London close: Stocks finish higher as BoE holds rates

19th Sep 2024 16:03

(Sharecast News) - London stocks closed higher on Thursday, buoyed by the Bank of England's widely-expected decision to leave interest rates unchanged.

The FTSE 100 index rose 0.91% to finish at 8,328.72 points, while the FTSE 250 gained 1.57% to 21,162.71 points.

In currency markets, sterling was last up 0.55% on the dollar, trading at $1.3287, while it edged up 0.26% against the euro to change hands at €1.1915.

"Investors seem very pleased with the Fed's 50 basis point cut and its optimistic assessment of the US economy," said IG chief market analyst Chris Beauchamp.

"Stock markets across the globe have made headway, confident that the US central bank has their back.

"New record highs for the Dow and S&P 500 seem to lead the way for other indices, with no sign yet of any of the weakness that often bedevils the second half of September."

Beauchamp added that sterling had pushed to a new two-and-a-half year high against the dollar, briefly topping the $1.33 mark once more.

"Unlike the Fed, the UK still has to bring its inflation problem to heel, leaving Threadneedle Street unable to loosen policy.

"The onus now lies on the still newly-elected government to unveil a targeted programme of growth in order to provide the boost that the UK economy needs."

Bank of England keeps rates on hold, jobless claims fall stateside

The Bank of England was at the top of the economic agenda after it decided to maintain its key interest rate at 5%, while hinting at potential future cuts.

Its Monetary Policy Committee (MPC), which previously reduced rates by 25 basis points in August, voted eight-to-one to keep them unchanged.

The sole dissenting voice, external member Swati Dhingra, supported a further cut to 4.75%.

It also unanimously agreed to reduce the stock of UK government bonds by £100bn over the next year, aligning with expectations.

The Bank's decision came as the UK economy showed signs of stagnation, with GDP growth flat for the second consecutive month in July, defying forecasts of a 0.2% increase.

Meanwhile, inflation remained above target, with the consumer price index steady at 2.2% in August.

Despite core and services inflation rising, the MPC signalled a cautious approach to further rate adjustments, emphasising the need to curb persistent inflation while navigating a volatile global economic environment.

Andrew Bailey, BoE governor, said the economy was moving "broadly as we expected".

"If that continues, we should be able to reduce rates gradually over time," he explained.

"But it's vital that inflation stays low, so we need to be careful not to cut too fast or by too much."

Across the Atlantic, unemployment claims in the US dropped more than anticipated in their latest reading, reaching a four-month low.

The Labor Department reported that initial jobless claims fell by 12,000 to 219,000 for the week ended 14 September, below the expected 230,000.

Continuing claims also declined, falling by 14,000 to 1.82 million, while the four-week moving average edged down to 184,845.

Manufacturing activity in the Philadelphia region meanwhile showed unexpected growth in September after a sharp decline in August.

The Federal Reserve Bank of Philadelphia's general activity index rose from 7.0 to 1.7, beating economists' forecasts of a negative reading.

However, industry indicators remain mixed, as only 22% of firms reported increased activity, while 20% saw declines and 51% reported no change.

In the American housing market, existing home sales in the US fell by 2.5% in August, despite a drop in mortgage rates.

According to the National Association of Realtors, sales fell to an annual rate of 3.86 million, as rising house prices continue to strain affordability.

The median price of existing homes increased by 3.1% to a record high of $416,700.

Rolls-Royce jumps on Czech nuclear deal, Close Brothers in the red

On London's equity markets, Rolls-Royce Holdings jumped 5.08% after being selected to build mini nuclear power plants for the Czech government.

The deal would involve developing small modular reactors (SMRs), with the first set to be constructed near the Temelin nuclear power plant before 2035.

Clothing retailer Next saw a modest increase of 0.63% after raising its annual earnings guidance for the second time this year.

The high-street stalwart reported that full-price sales in the first six weeks of the second half of the year exceeded expectations, increasing by 6.9%.

As a result, it upgraded its pre-tax profit forecast for 2024-2025 by £15m to £995m, representing an 8.4% rise compared to last year.

