London close: Stocks rise as BoE holds interest rates

20th Jun 2024 16:16

(Sharecast News) - London stocks ended Thursday on a positive note following the Bank of England's decision to maintain interest rates, aligning with market expectations despite the backdrop of decreasing inflation.

The FTSE 100 rose 0.82%, closing at 8,272.46 points, while the FTSE 250 increased 0.58% to finish at 20,498.72.

In currency markets, sterling was last down 0.43% on the dollar, trading at $1.2665, while it decreased 0.11% against the euro, to change hands at €1.1827.

"UK stocks had been in limbo ahead of the BoE decision, but the decision was perceived in a dovish light and provided a tailwind for the London market," said IG chief market analyst Chris Beauchamp.

"Ocado's slump has knocked a point off the index, but the broad-based rally has powered the FTSE 100 to a two-week high, and this could mark the start of a new leg higher for the index as investors continue to take advantage of the competitive valuation on offer."

Beauchamp added that the Nasdaq 100's ascent had paused for the moment following its move to 20,000, but instead the lagging Dow Jones was making headway in early US trading this afternoon.

"Broadening participation in the rally would be a major boost for investors, who have fretted about the sustainability of the rally, given that it was big tech that was making all the running."

BoE stands pat on rates, Swiss National Bank makes another cut

The Bank of England held its interest rate at 5.25% on Thursday, maintaining the highest borrowing costs in 16 years.

Its midday decision came despite a recent drop in inflation to the BoE's 2% target for the first time in three years.

The Monetary Policy Committee (MPC) voted 7-2 in favour of keeping rates steady, with Swati Dhingra and Dave Ramsden dissenting, favouring a 0.25% cut.

Core inflation, excluding volatile elements like food and energy, remains elevated at 3.5%, while services inflation is high at 5.7%.

Governor Andrew Bailey emphasised the need to ensure sustained low inflation, noting a slight expected rise in the consumer price index in the latter half of the year.

The BoE now anticipated 0.5% GDP growth in the second quarter, up from 0.2% previously forecasted.

Elsewhere, Norges Bank kept its policy rate unchanged at 4.5%, a level maintained since January.

The Norwegian central bank's Monetary Policy and Financial Stability Committee highlighted that inflation was expected to remain high, and monetary policy would likely stay stable until at least the end of the year.

Norway's monetary tightening began in September 2021, aiding in cooling the economy and reducing inflation.

The Swiss National Bank (SNB) meanwhile reduced its key rate to 1.25% from 1.5%.

Its decision was influenced by a slight rise in inflation to 1.4% in May, driven by higher prices for domestic services, including rents, tourism, and oil products.

The SNB forecast inflation to be 1.3% in 2024, decreasing to 1.1% in 2025 and 1% in 2026.

Finally on the monetary policy front, the People's Bank of China left its one-year and five-year loan prime rates unchanged at 3.45% and 3.95%, respectively.

The rates, which influence corporate, household, and mortgage loans, remained steady as expected.

In economic news, German producer price deflation eased to its lowest level in 11 months in May.

The producer price index (PPI) fell by 2.2% annually, compared to a 3.3% drop in April, marking the smallest decline in the ongoing cycle since July 2023.

Across the Atlantic, both housing starts and building permits saw significant declines in May, reaching their lowest levels since mid-2020.

Housing starts fell by 5.5% to an annualised rate of 1.277 million, below the consensus forecast of 1.370 million, driven by rising mortgage rates impacting demand.

Sainsbury's and NatWest rise, ex-divs drag on the downside

On London's equity markets, J Sainsbury rose 1.62% after NatWest Group announced its acquisition of the core banking business of Sainsbury's Bank.

The deal included £2.5bn of outstanding credit card, unsecured personal loan, and savings accounts.

NatWest itself gained 2.08% following the news.

Elsewhere, NCC Group jumped 8.48% as the company reported a return to growth in its cybersecurity revenues, leading to annual operating profits surpassing expectations.

