London midday: Stocks come off lows, analysts cautious ahead of BoE

Stocks have come off their lows of the session, with traders opting to sit on their hands ahead of key policy announcements from two of the main foreign central banks scheduled for later in the week and before a keenly awaited decision on interest rates from the Bank of England on Thursday.

"The FTSE100 may be in the red but it is holding a 2-week rising channel. Ahead of another busy week for corporate updates (on both sides of the pond) and central bank policy reviews (BoJ, BoE, Fed), sentiment is hampered by index heavyweights pricing in a combination of Sterling off its lows, metals continuing to give up ground on trade concerns as well as still digesting last week's Tech sector weakness," said Mike van Dulken at Accendo Markets.

Overnight, the Bank of Japan stepped-in for the third time in just over week in order to keep the yield on the country's 10-year government bonds under 0.10%, offering to purchase an unlimited amount of them at that level.

Speculation on the part of traders that the Bank of Japan might announce a shift in its policy the next day was behind the recent upwards pressure on bond yields around the world, which in turn had been weighing on share prices.

Against that backdrop, the FTSE 100 was down 0.10% or 7.99 points to 7,693.32 as of 1150 BST on Monday, weighed down by the phalanx of blue chip miners amid lower copper prices, led by Anglo American and Rio Tinto.

Three-month LME copper futures were falling further, changing hands at $6,177 per metric tonne ahead of the release of key manufacturing sector surveys in China over the next two days.

BoE set to raise rates - really

Looking ahead to the BoE announcement on Thursday, the consensus among economists was for a 25 basis point hike in Bank Rate, to 0.75%. UK bank shares were higher, led by Barclays and RBS.

However, by and large, markets appeared to be quite sceptical that another rate hike would follow before the end of 2019, with the uncertainty around Brexit a key factor.

According to analysts at ING, "after August, markets are barely pricing in another rate hike before the end of 2019. We suspect policymakers would prefer investors to expect an earlier move, however realistically we think the Bank will struggle to hike rates again for quite some time.

"As long as Brexit talks remain in deadlock (specifically over the Irish backstop), talk of ‘no deal’ will only increase. If this starts to hit sentiment, it would complicate efforts to tighten policy further."

Analysts at UBS were even more cautious, saying: "Guidance and communication from the MPC over recent months, and in particular the lack of any attempt to rein in the ever higher market-implied probability of a 25bp hike, suggests a majority of members are set to vote for a hike on Thursday. We continue to view even the tentative tightening embarked on since late 2017 as an unnecessary risk, and see several reasons why a hike is not justified at this point in time."

On that note, in an interview with Bloomberg published on Monday, Governor Mark Carney said he had spent a fair amount of time on contingency planning for Brexit and that now it certainly does crowd-out other factors, adding that it was taking up nearly half his time.

Also in the headlines, at the weekend Italian far-right deputy prime minister, Matteo Salvini, told The Sunday Times that his government would back the UK in its trade talks, urging Westminster to take a tougher stance in its negotiations with Brussels.

The UK also received a dose of support from China, with new foreign minister Jeremy Hunt saying on Monday that Beijing had offered to start discussions on a free trade deal with Britain.

Mortgage approvals in the UK picked-up from 64,684 for May to 65,619 in June (consensus: 65,500), alongside a £1.6bn in consumer credit in June which left the annual pace of credit growth at 8.8%.

Commenting on those fiigures from the Bank of England, analysts at Capital Economics said: "the robust increase in consumer credit suggests that households remain confident enough to increase borrowing – helping to smooth consumption in the face of recent meagre real pay increases."

Foxtons scraps dividend, Ibstocks warns

Shares in Foxtons were moving higher despite swinging to a loss for the first half on the back of a 9.5% drop in sales, which forced it to scrap its dividend. Nevertheless, the latter may be a bit of a 'non-event', said Mike van Dulken at Accendo Markets, given how the shares were barely yielding 1% even after plummeting 44% from their April highs.

The real estate agent also said renting was showing some momentum and announced a review of its cost base, although overall sales were subdued.

Brick and tile-maker Ibstock meanwhile followed-up on what Accendo termed a "disappointing" AGM in May with a profit warning, telling shareholders that slow production had extended into July. Making matters worse, increased maintenance would be needed over the next twelve months.

