London close: Stocks slide as Bank of England trims rates

1st Aug 2024 16:09

(Sharecast News) - London's stock markets ended the day in negative territory on Thursday, as investors digested the Bank of England's decision to cut interest rates for the first time in four years.

The FTSE 100 fell by 1.01%, closing at 8,283.36, while the FTSE 250 declined 0.65% to finish at 21,459.23.

In currency markets, sterling was last down 0.62% on the dollar to trade at $1.2776, while it slipped 0.33% against the euro, changing hands at €1.1836.

"The FTSE 100 in London opened higher, supported by positive company reports and indications of a September interest rate cut by the US Federal Reserve," said TickMill market analyst Patrick Munnelly, adding that investors cheered the Bank of England's decision to reduce interest rates by 0.25%.

"Energy stocks increased on Wednesday - the day the industry had its best day since April 12 as oil prices continued to rise on the possibility of a larger conflict in the Middle East.

"Shell saw a 1.7% increase after reporting a $6.3bn profit, beyond analysts' estimates, but a 19% quarterly decline.

"Rolls-Royce's record high share price helped boost aerospace and defence equities."

Munnelly noted that the aerospace engineer increased its outlook for operational profit and free cash flow following a solid first half.

"Conversely, travel and leisure companies led declines.

"Wizz Air's decline to the bottom of the FTSE 250 occurred after the company cut its annual profit projection and revealed a 44% decline in its first-quarter revenue."

Bank of England trims interest rates, UK manufacturing growth picks up

At the top of the agenda was the Bank of England, which lowered interest rates by 25 basis points to 5% at lunchtime, marking its first cut in four years.

The decision, which followed the Bank's previous rate of 5.25%, was passed by a narrow margin of five to four within the Monetary Policy Committee.

Dissenting members argued for holding rates steady, citing concerns over potential long-term inflationary pressures driven by structural economic shifts.

They favoured waiting for clearer evidence before adjusting rates further.

"It looks like the MPC argued long and hard over today's decision," said Chris Beauchamp, chief market analyst at online trading platform IG.

"While three members switched their vote to a cut there remains a solid caucus in favour of holding rates unchanged, which means borrowers shouldn't hold out much hope for another rate cut at the next meeting.

"While this isn't 'one and done' from the Bank of England, there does seem to be a relatively high bar to another cut this year."

In other economic news, the UK manufacturing sector experienced its fastest growth since February 2022.

The S&P Global manufacturing purchasing managers' index (PMI) rose to 52.1 in July, up from 50.9 in June, indicating continued expansion in the sector.

That marked the third consecutive month of growth, the longest such streak since mid-2022.

"UK manufacturing has started the second half of 2024 on an encouragingly solid footing," said Rob Dobson, director at S&P Global Market Intelligence.

"July saw growth of production and new orders strengthened and staffing levels rose for the first time since September 2022.

"Hopes for an economic revival and reduced political uncertainty took confidence to one of its highest levels for two-and-a-half years, with 60% of companies surveyed now forecasting output will rise over the coming 12 months."

Meanwhile, UK house prices saw their most significant annual increase since December 2022.

According to Nationwide, annual growth in July accelerated to 2.1%, up from 1.5% in June, with the average home price rising to £266,334.

Nationwide chief economist Robert Gardner noted that prices were still around 2.8% below the all-time highs recorded in the summer of 2022.

"Housing market activity has been holding relatively steady in recent months with the number of mortgages approved for house purchase at around 60,000 per month," he said.

"While this is still circa 10% below the level prevailing before the pandemic struck, it is still a respectable pace given the higher interest rate environment."

On the continent, eurozone manufacturing activity remained in contraction, with HCOB's final manufacturing PMI unchanged at 45.8 in July.

The PMI output index dipped to 45.6, reflecting a seven-month low.

Across the Atlantic, the US labour market showed signs of easing, with initial unemployment claims rising to 249,000 for the week ended 27 July - higher than economists' expectations.

Despite that, US labour productivity exceeded forecasts in the second quarter, growing at an annualised rate of 2.3% and helping to keep unit labour costs lower than expected.

US manufacturing faced a steeper decline in July, as the Institute for Supply Management's PMI dropped to 46.8, indicating weaker demand across various sectors.

Finally on data, China's manufacturing sector contracted more than anticipated, with the Caixin PMI falling to 49.8 in July, down from 51.8 in June, signalling a slowdown in economic activity.

