London midday: FTSE inches up as pound buffeted by Carney calls, Fed plans

London stocks steadily edged higher as Tuesday wore on as the pound gave up early gains against the dollar.

The FTSE 100 was up 0.34% to 7,277.85 just before midday, having fallen in early trade.

Sterling initially weighed on the blue chip index as it surged above 1.355 against the dollar before falling back to 1.350 by noon, where it was down almost 0.3% at 1.1258.

After the pound suffered a slight hangover the previous day after its strongest weekly performance in eight years last week, Tuesday saw currency traders looking towards the US Federal Reserve as it begins its two-day meeting ahead of a policy announcement on Wednesday as well as mulling various opinions on the overnight speech at the International Monetary Fund from Bank of England governor Mark Carney.

"The tone used by BoE Governor Carney at his speech at the IMF yesterday doused some of the hawkishness that had spread across sterling markets last week," said analysts at Rabobank.

Having already absorbed last week's message that the Bank feels that the time is nearing for a withdrawal of some monetary stimulus, Rabobank felt the main takeaway from the talk was that “any prospective increases in Bank Rate would be expected to be at a gradual pace and to a limited extent, and to be consistent with monetary policy continuing to provide substantial support to the economy”.

Barclays agreed, feeling that markets saw the overall tone as being "less hawkish than Vleighe’s speech on Friday", pointing to Carney's focus on the considerable risks to the outlook and indication that rate hikes were likely to be limited and gradual.

"However, the near-term inflationary risks are clearly emphasised through a number of channels. We believe the views expressed in the speech are consistent with our forecast of a rate hike in November."

HSBC chipped into the sterling chat as the bank's strategists have changed their opinion in light of the more hawkish BoE and cyclical factors driving the currency. "[W]e revise our year-end 2017 forecast for GBP-USD higher, from 1.20 to 1.35...
But GBP is likely to weaken in 2018 as the market questions the merit of rate hikes and politics belatedly gets a grip on it."

Meanwhile, ahead of the Fed announcement, the US dollar has been swinging between the bulls and the bears, adding another factor to the pound's bumpy progress so far this week.

"Analysts expect the Fed to keep the possibility of a December interest rate hike on the table. There could be discussions on the balance sheet normalisation as well," said Ipek Ozkardeskaya, an analyst at London Capital Group.

The probability of a December rate hike rose to 50%, which Ozkardeskaya said was too low to trigger a panic across the stock markets yet too high to be ruled out by the currency and money markets.

In other macro data, Germany's ZEW economic sentiment figures smashed expectations to come in at 17.0, and while the region-wide reading missed estimates, it still improved to 31.7 from 29.3 month-on-month..

In the UK, Kantar Worldpanel released data on the food retail industry showing sales had risen 3.6% in the 12 weeks to 10 September, the sixth consecutive period in which sales rose by more than 3% but down slightly from the 4% announced in August. Marks & Spencer, Sainsbury's, Morrisons and Tesco were all among the top risers.

Sales at online grocery specialist Ocado have also been strong, but its shares were trading lower as the company's third-quarter update included comments about a spike in costs as it completes the construction of its fourth and largest 'customer fulfilment centre'.

Easyjet and IAG investors were enjoying the grimaces over at Ryanair as the Dublin carrier admitted to a “mess-up” on pilot rostering that forced it to write to 400,000 passengers to tell them that their flights were cancelled.

Tullow Oil was higher after analysts at Credit Suisse rejigged their recommendations for European exploration and production outfits, telling clients the sector was better positioned to emerge from the cycle, while its year-to-date de-rating had made it more attractive.

Medical products and technology company ConvaTec was modestly higher announced the European introduction of its new “intermittent catheter”.

GlaxoSmithKline was down slightly even though it announced that the US Food and Drug Administration has approved once-daily, single inhaler triple therapy under the brand name Trelegy Ellipta for the long-term treatment of patients with chronic obstructive pulmonary disease.

Market Movers

FTSE 100 (UKX) 7,277.88 0.34%
FTSE 250 (MCX) 19,507.88 0.36%
techMARK (TASX) 3,422.86 0.13%

FTSE 100 - Risers

Marks & Spencer Group (MKS) 337.60p 2.74%
Sainsbury (J) (SBRY) 242.80p 2.45%
easyJet (EZJ) 1,239.00p 2.40%
Morrison (Wm) Supermarkets (MRW) 235.60p 1.95%
International Consolidated Airlines Group SA (CDI) (IAG) 602.00p 1.86%
Ferguson (FERG) 4,658.00p 1.84%
Kingfisher (KGF) 298.80p 1.56%
G4S (GFS) 277.10p 1.54%
Tesco (TSCO) 186.60p 1.50%
Smurfit Kappa Group (SKG) 2,407.00p 1.43%

FTSE 100 - Fallers

NMC Health (NMC) 2,689.00p -2.25%
Coca-Cola HBC AG (CDI) (CCH) 2,535.00p -1.59%
BT Group (BT.A) 283.65p -1.37%
Antofagasta (ANTO) 942.00p -1.21%
Smith & Nephew (SN.) 1,336.00p -0.67%
Ashtead Group (AHT) 1,759.00p -0.62%
Mondi (MNDI) 2,046.00p -0.58%
Anglo American (AAL) 1,289.50p -0.54%
British American Tobacco (BATS) 4,680.50p -0.50%
Whitbread (WTB) 3,648.00p -0.44%

FTSE 250 - Risers

Stagecoach Group (SGC) 167.10p 4.96%
Cairn Energy (CNE) 183.00p 4.69%
Tullow Oil (TLW) 164.00p 4.39%
Dunelm Group (DNLM) 648.50p 3.02%
Millennium & Copthorne Hotels (MLC) 461.60p 2.51%
FDM Group (Holdings) (FDM) 970.50p 2.48%
Lancashire Holdings Limited (LRE) 656.00p 2.26%
Marston's (MARS) 107.40p 2.19%
Alfa Financial Software Holdings (ALFA) 488.00p 2.05%
Wizz Air Holdings (WIZZ) 2,856.00p 2.04%

FTSE 250 - Fallers

Provident Financial (PFG) 726.00p -2.94%
Ocado Group (OCDO) 294.20p -2.58%
Hikma Pharmaceuticals (HIK) 1,169.00p -2.01%
Euromoney Institutional Investor (ERM) 1,132.00p -1.99%
Kaz Minerals (KAZ) 742.00p -1.92%
TBC Bank Group (TBCG) 1,626.00p -1.45%
Nostrum Oil & Gas (NOG) 385.00p -1.28%
Telecom Plus (TEP) 1,084.00p -1.09%
Investec (INVP) 552.50p -1.07%
NewRiver REIT (NRR) 340.00p -1.05%