London close: FTSE closes at 10th record high in a row

The FTSE 100 jumped on Wednesday after Bank of England Governor Mark Carney said Brexit is no longer the most significant domestic risk to the UK’s financial stability.

The index ended up 0.21% to 7,290.49 points, a 10th consecutive record high.

In his testimony to select committee lawmakers, Carney said Brexit was no longer the biggest risk to the UK economy following action taken by the BoE.

"In the run up to referendum, we felt it was largest risk because there were things that could have happened which had financial stability implications," he said.

“Actions were taken to mitigate that, but having got through the day after, the scale of the immediate risks has gone down.”

Carney also revealed the BoE is keeping an open-mind over potential interest rate hikes while at the same time reiterating that the central bank is willing to pull back on stimulus if needed.

His comments failed to have much impact on the pound with it falling 0.07% versus the euro at €1.1529 and declining 0.75% against the dollar to $1.2086.

Sterling was dragged lower after official data showed the UK trade deficit widened markedly in November due to a surge in imports.

The overall trade deficit grew £2.6bn to £4.2bn by the end of November, the Office for National Statistics said, as a £3.3bn increase in imports was only partially offset by a £0.7bn increase in exports.

"Today’s trade balance release has walked back most of the deficit contraction seen last month, and as a result sterling reaction shows investors becoming increasingly worried about the likelihood of a 'hard Brexit',” said Manuel Ortiz-Olave, market analyst at Monex Europe.

"The goods trade balance has become one of the most important indicators to watch after the referendum given the trade deficit the UK will have to reduce once it leaves the EU. A significant increase in imports in November counters the traditional economic belief that a weaker currency would automatically boost exports.”

The ONS also revealed that UK industrial production rebounded but that construction output unexpectedly fell in November.

Seasonally adjusted construction output declined 0.2% on the previous month, extending the 0.6% fall in October when the market had expected a bounce back of 0.2%.

UK industrial production also rose by a surprising 2.1% in November compared to October and 2.0% versus the same month last year, which was more than double the respective consensus forecast and reversed the falls from the preceding month.

Manufacturing production was up 1.3% month-on-month, beating the consensus estimate of 0.50% and a turnaround from the revised 1% decline from the previous month.

Separately, analysis by the National Institute of Economic and Social Research revealed UK economic growth slowed in the final three months of the year. Gross domestic product grew by 0.5% in the fourth quarter, down from growth of 0.6% in the third quarter but in line with market expectations and the level of GDP growth in the three months ending November.

Elsewhere, US President-elect Donald Trump held a news conference in New York ahead of his 20 January inauguration date. It marked his first major speech since he was elected president on 8 November.

During his speech, Trump slammed “fake news”, including reports that Russia has compromising material about the country’s new leader. He also criticised Obamacare as a "complete disaster" and said that it will be repealed and replaced.

Trump also said US companies will be hit with a "major border tax" in order to to protect jobs if they expand manufacturing facilities abroad for products to be sold domestically.

Meanwhile, oil prices jumped despite data from the Energy Information Administration showing crude inventories increased by 4.1m barrels last week.

“Signs of further cuts to Saudi output is helping to keep belief in the OPEC deal alive, but with the US evidently ramping up output it is becoming questionable whether the output reduction narrative can be maintained,” said IG market analyst Chris Beauchamp.

In company news, Sainsbury’s was a top riser after the supermarket’s third-quarter like-for-like grocery sales were surprisingly positive and group revenue was further lifted by recently-acquired Argos as online sales proved a crucial factor over the festive period.

Total group sales for the 15 weeks to 7 January rose 0.8%, with group LFL sales up 1.0% as weak LFL growth from the supermarkets business of 0.1% was offset by a 4% gain from Argos.

BT Group was boosted by an upgrade to ‘overweight’ from ‘equalweight’ by Morgan Stanley, which bumped up the price target to 490p from 450p.

Engineer Smiths Group also benefited from a broker note as Bank of America Merrill Lynch said it was its preferred UK stock in the capital goods sector as new management adopts a proactive strategy.

On the downside, TUI was hit by a downgrade to ‘underperform’ from ‘outperform’ by Credit Suisse, which highlighted a series of key challenges across all segments of the group, leading to a 15% downgrade of 2018 earnings per share forecasts.

Thomas Cook was also lower on a downgrade by Credit Suisse to ‘neutral from ‘outperform’.

Housebuilder Taylor Wimpey was in the red after it said its order book for 2017 weakened from the previous year, although it did express confidence that full-year profits will be at the upper end of the range of analysts' estimates

Engineering and aerospace group Babcock International was under pressure on read-across from FTSE 250 peer Cobham, which posted group trading profit below guidance for the year ended 31 December and said it was not recommending a final dividend.

Market Movers

FTSE 100 (UKX) 7,290.49 0.21%
FTSE 250 (MCX) 18,391.40 -0.12%
techMARK (TASX) 3,428.80 -0.61%

FTSE 100 - Risers

Anglo American (AAL) 1,285.00p 3.84%
Dixons Carphone (DC.) 357.00p 3.60%
Worldpay Group (WPG) 291.00p 2.39%
BT Group (BT.A) 396.85p 2.36%
Smiths Group (SMIN) 1,512.00p 1.96%
Burberry Group (BRBY) 1,561.00p 1.83%
Rio Tinto (RIO) 3,346.00p 1.59%
BHP Billiton (BLT) 1,420.00p 1.43%
Vodafone Group (VOD) 213.10p 1.36%
Old Mutual (OML) 211.90p 1.34%

FTSE 100 - Fallers

TUI AG Reg Shs (DI) (TUI) 1,137.00p -4.53%
Fresnillo (FRES) 1,381.00p -3.56%
Shire Plc (SHP) 4,681.50p -3.16%
Morrison (Wm) Supermarkets (MRW) 239.50p -2.64%
Taylor Wimpey (TW.) 170.60p -2.46%
Randgold Resources Ltd. (RRS) 6,560.00p -2.24%
easyJet (EZJ) 1,055.00p -2.22%
Standard Life (SL.) 353.80p -2.13%
Tesco (TSCO) 208.80p -1.97%
AstraZeneca (AZN) 4,577.00p -1.78%

FTSE 250 - Risers

Pagegroup (PAGE) 421.70p 7.30%
Evraz (EVR) 222.00p 6.47%
Ted Baker (TED) 2,769.00p 4.53%
Spectris (SXS) 2,481.00p 3.98%
Sophos Group (SOPH) 277.00p 3.20%
Debenhams (DEB) 54.35p 3.13%
Caledonia Investments (CLDN) 2,756.00p 2.87%
Euromoney Institutional Investor (ERM) 1,162.00p 2.83%
Hays (HAS) 158.80p 2.78%
Nostrum Oil & Gas (NOG) 501.50p 2.49%

FTSE 250 - Fallers

Cobham (COB) 140.10p -14.88%
Hochschild Mining (HOC) 222.70p -5.60%
Allied Minds (ALM) 443.30p -3.38%
Acacia Mining (ACA) 400.80p -3.33%
Stagecoach Group (SGC) 213.00p -3.27%
IP Group (IPO) 183.00p -3.07%
Bodycote (BOY) 625.00p -2.95%
Thomas Cook Group (TCG) 85.90p -2.88%
Shawbrook Group (SHAW) 261.30p -2.79%
Ladbrokes Coral Group (LCL) 119.60p -2.29%