Wizz Air leads airlines lower, Rolls-Royce surges on raised guidance

On London's equity markets, Schroders dropped 9.32% after missing its half-year profit forecasts, putting pressure on the asset manager's stock.

Wizz Air Holdings saw a steep decline of 19.92% following a 44% drop in first-quarter operating profit and a reduction in its full-year profit forecasts.

Other airlines were also in the red, with easyJet down 3.99% and British Airways owner IAG losing 3.2%.

Vesuvius fell 11.79% after it reported weaker-than-expected end markets in the first half and forecasted only a slight increase in full-year trading profit.

Barclays reversed earlier gains, closing down 3.63% despite lifting its full-year net interest income outlook after a decline in half-year profit.

Shell ended the day down 0.53%, also reversing its earlier fortunes despite reporting better-than-expected second-quarter earnings of $6.3bn and announcing a $3.5bn share buyback.

Serco Group was down 4.93% after the outsourcer reported a drop in first-half profit and revenue, though it maintained its full-year guidance.

Pets at Home Group also saw a 1.89% decline, despite maintaining its full-year guidance and reporting a resilient start to the year.

On the upside, Rolls-Royce Holdings surged 9.4% after it raised its full-year profit guidance, citing a strong first half and reinstating dividends.

Next gained 8.33% after the retailer increased its full-year profit guidance by £20m, driven by better-than-expected second-quarter sales.

Smith & Nephew rose 6.77%, buoyed by a jump in first-half operating profit and revenue.

Coats Group jumped 12.85%, while Elementis and Mondi also posted gains of 0.5% and 1.38%, respectively, following their half-year results.

London Stock Exchange Group climbed 4.03% after reporting consistent growth across its divisions and improved profitability in its interim results, alongside significant shareholder returns.

Haleon rose 2.4% on strong half-year sales of its vitamins and oral health products, contributing to profit growth in the first half of the year.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,283.36 -1.01%

FTSE 250 (MCX) 21,459.23 -0.65%

techMARK (TASX) 4,824.14 -0.22%

FTSE 100 - Risers

Next (NXT) 9,830.00p 8.33%

Rolls-Royce Holdings (RR.) 481.10p 7.01%

Smith & Nephew (SN.) 1,199.00p 6.77%

London Stock Exchange Group (LSEG) 9,852.00p 4.03%

Haleon (HLN) 358.20p 2.40%

British American Tobacco (BATS) 2,797.00p 1.89%

Kingfisher (KGF) 281.30p 1.85%

Barratt Developments (BDEV) 531.00p 1.41%

Mondi (MNDI) 1,545.00p 1.38%

LondonMetric Property (LMP) 203.80p 1.19%

FTSE 100 - Fallers

Melrose Industries (MRO) 514.20p -12.53%

Schroders (SDR) 354.60p -9.73%

NATWEST GROUP (NWG) 340.20p -8.07%

HSBC Holdings (HSBA) 658.50p -6.46%

Standard Chartered (STAN) 724.60p -5.97%

Lloyds Banking Group (LLOY) 56.16p -5.74%

Antofagasta (ANTO) 1,925.00p -4.70%

Barclays (BARC) 222.90p -4.66%

Prudential (PRU) 667.20p -4.58%

easyJet (EZJ) 432.80p -4.22%

FTSE 250 - Risers

Coats Group (COA) 101.00p 12.85%

Rathbones Group (RAT) 1,962.00p 3.12%

St James's Place (STJ) 704.50p 2.85%

W.A.G Payment Solutions (WPS) 66.60p 2.73%

Assura (AGR) 41.58p 2.16%

Bluefield Solar Income Fund Limited (BSIF) 111.00p 2.00%

Workspace Group (WKP) 618.00p 1.96%

Mitchells & Butlers (MAB) 311.00p 1.93%

IP Group (IPO) 42.80p 1.92%

Pantheon International (PIN) 326.00p 1.85%

FTSE 250 - Fallers

Wizz Air Holdings (WIZZ) 1,480.00p -22.63%

Vesuvius (VSVS) 431.00p -11.79%

Serco Group (SRP) 179.00p -6.32%

Diversified Energy Company (DEC) 1,207.00p -6.07%

TBC Bank Group (TBCG) 2,925.00p -5.97%

SSP Group (SSPG) 174.30p -4.97%

Mony Group (MONY) 226.40p -4.87%

Renishaw (RSW) 3,615.00p -4.74%

Telecom Plus (TEP) 1,806.00p -4.11%

Endeavour Mining (EDV) 1,659.00p -4.10%