipartisan agreement on a US infrastructure package which could top USD1 trillion, the Financial Times reported on Thursday.

The infrastructure deal represents a core aspect of the Joe Biden administration's agenda. Biden initially earmarked a figure of USD2.3 trillion to boost US roads, broadband networks and bridges, so the USD1 trillion amount falls some way short of that.

Still to come on Thursday is the latest US jobless claims figures, GDP and the quarterly personal consumption expenditure readings, all at 1330 BST. The core PCE index print is the Fed's preferred gauge of inflation. Core PCE for May is due on Friday.

Gold was quoted at USD1,782.86 an ounce midday Thursday, down from USD1,788.30 late Wednesday. Brent oil was quoted at USD75.10 a barrel, down from USD75.65.

By Eric Cunha; ericcunha@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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