LONDON (SHARECAST) - - MPC in wait-and-see mode
- UK jobless rates falls more than expected
- StanChart, Resolution lead the risers
UK equities were stuck in the red by Wednesday lunchtime as minutes from the latest rate-setting meeting at the Bank of England dampened expectations that the Monetary Policy Committee (MPC) would act immediately to inject more stimulus into the economy.
"With many on their holidays, including politicians, we are seeing the usual low volumes of August at the moment. In the markets, we’re also waiting for more details from the Eurozone leaders on how they plan to bring down the borrowing costs in Spain and Italy. There is likely to be little volatility in stocks until then," said analyst Craig Erlam from Alpari.
The MPC voted unanimously this month in favour of keeping the central bank's key interest rate at 0.5% and maintaining the asset purchase programme at £375bn. The central bank said it was waiting to see what impact its Funding for Lending Scheme (FLS) - aimed at boosting bank credit - would have on the economy.
"For most members, the decision this month was relatively straightforward," the minutes said. However, for others, "the decision was nevertheless more finely balanced, since a good case could be made at this meeting for more asset purchases."
The UK unemployment rate fell to 8.0% in July from 8.1% in June, versus economists' expectations of no change. The number of people claiming Job-seeker's Allowance eased by by 5,900 to 1.59m in July, while the number of people out of work dropped 46,000 to 2.56m in the three months to June.
European markets started cautiously today on the news that Greece needs two more years to implement its austerity package which seeks to comply with the bailout requirements by reducing debt. According to a report by Financial Times on Tuesday evening, the proposal suggests slowing down the cuts by spreading them over a four-year period until 2016.
FTSE 100: StanChart rises after US settlement
Standard Chartered jumped after having reached a $340m settlement with the New York Department of Financial Services (DFS) over claims its US subsidiary illegally processed payments for Iran. Investec said that while uncertainty still remains, the settlement reduces the risk of the group loosing its banking licence. StanChart was given a lift this morning by Bank of America and Oriel Securities who both upgraded their ratings on the stock to 'buy'.
Insurance group Resolution was also a high riser after abandoning plans to split itself up and saying it would overhaul its board structure.
Diversified mining giant Eurasian Natural Resources Corp (ENRC) dropped after being hit by a fall in commodity prices and challenging economic conditions in the first half, meaning that both revenues and profits were significantly lower than the same period in 2011. The group slashed its interim dividend by 59.4%.
Cigarette giants Imperial Tobacco and British American Tobacco (BATS) were among the worst performers after a legal challenge to Australia's decision to insist cigarettes are sold in plain packaging was thrown out. The new packaging rules are scheduled to be come into force at the beginning of December.
BATS was also lower after being among the handful of stocks that went ex-dividend today, along with Anglo American, Fresnillo, Hammerson, Meggitt, Pearson, Rio Tinto, Schroders and Vedanta. From today, investors will not have the right to each company's respective dividends.
Banking group Lloyds was flat after announcing its intention to sell its interest in a portfolio of private equity-related investments worth over a billion pounds which made a loss last year.
FTSE 250: FirstGroup drops after West Coast win
Transport firm FirstGroup was a heavy faller in spite of winning the West Coast franchise, awarded by the Department for Transport. The contract runs from December 2012 to 2026 and has annual revenues of around £900m for FirstGroup.
Panmure Gordon said this morning that while this is a "significant franchise win", it was probably already priced into the stock with shares having risen strongly in recent weeks.
International infrastructure specialist Balfour Beatty headed the other way after underlying profits came in higher than expected.
FTSE 100 - Risers
Standard Chartered (STAN) 1,436.00p +4.82%
Resolution Ltd. (RSL) 229.20p +4.18%
Shire Plc (SHP) 2,042.00p +2.15%
ARM Holdings (ARM) 584.00p +1.74%
Admiral Group (ADM) 1,199.00p +0.93%
Burberry Group (BRBY) 1,374.00p +0.88%
Centrica (CNA) 325.20p +0.71%
Rexam (REX) 437.50p +0.69%
Carnival (CCL) 2,197.00p +0.69%
Capital Shopping Centres Group (CSCG) 331.90p +0.61%