CMC Markets saw a substantial increase of 9.96%, after it reported a 15% rise in full-year net operating income to £332.8m, marking a new record high outside of the pandemic period.

DS Smith climbed 3.01% after the paper and packaging company reported a decline in annual profits due to weak volumes and high inflation but expressed optimism about higher prices and demand driving a recovery in the second half of the current year and into 2026.

Energean shares rose 3.97% after the company announced a deal to sell its portfolio in Egypt, Italy, and Croatia to Carlyle International Energy Partners for up to $945 million.

On the downside, several companies experienced declines as they traded without entitlement to dividends, with United Utilities Group down 1.27%, Persimmon seeing a slight decline of 0.11%, Experian off 0.13%, British Land Company 1.6% weaker, and Tate & Lyle 9.08% lower.

Tate & Lyle was also in the spotlight after agreeing to buy ingredients company CP Kelco from JM Huber for $1.8bn.

Ocado Group plunged 11.94%, after it announced a pause in the planned go-live of Canadian grocery retailer Sobeys' customer fulfilment centre in Vancouver and the end of terms related to mutual exclusivity.

Upper Crust owner SSP Group fell 5.29% following a downgrade to 'hold' from 'buy' by Berenberg.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,272.46 0.82%

FTSE 250 (MCX) 20,498.72 0.58%

techMARK (TASX) 4,822.16 0.57%

FTSE 100 - Risers

JD Sports Fashion (JD.) 125.90p 5.09%

Fresnillo (FRES) 565.00p 4.44%

Land Securities Group (LAND) 636.50p 4.43%

Antofagasta (ANTO) 2,146.00p 4.33%

WPP (WPP) 758.00p 3.02%

Smith (DS) (SMDS) 362.00p 2.84%

Rolls-Royce Holdings (RR.) 485.50p 2.75%

NATWEST GROUP (NWG) 320.50p 2.56%

Scottish Mortgage Inv Trust (SMT) 897.60p 2.30%

Halma (HLMA) 2,676.00p 2.29%

FTSE 100 - Fallers

Ocado Group (OCDO) 310.00p -12.06%

United Utilities Group (UU.) 993.40p -1.64%

CRH (CDI) (CRH) 6,002.00p -1.02%

easyJet (EZJ) 451.10p -0.88%

Croda International (CRDA) 4,100.00p -0.34%

Smurfit Kappa Group (CDI) (SKG) 3,738.00p -0.32%

BAE Systems (BA.) 1,346.50p -0.30%

Persimmon (PSN) 1,363.00p -0.15%

Unilever (ULVR) 4,433.00p 0.00%

Tesco (TSCO) 308.90p 0.00%

FTSE 250 - Risers

CMC Markets (CMCX) 317.00p 12.81%

NCC Group (NCC) 156.00p 8.48%

Aston Martin Lagonda Global Holdings (AML) 152.40p 6.28%

Bank of Georgia Group (BGEO) 3,955.00p 4.72%

Britvic (BVIC) 1,015.00p 4.69%

Foresight Group Holdings Limited NPV (FSG) 474.00p 4.41%

Hochschild Mining (HOC) 184.80p 4.05%

Energean (ENOG) 1,073.00p 3.97%

Games Workshop Group (GAW) 10,690.00p 3.79%

Harbour Energy (HBR) 311.10p 3.39%

FTSE 250 - Fallers

Tate & Lyle (TATE) 615.50p -9.08%

SSP Group (SSPG) 150.30p -6.06%

Telecom Plus (TEP) 1,784.00p -3.88%

Spectris (SXS) 2,912.00p -3.77%

Fidelity China Special Situations (FCSS) 212.00p -3.20%

W.A.G Payment Solutions (WPS) 66.00p -2.37%

Future (FUTR) 1,010.00p -1.94%

Paragon Banking Group (PAG) 755.50p -1.88%

British Land Company (BLND) 416.60p -1.79%

Hargreaves Lansdown (HL.) 1,134.00p -1.65%