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LONDON MARKET MIDDAY: FTSE 100 up but pound struggles after BoE hold
Stock prices in London surged on Thursday afternoon, shaking off a muted morning, as a dovish tilt to the Bank of England’s latest rate hold supported equities.
Threadneedle Street maintained bank rate at a 16-year high of 5.25% for the sixth meeting in-a-row. However, two members of its Monetary Policy Committee backed a 25 basis point cut. Seven, Governor Andrew Bailey included, supported the hold.
Sterling was quoted at $1.2458 at midday on Thursday, lower than $1.2495 at the London equities close on Wednesday, and down from $1.2488 just before the BoE decision.
The BoE said: ‘Headline CPI inflation has continued to fall back, in part owing to base effects and external effects from goods prices. The restrictive stance of monetary policy is weighing on activity in the real economy, is leading to a looser labour market and is bearing down on inflationary pressures. Key indicators of inflation persistence are moderating broadly as expected, although they remain elevated.’
The FTSE 100 index was up 37.96 points, 0.5% at 8,392.01. The FTSE 250 was up 37.15 points, 0.2%, at 20,529.14, and the AIM All-Share was up 2.43 points, 0.3%, at 782.26.
The Cboe UK 100 was up 0.5% at 838.19, the Cboe UK 250 was 0.3% higher at 17,806.89, and the Cboe Small Companies was up 0.5% at 16,076.45.
Pepperstone analyst Michael Brown said the BoE has taken ‘further steps towards delivering the first rate cut of the cycle’. Deputy Governor Dave Ramsden voted for a 25 basis point cut, alongside external MPC member Swati Dhingra.
‘Dissent from an internal member, however, is rather rare, and should be taken as a strong signal that the BoE are ready to cut rates, soon. Furthermore, Governor Bailey noted his ’optimism’ that things are moving in the right direction, while the latest inflation forecasts point towards the 2% CPI target being achieved in the second quarter of this year,’ Brown added.
In European equities on Thursday, the CAC 40 in Paris was marginally down, while the DAX 40 in Frankfurt was up 0.4%, hitting a record high.
The euro traded at $1.0736 at midday on Thursday, lower than $1.0749 late Wednesday. Against the yen, the dollar was quoted at JP¥155.90 versus JP¥155.55.
In the FTSE 100, BAE Systems rose 0.7%.
The aerospace and defence manufacturer said trading is in line with expectations, backed by increased defence spending.
In a statement ahead of its annual general meeting, Chief Executive Charles Woodburn said: ‘Operational performance continues to be strong and our backlog and programme incumbencies underscore our confidence in our long-term value-creating model.’
BAE Systems said its full-year 2024 guidance remains unchanged. It expects 2024 sales growth between 10% to 12% from £25.28 billion in 2023, with underlying earnings before interest and tax to grow between 11% to 13% from £2.68 billion. Underlying earnings per share are predicted to grow between 6% to 8% from 63.2 pence in 2023.
In the FTSE 250, Harbour Energy rose 6.9%.
The oil and gas company said first quarter production averaged 172,000 barrels of oil equivalent per day, down from 202,000 barrels a year earlier.
It proposed a final dividend of 13 US cents, up from 12 cents a year earlier, in line with its $200 million annual dividend policy and representing around 9% growth year-on-year.
Harbour Energy Chief Executive Officer Linda Cook commented: ‘During the first quarter, we continued to deliver safe and responsible operations, maximise the value of our UK production base and advance our organic growth projects. At the same time, we made significant progress towards completion of the Wintershall Dea acquisition which will transform our portfolio and capital structure and support enhanced and sustainable shareholder returns.’
Among London’s small-caps, Avon Protection rose 2.9%.
The personal protection equipment company said it won a contract from the UK Ministry of Defence worth up to £38 million for the continued supply of general service respirator and associated in service support.
The contract runs for four years with five further 12-month option periods.
On AIM in London, Robinson surged 20%.
The plastic and paperboard packaging manufacturer said it is in ‘advanced discussions’ over the appointment of a new chief executive officer, after a ‘thorough search process with a leading recruitment agency’.
In August last year, it reported that Helene Roberts would resign as CEO in September, with senior independent non-executive director Sara Halton taking over on an interim basis while the company searched for a new CEO.
Meanwhile, in a trading update, Robinson said the momentum that it experienced in the second half of 2023 has continued into 2024.
Sales volumes in the first four months of 2024 are up 12% from a year earlier. With the effect of sales price and foreign exchange movements, total revenue is up 8%.
Looking ahead, the company expects 2024 revenue and profit to be ahead of 2023 and current market expectations.
Stocks in New York were called lower. The Dow Jones Industrial Average and S&P 500 were each called down 0.1% and the Nasdaq Composite down 0.2%.
Brent oil was trading at $84.22 a barrel at midday on Thursday, higher than $83.48 late Wednesday.
Two top Israeli officials criticised US President Joe Biden on Thursday for threatening to stop certain arms supplies to Israel if it invades the crowded Gaza city of Rafah.
Israel has defied international objections by sending in tanks and conducting ‘targeted raids’ in the eastern areas of Rafah.
It says Rafah is home to Hamas’s last remaining battalions but the city on the border with Egypt is also crammed with displaced Palestinian civilians.
‘If they go into Rafah, I’m not supplying the weapons that have been used... to deal with the cities,’ Biden told CNN, in his starkest warning to Israel since the start of the war.
‘Civilians have been killed in Gaza as a consequence of those bombs,’ Biden said. ‘It’s just wrong.’
Israel’s ambassador to the United Nations, Gilad Erdan, said Biden’s comments would be interpreted by Israel’s foes Iran, Hamas, and Hezbollah as ‘something that gives them hope to succeed’.
Gold was quoted at $2,310.71 an ounce at midday on Thursday, lower than $2,317.69 on Wednesday.
Still to come on Thursday’s economic calendar, the latest US jobless claims figures are out at 1330 BST.
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