Aerospace and automobile engineering group Senior bumped up its interim dividend payout by 6.8% to 2.19p, telling shareholders that trading was ahead of expectations over the six months ending on 30 June, with higher margins seen in both of its main divisions, Aerospace and Flexonics. Profits before tax were 20% higher at £39.0m (Numis: £37.0m). Free cash flow also improved, the company said, rising 9% to £32.2m, even as the firm cut net debt by £33.0m to £148.8m.

Insurer Hiscox was higher as its first-half profit before tax came out 7% ahead of consensus, driven by stronger underwriting, boosted by reserve releases.

Shares in Ladbrokes owner GVC Holdings were boosted by its new 50-50 joint venture with Las Vegas casino giant MGM Resorts International to capitalise on the new sports betting laws in the US. The pair will invest $100m apiece into the JV and said its formation would significantly increase the speed to market for both parties, lower execution risk and create "meaningful early mover advantages", getting up and running before the start of the upcoming NFL season.

CYBG confirmed that trading in the three months to 30 June was in line with its expectations on Monday, with year-to-date mortgage growth of 3.8% on an annualised basis after its third quarter to £24.2bn. The FTSE 250 firm said that as previously guided, it saw reduced mortgage drawdowns in the third quarter due to lower applications in the second quarter, with full-year mortgage growth expected to be at the lower end of its guidance range, as previously indicated. It said the all-share offer for Virgin Money was continuing to progress as planned.

Indivior erased early losses as it revealed that lawyers will be able to begin arguing the drug developer's case against Dr Reddy Laboratories in October, after the US appeals court agreed to speed up the process. Dr Reddy's is appealing after it was prevented from selling its generic version of Indivior's Suboxone Film, a treatment for opioid addiction.

Grocer Morrisons was higher after an upgrade from UBS, which moved to 'buy' from 'neutral' and upped its target price to 300p from 225p.

Market Movers

FTSE 100 (UKX) 7,696.08 -0.07%
FTSE 250 (MCX) 20,860.62 -0.04%
techMARK (TASX) 3,584.28 -0.16%

FTSE 100 - Risers

GVC Holdings (GVC) 1,147.00p 4.75%
St James's Place (STJ) 1,224.00p 2.99%
Evraz (EVR) 553.60p 1.54%
Morrison (Wm) Supermarkets (MRW) 260.09p 1.32%
Aviva (AV.) 495.80p 1.27%
InterContinental Hotels Group (IHG) 4,756.00p 1.06%
Barclays (BARC) 192.90p 1.05%
Direct Line Insurance Group (DLG) 335.20p 1.02%
RSA Insurance Group (RSA) 631.00p 1.02%
Reckitt Benckiser Group (RB.) 6,878.00p 1.00%

FTSE 100 - Fallers

National Grid (NG.) 807.13p -2.27%
Pearson (PSON) 936.20p -2.21%
Ocado Group (OCDO) 1,109.00p -2.12%
Sage Group (SGE) 634.40p -1.80%
BT Group (BT.A) 232.50p -1.48%
SSE (SSE) 1,245.50p -1.42%
Smith & Nephew (SN.) 1,361.00p -1.13%
Relx plc (REL) 1,671.50p -1.12%
Diageo (DGE) 2,804.50p -1.11%
Severn Trent (SVT) 1,898.50p -1.09%

FTSE 250 - Risers

Hiscox Limited (DI) (HSX) 1,609.00p 9.23%
Senior (SNR) 326.40p 7.16%
Thomas Cook Group (TCG) 96.30p 6.59%
Lancashire Holdings Limited (LRE) 570.50p 3.35%
Hikma Pharmaceuticals (HIK) 1,642.00p 2.63%
Sirius Minerals (SXX) 35.86p 2.46%
Millennium & Copthorne Hotels (MLC) 530.36p 2.39%
PZ Cussons (PZC) 232.40p 2.29%
G4S (GFS) 275.80p 2.15%
Vesuvius (VSVS) 633.00p 1.61%

FTSE 250 - Fallers

Ibstock (IBST) 248.00p -10.79%
Energean Oil & Gas (ENOG) 505.00p -4.72%
Alfa Financial Software Holdings (ALFA) 161.60p -3.58%
Domino's Pizza Group (DOM) 317.30p -3.47%
Equiniti Group (EQN) 213.50p -3.39%
Inchcape (INCH) 708.03p -2.61%
Superdry (SDRY) 1,200.00p -2.52%
Softcat (SCT) 801.00p -2.44%
Centamin (DI) (CEY) 114.75p -2.42%
Pennon Group (PNN) 739.00p -2.33%