LONDON MARKET MIDDAY: FTSE Reverses Early Losses; BoE Holds Rates

(Alliance News) - Stocks in London recovered losses at the open Thursday to trade higher by midday, helped by share price gains for British Airways-owner IAG and British Gas-owner Centrica.

The Bank of England's Monetary Policy Committee voted unanimously to keep UK interest rates and other policy measures unchanged. The MPC meeting minutes noted underlying economic growth in the UK has slowed bu remains "slightly positive".

The pound was quoted at 1.2455 at midday following the BoE announcement on Thursday, down from USD1.2476 late Wednesday.

The FTSE 100 index was up 43.37 points, or 0.6%, at 7,357.42 midday Thursday. The FTSE 250 was up 30.31 points, or 0.2%, at 20,084.74. The AIM All-Share was up 0.3% at 886.80.

The Cboe UK 100 index was up 0.5% at 12,478.01. The Cboe UK 250 was up 0.2% at 18,007.29, and the Cboe UK Small Companies 0.3% higher at 10,980.99.

In mainland Europe, the CAC 40 in Paris and DAX 30 in Frankfurt were 0.4% and 0.1% higher, respectively, in early afternoon trade on Thursday.

The BoE's decision comes the day after the Federal Reserve cut US interest rates by a quarter percentage point.

The US central bank cut its benchmark interest rate for the second time this year on Wednesday, and Fed Chair Powell vowed to do whatever is needed to keep the economy growing. But the Fed's policy committee is divided, with three of 10 voting members dissenting from the decision, one because he wanted even more stimulus.

Wall Street ended mixed on Wednesday after the decision, with the Dow Jones Industrial Average up 0.1%, the S&P 500 flat, and the Nasdaq Composite down 0.1%. Stocks are called lower on Thursday, with the Dow Jones and S&P 500 both seen down 0.3% and the Nasdaq called 0.4% lower.

To come in the economic events calendar on Thursday, there are US initial jobless claims at 1330 BST and existing home sales at 1500 BST.

Paris-based think tank the Organisation for Economic Co-operation & Development warned the global outlook has become "increasingly fragile and uncertain" as it cut its growth predictions.

Global growth is projected to slow to 2.9% in 2019 and 3.0% in 2020, which would be the weakest rates since the financial crisis. Further, downside risks are "continuing to mount".

In the May Economic outlook, growth had been seen at 3.2% in 2019 and 3.4% in 2020. In 2018, the global economy grew 3.6%.

"Substantial" uncertainty persists over Brexit, the OECD added. The OECD revised UK growth prospects down by 0.2 percentage point to 1.0% in 2019, and by 0.1 percentage point in 2020 to 0.9%.

"A no-deal exit would be costly in the near-term, potentially pushing the UK into recession in 2020 and reducing growth in Europe considerably," the organisation commented.

The warning from the OECD comes as the UK's highest court is set to hear from a host of supporters of a legal challenge over the controversial prorogation of Parliament – including former prime minister John Major.

On Thursday, the third and final day of a historic hearing at the Supreme Court in London, a panel of 11 justices will hear submissions on behalf of Major, the Welsh and Scottish governments and Northern Irish victims' campaigner Raymond McCord.

Major will not address the court himself, but his lawyers will put forward his argument that the suspension was motivated by Johnson's "political interest" in closing down Parliament ahead of the UK's planned exit from the EU on October 31.

Elsewhere, UK retail sales growth slowed sharply in August, dragged down by struggling department stores.

The quantity of goods bought in August fell 0.2% month-on-month, but, year-on-year, this was up 2.7%. The annual rate was, nonetheless, a slowdown from stronger growth seen earlier in 2019, with annual growth peaking at 6.7% in March.

Consensus, as cited by FXStreet, was for 2.9% annual growth in August. In July, sales had registered 3.4% growth.

Year-on-year, food store sales were up 0.6% and clothing & footwear sales up 3.8%, while department store sales fell 2.5% and household goods were down 5.6%.

In other retailing news on Thursday, shares in FTSE 100-listed Next fell 3.3% as the fashion and homewares chain reported a disappointing start to Autumn trade.

"There is always a sense of trepidation when retailers publish financial results for fear they will be bearers of bad news. Next flags a weak start to the autumn season but reassuringly says there is no change to its earnings guidance. Alas that isn't enough to keep the market happy which explains why the shares have fallen on the news," said Russ Mould, investment director at AJ Bell.

Next group sales for the six months to July 2 rose 3.7% to GBP2.06 billion, with Online up 13% to GBP1.00 billion and Retail falling 5.5% to GBP874.3 million. Next's pretax profit was up 4.0% to GBP327.4 million, and on an underlying basis, pretax profit was up 2.7% to GBP319.6 million.

Next said the first few weeks of Autumn trading have been "disappointing", but it believes this is more due to warmer weather than usual rather than dampened consumer confidence in the UK.

On the Brexit front, Next commented: "At this time, it is impossible to predict whether the UK will leave the EU with or without a deal and equally difficult to predict the effect no-deal might have on the wider UK economy. So, our guidance comes with one important caveat: we have not accounted for the possible positive effects of a deal or possible negative effects of a no-deal Brexit."

Among the risers in London's FTSE 100 on Thursday were International Consolidated Airlines and Centrica, both boosted by rating changes.

IAG was up 2.3% after Morgan Stanley raised the airline operator, which also owns Aer Lingus In Ireland and Iberia in Spain, to Overweight from Underweight.

Centrica was up 1.7% after Jefferies raised the energy supplier to Buy from Hold.

"We see Centrica's new strategy delivering stable earnings and a more resilient dividend and balance sheet," commented Jefferies.

JD Sports shares slipped 2.2% after the UK Competition & Markets Authority said the retailer's acquisition of smaller rival Footasylum may lead to a substantial lessening of competition.

The CMA issued an initial enforcement order on the GBP90 million deal in May and subsequently in July it commenced a probe into the deal. An initial enforcement order - also known as a "hold separate" order - stops firms from undertaking any integration of the two businesses.

The monopoly regulator is now considering whether to accept an undertaking from the companies. It will refer the merger to an in-depth probe, if no undertakings are offered.

In the FTSE 250, IG Group Holdings was up 8.4% as it reported flat revenue for its first quarter, despite tough comparatives.

IG recorded revenue of GBP129.1 million for the three months to August 31, broadly unchanged from GBP128.9 million in the same period a year ago. The company noted that restrictions placed by the European Securities & Markets Authority on the sale of contracts-for-difference to retail clients affected just one month of trading in the first quarter of financial 2019, skewing the year-on-year comparison.

Peers Plus500 and CMC Markets were 3.5% and 3.1% higher, respectively, in a positive read-across from IG's respectable results.

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