London close: Stocks grind higher despite tensions in Gulf, pound strength

London stocks finished higher on Thursday as 'dovish' comments from the US central bank overnight offset the impact from the Bank of England's decision to insist on the need for "gradual" rate hikes even as it reduced its forecasts for second-quarter growth.

The FTSE 100 was up 0.28% at 7,424.44, while the pound was trading up 0.41% against the US dollar at 1.26946, as the Greenback took a hit following the Federal Reserve's policy announcement. Against the euro, sterling was 0.14% lower at 1.1244.

Acting as a backdrop, front month Brent crude oil futures were running up 3.8% to $64.23 a barrel on ICE, after Iran's Revolutionary Guards shot down a US military drone they said had entered the country's airspace, a claim that was quickly rebutted by Washington. Gold futures were also higher, rising by 3.05% to $1,389.90/oz. on COMEX.

"This is nuts. The Fed is still not saying it will cut, the risks to trade remain with no end in sight for a deal between the US and China. Anyway the market can stay irrational longer than bears can stay solvent," said Markets.com chief market analyst Neil Wilson.

In the US meanwhile, the S&P 500 had hit a fresh record intraday high shortly after the start of trading at 2,956.20 after Federal Reserve chair Jerome Powell said the central bank would act to ensure the continuity of the economic expansion, in effect opening the door to possible interest rate cuts.

The Bank of England's Monetary Policy Committee voted unanimously to keep rates on hold at 0.75%, as expected, and to maintain the stock of corporate bond purchases and UK government bond purchases. The BoE also lowered its growth forecast for the second quarter to zero from 0.2% growth.

Policymakers did acknowledge a slowdown in economic growth and said the chances of a no-deal Brexit have increased, but under the assumption of an orderly Brexit, continued to reiterate " the need for a gradual pace of rate hikes".

"Against the backdrop of increased tail risks and easing from the Fed and ECB, it is likely difficult for the BoE to materially shift market pricing back toward pricing in hikes over the forecast horizon. We maintain our view of unchanged rates through 2019 and 2020," said Fabrice Montagne and Sreekala Kochugovindan at Barclays Research.

Earlier, figures from the Office for National Statistics showed that retail sales eased in May as unseasonably cold weather saw shoppers delay buying summer clothes.

Monthly retail sales volumes fell by 0.5% overall, in line with consensus, with clothing and footwear sales slumping 4.5%. Year-on-year growth of 2.3%, compared to 5.1% in April, was below consensus, with most analysts looking for around 2.7%. It was also the smallest annual rise since October.

In equity markets, shares in precious metals miner Fresnillo shone as gold prices rallied to a more than five-year high after the dovish Fed comments.

BCA Marketplace saw its share surge as it confirmed that it was in advanced discussions with private equity firm TDR Capital about a possible £1.9bn cash offer for the company.

Homewares group Dunelm rallied after saying it expects pre-tax profits for the year to 29 June 2019 to be ahead of expectations, driven by good weather and strong trading across its businesses.

On the downside, Dixons Carphone slumped as it reported a big drop in full-year profit and warned of further falls in the current trading year.

Carnival shares sank after the cruise operator cut its guidance for 2019 adjusted earnings per share to between $4.25 and $4.35 from between $4.35 and $4.55.

Evraz was under the cosh after the steel maker's chair and chief executive sold a 1.7% stake in the company.

Ex-dividends also weighed, with B&M European Value Retail, Big Yellow, Cineworld, Compass, ITE, Land Securities, Stobart, Tate & Lyle and United Utilities all in the frame.

In broker note action, Halma rallied on the back of an upgrade to 'neutral' at UBS, while Assura was lifted to 'overweight' at JP Morgan.

Whitbread was cut to 'reduce' at Oddo, while Paragon was downgraded to 'underperform' at RBC Capital Markets and CYBG was lifted to 'outperform' at RBC.

Market Movers

FTSE 100 (UKX) 7,424.44 0.28%
FTSE 250 (MCX) 19,384.13 0.72%
techMARK (TASX) 3,635.83 0.09%

FTSE 100 - Risers

Fresnillo (FRES) 868.80p 5.54%
International Consolidated Airlines Group SA (CDI) (IAG) 456.00p 2.93%
easyJet (EZJ) 892.60p 2.86%
Johnson Matthey (JMAT) 3,203.00p 2.46%
St James's Place (STJ) 1,087.50p 2.31%
Halma (HLMA) 2,028.00p 2.27%
Flutter Entertainment (FLTR) 6,054.00p 2.06%
BHP Group (BHP) 1,963.00p 2.02%
CRH (CRH) 2,565.00p 1.95%
Melrose Industries (MRO) 178.00p 1.92%

FTSE 100 - Fallers

Carnival (CCL) 3,549.00p -12.00%
Evraz (EVR) 650.80p -3.70%
United Utilities Group (UU.) 791.60p -3.46%
Centrica (CNA) 88.26p -3.02%
Reckitt Benckiser Group (RB.) 6,310.00p -2.95%
Whitbread (WTB) 4,514.00p -2.51%
Royal Bank of Scotland Group (RBS) 217.80p -2.16%
Barclays (BARC) 150.72p -1.79%
BT Group (BT.A) 203.15p -1.72%
BAE Systems (BA.) 483.80p -1.61%

FTSE 250 - Risers

BCA Marketplace (BCA) 238.00p 22.30%
Domino's Pizza Group (DOM) 279.80p 10.59%
Dunelm Group (DNLM) 981.00p 8.52%
Bakkavor Group (BAKK) 129.60p 7.46%
Saga (SAGA) 35.50p 7.38%
Just Group (JUST) 58.45p 6.27%
Premier Oil (PMO) 77.30p 5.80%
Tullow Oil (TLW) 213.70p 5.06%
Centamin (DI) (CEY) 110.30p 4.95%
Cairn Energy (CNE) 164.30p 4.78%

FTSE 250 - Fallers

Cineworld Group (CINE) 258.50p -8.01%
Intu Properties (INTU) 77.24p -6.31%
Dixons Carphone (DC.) 118.20p -5.10%
Aston Martin Lagonda Global Holdings (AML) 1,020.40p -3.55%
Paragon Banking Group (PAG) 434.20p -3.25%
Metro Bank (MTRO) 513.00p -3.21%
EI Group (EIG) 196.40p -3.02%
Big Yellow Group (BYG) 1,000.00p -2.25%
B&M European Value Retail S.A. (DI) (BME) 327.50p -2.18%
Contour Global (GLO) 185.00p -2.02%