Retailers were generally positive, with JD Sports Fashion up 3.5%, Associated British Foods - owner of Primark - gaining 0.72%, and Burberry Group rising 2.2%.

Mining stocks also performed well, supported by a rise in copper prices to a two-month high.

Anglo American climbed 3.77%, Antofagasta advanced 4.64%, Rio Tinto gained 3.06%, and Glencore rose 2.28%.

Equipment rental firm Ashtead Group added 2.92% after receiving a 'buy' rating from Berenberg, while Ocado Group surged 2.97% following an upgrade to its revenue guidance for Ocado Retail.

The joint venture with Marks & Spencer saw a 15.5% increase in retail revenues for the third quarter and now anticipated low double-digit sales growth for the year, up from the previous mid-high single-digit forecast.

Bytes Technology Group soared 7.44% after it reported strong trading since its last market update in July.

Babcock International Group rose 5.5% after holding annual guidance and posting a rise in underlying profit for the first five months of the financial year.

On the downside, IG Group Holdings and Drax Group fell 1.64% and 3.2%, respectively, as both traded without entitlement to the dividend.

Utilities were broadly weaker, with National Grid dropping 3%, SSE down 3.33%, and Severn Trent losing 1.75%.

Close Brothers Group was among the biggest losers, sliding 5.59% after announcing the sale of its wealth management arm for up to £200m to Oaktree Capital Management funds and releasing in-line full-year results.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,328.72 0.91%

FTSE 250 (MCX) 21,162.71 1.57%

techMARK (TASX) 4,845.52 0.46%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 525.00p 5.85%

Fresnillo (FRES) 588.50p 4.53%

Antofagasta (ANTO) 1,858.00p 4.53%

Ashtead Group (AHT) 5,780.00p 4.33%

JD Sports Fashion (JD.) 156.50p 4.19%

Weir Group (WEIR) 2,148.00p 3.74%

Anglo American (AAL) 2,201.00p 3.65%

Spirax Group (SPX) 7,470.00p 3.46%

IMI (IMI) 1,898.00p 3.26%

Glencore (GLEN) 392.00p 3.20%

FTSE 100 - Fallers

SSE (SSE) 1,938.50p -2.91%

National Grid (NG.) 1,023.00p -2.62%

Vodafone Group (VOD) 76.16p -2.46%

Severn Trent (SVT) 2,625.00p -2.13%

Reckitt Benckiser Group (RKT) 4,576.00p -1.95%

GSK (GSK) 1,574.50p -1.84%

Bunzl (BNZL) 3,612.00p -1.64%

British American Tobacco (BATS) 2,825.00p -1.50%

Airtel Africa (AAF) 118.70p -1.49%

Haleon (HLN) 391.00p -1.46%

FTSE 250 - Risers

Bytes Technology Group (BYIT) 513.00p 8.09%

Trustpilot Group (TRST) 234.50p 7.32%

Babcock International Group (BAB) 494.20p 7.09%

Coats Group (COA) 104.20p 6.44%

International Workplace Group (IWG) 179.50p 5.90%

Jupiter Fund Management (JUP) 87.60p 5.80%

Bloomsbury Publishing (BMY) 694.00p 5.15%

Softcat (SCT) 1,573.00p 5.15%

PZ Cussons (PZC) 92.00p 5.14%

JTC (JTC) 1,074.00p 5.09%

FTSE 250 - Fallers

Close Brothers Group (CBG) 498.00p -5.59%

Drax Group (DRX) 617.50p -3.67%

IG Group Holdings (IGG) 918.00p -3.06%

Foresight Group Holdings Limited NPV (FSG) 520.00p -1.89%

Energean (ENOG) 890.00p -1.71%

FirstGroup (FGP) 155.20p -0.83%

Discoverie Group (DSCV) 611.00p -0.82%

Playtech (PTEC) 720.00p -0.55%

Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 278.00p -0.54%

Helios Towers (HTWS) 111.40p -0.54%