London midday: Stocks turn positive despite surging pound; BoE stands pat
London stocks had turned positive by midday on Thursday despite a surging pound, with solid updates from the likes of BT, Smith & Nephew and Just Eat helping to underpin the tone as the Bank of England stood pat on rates.
Just after midday, the FTSE 100 was up 0.2% to 7,144.85, while the pound was 1.1% firmer against the dollar at 1.2900 and 0.4% higher versus the euro at 1.1333 as the BoE voted unanimously to leave interest rates unchanged at 0.75%.
"Any future increases in bank rate are likely to be at a gradual pace and to a limited extent," the Bank's monetary policy committee said in a summary. But the Bank also warned that a no-deal Brexit could force interest rates higher and cut its UK growth forecast for this year to 1.3% from 1.4% and its forecast for next year to 1.7% from 1.8%.
David Cheetham, chief market analyst at XTB, said that the overall tone of the accompanying statement was fairly mixed and as thus, there’s been a fairly muted market reaction with the pound remaining close to its highest levels of the day.
"The message is in keeping with prior communications by and large, with the bank stating that they foresee ongoing tightening of monetary policy if the economy grows as forecast, but checking this with the caveat that increases will likely be at a gradual pace and to a limited extent. The growth forecasts for this year and next were revised lower by 0.1%, in what could be seen as a negative sign but on balance the report could be considered mildly positive.
"Stating that the output gap has closed and that this may mean a possible faster pace of hikes post-Brexit is arguably the most hawkish comment and pound bulls may look to focus in on this."
BoE governor Mark Carney’s press conference at 1230 GMT will be the next focus.
Sterling was holding on to the strong gains it racked up earlier on the back of a report suggesting that a tentative deal has been struck for UK financial services. According to The Times, the UK has agreed with Brussels to give financial services continued access to European markets after Brexit. Citing government sources, it said a tentative agreement has been reached on all aspects of a future partnership on services, along with the exchange of data.
A subsequent report by Reuters quoting an EU official as saying that the Times article was wrong, as the equivalence regime could only ever be unilateral, did nothing to halt the pound's ascent.
Earlier, the latest survey from Nationwide showed annual house price growth in the UK slowed to 1.6% in October from 2% in September, missing expectations for a 1.9% increase and marking the slowest rate since May 2013.
Manufacturing data was nothing to write home about either. The Markit/CIPS manufacturing purchasing managers' index fell to 51.1 this month - a 27-month low - from a downwardly-revised 53.6 in September, with new orders and employment down for the first time since mid-2016. Analysts had been expecting a reading of 53.0.
The drop was attributed in part to rising global trade tensions and Brexit uncertainties.
On the corporate front, BT Group rallied after saying its profits increased 24% in the first half of its trading year as costs fell as 2,000 jobs were cut as part of its massive restructuring programme. The company also said it expects EBITDA to be in the upper half of its £7.3bn to £7.4bn range for the year. On the FTSE 250, TalkTalk gained on read-across from BT.
Medical equipment maker Smith & Nephew racked up sharp gains as it posted a 3% rise in third-quarter revenue thanks to a strong performance in the US and emerging markets.
BHP Billiton advanced after unveiling plans to return $10.4bn to shareholders and Just Eat reversed earlier losses to trade higher as it served up a 41% jump in third-quarter revenue and said full-year revenue would be towards the top end of its £740m to £770m range.
Spire Healthcare was the top gainer on the 250 after a report on the Betaville website that private equity firm Advent International has quietly build up a 3.5% stake in the company and Croda rose after posting 4.5% growth in third-quarter core business sales.
On the downside, Shell spilled lower as the oil giant's third-quarter profits rose 37% to a four-year high, thanks to rising oil prices, but still managed to miss forecasts. Profits increased to $5.6bn from $4.1bn the year before, versus expectations of $5.8bn.
"Unlike BP, which delivered better than expected numbers earlier this week, earnings are slightly short of consensus expectations. There might also be some disappointment at the lack of an increase in the dividend despite cash flow from operations of nearly $15bn," said Russ Mould, investment director at AJ Bell.
Most oil and gas related companies, however, were in the red on the day as oil prices fell to their lowest since mid August. Brent crude was down 0.7% to $74.49 per barrel. Producers BP, Premier Oil and Tullow were among the fallers, along with engineers such as Wood Group.
Ashmore, Hilton Food, Morgan Advanced Materials, Senior, Softcat and Unilever were among the companies whose stock went ex-dividend.
On the broker note front, HSBC was upgraded to 'hold' at DZ Bank, while Synthomer was cut to 'underweight' at JPMorgan. Berenberg initiated coverage of Cairn Energy and Nostrum Oil & Gas at 'buy', while Premier Oil and Tullow were started at 'hold'.
Market Movers
FTSE 100 (UKX) 7,144.85 0.23%
FTSE 250 (MCX) 19,208.31 1.54%
techMARK (TASX) 3,337.01 1.10%
FTSE 100 - Risers
BT Group (BT.A) 265.32p 10.30%
Smith & Nephew (SN.) 1,355.50p 6.44%
Persimmon (PSN) 2,434.00p 6.10%
Taylor Wimpey (TW.) 171.20p 6.01%
Just Eat (JE.) 639.80p 5.30%
Barratt Developments (BDEV) 538.40p 4.75%
ITV (ITV) 155.45p 4.36%
Fresnillo (FRES) 884.80p 4.27%
Royal Bank of Scotland Group (RBS) 246.04p 4.08%
Berkeley Group Holdings (The) (BKG) 3,635.00p 3.83%
FTSE 100 - Fallers
Wood Group (John) (WG.) 687.20p -3.78%
Royal Dutch Shell 'B' (RDSB) 2,496.00p -2.69%
BP (BP.) 553.10p -2.50%
Rentokil Initial (RTO) 309.10p -2.25%
NMC Health (NMC) 3,455.98p -2.15%
Royal Dutch Shell 'A' (RDSA) 2,447.00p -2.14%
AstraZeneca (AZN) 5,862.00p -2.14%
Smurfit Kappa Group (SKG) 2,530.00p -1.40%
Experian (EXPN) 1,778.00p -1.36%
Shire Plc (SHP) 4,619.50p -1.30%
FTSE 250 - Risers
Spire Healthcare Group (SPI) 127.30p 8.43%
Metro Bank (MTRO) 2,396.00p 7.73%
Just Group (JUST) 94.80p 6.82%
Thomas Cook Group (TCG) 48.12p 6.65%
Contour Global (GLO) 198.00p 6.45%
Bellway (BWY) 3,056.00p 6.44%
IP Group (IPO) 113.80p 6.36%
Crest Nicholson Holdings (CRST) 361.74p 6.14%
Bovis Homes Group (BVS) 1,027.50p 6.04%
Computacenter (CCC) 1,164.00p 6.01%
FTSE 250 - Fallers
Wood Group (John) (WG.) 687.20p -3.78%
Dairy Crest Group (DCG) 462.20p -3.35%
Synthomer (SYNT) 429.60p -3.24%
Premier Oil (PMO) 104.90p -2.87%
Tullow Oil (TLW) 220.20p -2.48%
Ashmore Group (ASHM) 344.40p -2.21%
Centamin (DI) (CEY) 97.34p -2.17%
Morgan Advanced Materials (MGAM) 270.40p -2.03%
Convatec Group (CTEC) 159.20p -1.73%
Vietnam Enterprise Investments (DI) (VEIL) 444.00p -1.33%