London midday: Stocks edge lower as BoE stands pat; retailers in focus

London stocks had fallen into the red by midday on Thursday amid weakness in the retail sector, as the Bank of England stood pat on policy as expected.

The FTSE 100 was down 0.3% to 7,290.63 , while the pound was flat against the dollar and the euro at 1.3044 and 1.1222, respectively.

Members of the Bank of England's monetary policy committee voted unanimously to leave interest rates unchanged at 0.75% and the asset purchase programme at £435bn, as expected. The BoE hiked the interest rate last month from 0.5%, taking it to its highest level since March 2009.

The BoE also upgraded its growth forecast, pointing to 0.5% economic growth in the third quarter, up from an August estimate of 0.4%.

Tom Stevenson, investment director for personal investing at Fidelity International, said: "No surprises. Despite stronger than expected GDP growth and wage growth edging higher than price rises again, the Bank of England held fire today.

"While this latest wave of economic data vindicates the decision to hike rates last month, any further tightening from here is likely to remain at a ‘gradual pace and to a limited extent’. The Bank of England will not want to unsettle the UK’s delicate recovery with an ill-timed rate hike.

"The Bank is right to worry about a messy divorce from the EU and it is also flagging up the threat from rising trade tensions. The extension of Mark Carney’s tenure as Governor shows the need to have a grown-up in charge. He may well be called on to demonstrate a firm hand on the tiller in the difficult period ahead."

The European Central Bank will also announce its latest policy decision at 1245 BST, with no changes expected to policy there either.

Trade relations remained in focus after US officials invited China to new trade talks, which the Chinese foreign ministry welcomed.

Lukman Otunuga, research analyst at FXTM, said: "A collective sigh of relief across financial markets and investors has been noticed following the latest reports that the United States has proposed fresh trade talks with China. This shortly followed headlines that the United States and Canada were moving closer to an agreement on trade, which has encouraged the dollar to dip lower against its counterparts.

"While this is not the first time there has been optimism around negotiations between Washington and Beijing, which have later escalated to further trade tensions, investors will want to remain optimistic that an agreement over this long-standing issue will eventually be made. The talks are overall a positive step that both sides are willing to diffuse tensions between the two largest economies in the world."

In corporate news, retailers were in focus, with Marks & Spencer in the red after John Lewis said first-half profits tumbled nearly 99%, with gross margins squeezed by discounting to keep up with competitors as the retailer warned that it continues to expect profit for this year to be “substantially lower” than the last. Next was slightly lower, while Laura Ashley was another big faller.

Debenhams fell sharply after Sports Direct clarified overnight that it does not currently intend to bid for the struggling department store chain, in which it has a 29% stake. Sports Direct shares were also weaker.

Meanwhile, supermarket group Morrisons fell even as it more than doubled its interim dividend after like-for-like sales in the first half grew at the fastest rate since 2009. Group LFL sales excluding-fuel were up 4.9% in the six months 5 August after an acceleration to 6.3% in the second quarter from the 3.6% in the first.

Neil Wilson, chief market analyst at Markets.com, said: "The question now is where can Morrisons go from here? There remains some intense pressure from discounters, whilst Tesco has lately announced its own discount chain aimed at countering the German upstarts. Further pressure on margins seems inevitable. Finding new growth avenues like the Amazon tie-up and wholesale business are important but the key remains the core product offering, which Morrisons seems to be pitching just right at the moment."

GVC Holdings saw earlier gains flatten off after it posted a jump in half-year pre-tax profit as revenue rose amid strong momentum in the online and European retail segments and thanks to a boost from the World Cup, as it identified further cost savings from its Ladbrokes Coral acquisition.

On the upside, miners advanced as metals prices rose, with Glencore, Rio Tinto, Antofagasta and Anglo American all higher.

RBS gained on news that it could use £4bn of surplus capital to pay a special one-off dividend to shareholders. Chairman Howard Davies told The Times in an interview that he would prefer to use the spare cash to buy shares back from the government but that the special dividend is an option.

Legal & General was in the green as it completed a £4.4bn buy-in for the British Airways pension scheme, ‘Airways Pension Scheme’, covering nearly 22,000 pensioners.

In broker note action, Kaz Minerals was upgraded to ‘buy’ at HSBC, while Antofagasta was lifted to ‘hold’.

Aviva was started at ‘add’ by Investec, while Diageo was added to Citi’s Focus List for Europe and N Brown was downgraded to ‘hold’ at Stifel.

Ex-dividends took 0.25 points off the FTSE 100 and 11 points off the FTSE250, with Assura, BBA Aviation, BCA Marketplace, Bakkavor, Cineworld, Computacenter, Derwent, Equiniti, Gocompare, Inmarsat, and Melrose Industries all in the frame.

Market Movers

FTSE 100 (UKX) 7,290.63 -0.31%
FTSE 250 (MCX) 20,302.66 -0.38%
techMARK (TASX) 3,454.75 -0.25%

FTSE 100 - Risers

Royal Bank of Scotland Group (RBS) 248.70p 1.59%
Glencore (GLEN) 299.80p 1.59%
Rio Tinto (RIO) 3,571.00p 1.03%
Antofagasta (ANTO) 765.80p 0.92%
Anglo American (AAL) 1,499.40p 0.90%
Legal & General Group (LGEN) 252.80p 0.76%
HSBC Holdings (HSBA) 656.53p 0.66%
Micro Focus International (MCRO) 1,311.00p 0.65%
Royal Mail (RMG) 480.20p 0.59%
Mondi (MNDI) 2,081.00p 0.53%

FTSE 100 - Fallers

Marks & Spencer Group (MKS) 284.50p -3.00%
NMC Health (NMC) 3,612.00p -2.48%
WPP (WPP) 1,124.50p -2.34%
Imperial Brands (IMB) 2,634.00p -2.14%
SSE (SSE) 1,122.50p -2.14%
British American Tobacco (BATS) 3,691.50p -1.90%
ITV (ITV) 159.25p -1.70%
Barratt Developments (BDEV) 548.28p -1.57%
Relx plc (REL) 1,607.50p -1.56%
Pearson (PSON) 848.60p -1.51%

FTSE 250 - Risers

Grainger (GRI) 309.60p 3.61%
Centamin (DI) (CEY) 92.92p 2.76%
Lancashire Holdings Limited (LRE) 592.00p 2.69%
Greencore Group (GNC) 196.85p 2.63%
Sirius Minerals (SXX) 27.80p 2.13%
Coats Group (COA) 84.20p 2.06%
AA (AA.) 116.00p 1.89%
Kier Group (KIE) 964.00p 1.47%
Weir Group (WEIR) 1,608.00p 1.45%
Elementis (ELM) 256.80p 1.42%

FTSE 250 - Fallers

Tate & Lyle (TATE) 642.60p -3.72%
JD Sports Fashion (JD.) 503.20p -3.49%
Energean Oil & Gas (ENOG) 565.00p -3.42%
Euromoney Institutional Investor (ERM) 1,304.00p -3.41%
Rathbone Brothers (RAT) 2,448.00p -3.32%
Domino's Pizza Group (DOM) 278.90p -3.29%
BCA Marketplace (BCA) 212.00p -3.20%
Mediclinic International (MDC) 462.20p -3.10%
Inmarsat (ISAT) 491.50p -2.60%
Stobart Group Ltd. (STOB) 240.50p -2.24%