London midday: Stocks maintain gains as BoE stands pat; Next and RBS rally

London stocks were still a little higher by midday on Thursday as the Bank of England stood pat on rates, as expected, with updates from RBS and Next helping to keep the top-flight index afloat as BT disappointed.

The FTSE 100 was up 0.2% to 7,675.72 after the BoE voted 7-2 to keep interest rates unchanged at 0.5% and downgraded its outlook for GDP growth and inflation. Ian McCafferty and Michael Saunders were the two dissenters.

Sterling was down 0.3% against the euro at 1.1392 and 0.1% lower versus the dollar at 1.3538.

David Cheetham, chief market analyst at XTB, said the BoE announcement confirmed "a pretty remarkable stepping down from the bank", which was seen nailed-on for a May hike less than a month ago.

The BoE said it expects inflation to slow to its 2% target faster than previously anticipated and highlighted recent weak data points. The central bank also updated its growth forecasts, saying it now sees growth of 1.4% this year, down from 1.8% in February, although its 2019 and 2020 forecasts were unchanged at 1.7%.

"Overall the tone appears to be fairly dovish and it looks increasingly like it will be a case of one-and-done as far as hikes are concerned. Last November’s hike now appears to have been more a case of a reversal of the post-Brexit cut rather than the beginning of a sustained cycle of interest rate increases," said Cheetham.

The probability of a rate hike in May dropped from around 90% to just 10% early last month following the release of uninspiring UK data, which included a weak GDP reading for the first quarter.

Earlier, figures from the Office for National Statistics revealed sluggish factory output and a continuing contraction in the construction industry. Manufacturing output fell for the second month in a row in March, meaning first-quarter growth slowed to 0.2% from 1.3% in the final quarter of 2017.

The ONS said manufacturing growth weakened because of a reduction in both export and domestic turnover, suggesting the slowdown was not a weather-related blip. Manufacturing helped keep the economy growing in 2017 as the weaker pound and the booming global activity combined to support demand for UK products.

Construction output fell 2.3% in March and 2.7% in the first quarter - the biggest contraction since August 2012. Residential housing activity, previously a bright spot for a sector in recession, registered a quarter-on-quarter fall of 1.6%.

On the corporate front, Next rallied after the clothing retailer upgraded its profit guidance for the year, as it posted a rise in first-quarter sales thanks to unusually warm weather in recent weeks.

Royal Bank of Scotland was on the front foot as it agreed to pay $4.9bn (£3.6bn) to settle a long-running investigation by the US Department of Justice into the bank’s dealing in mortgage-backed securities before the financial crisis.

Broadcaster ITV advanced after it posted a 5% rise in total first-quarter external revenue and said it’s on track to deliver double-digit growth in online revenue.

Morrisons was on the front foot after it reported a strong start to the year, with group like-for-like sales in the 13 weeks to 6 May up 3.6%.

Coca-Cola HBC rose despite saying that first-quarter net sales fell 1.7%, mainly due to currency hits from the Russian rouble and Nigerian naira.

On the downside, BT slumped as it announced 13,000 back office job cuts as part of a new operating strategy that aims to cut £1.5bn of costs within three years, launch 'converged' products and increase full-fibre broadband.

Superdry was down 18% as it warned on profits due to the impact of February's Beast from the East snowstorm and lower spring temperatures on quarterly store sales, which fell 6%, though online was a bright spot.

Outsourcer Capita's shares nosedived as its stock went ex-rights, while Randgold Resources retreated after it said profit fell 22% in the first quarter.

On the Beach was under the cosh even as it posted a jump in interim profit and revenue, with growth slowing slightly compared to the rapid pace in the first quarter.

In broker note action, Schroders was downgraded to ‘hold’ at Berenberg, while Interserve was cut to ‘hold’ at Liberum and Lonmin was knocked down to ‘sell’ at Liberum. IMI was upgraded to ‘buy’ at Jefferies.

Admiral, BP, Centrica, GlaxoSmithKline, Shell, Sage, Fidessa, Hochschild, Hiscox, Polymetal and Greencoat UK Wind all went ex-dividend on Thursday.

Market Movers

FTSE 100 (UKX) 7,665.12 0.03%
FTSE 250 (MCX) 20,694.32 0.06%
techMARK (TASX) 3,483.53 -0.22%

FTSE 100 - Risers

Next (NXT) 5,648.00p 7.66%
ITV (ITV) 157.80p 4.37%
Royal Bank of Scotland Group (RBS) 286.30p 3.69%
Coca-Cola HBC AG (CDI) (CCH) 2,557.00p 3.69%
Associated British Foods (ABF) 2,819.00p 2.85%
Kingfisher (KGF) 296.30p 2.77%
Morrison (Wm) Supermarkets (MRW) 251.70p 2.57%
RSA Insurance Group (RSA) 650.20p 2.33%
WPP (WPP) 1,298.00p 2.16%
easyJet (EZJ) 1,689.50p 1.90%

FTSE 100 - Fallers

BT Group (BT.A) 217.93p -8.66%
Randgold Resources Ltd. (RRS) 5,654.80p -7.30%
Centrica (CNA) 147.30p -5.24%
Mediclinic International (MDC) 689.80p -2.35%
Admiral Group (ADM) 1,972.50p -1.96%
BP (BP.) 563.70p -1.45%
Fresnillo (FRES) 1,282.00p -1.35%
Evraz (EVR) 501.13p -1.31%
Royal Dutch Shell 'B' (RDSB) 2,697.00p -0.92%
Standard Life Aberdeen (SLA) 365.90p -0.89%

FTSE 250 - Risers

Capita (CPI) 127.50p 4.44%
Kaz Minerals (KAZ) 1,019.50p 3.92%
Sirius Minerals (SXX) 34.60p 3.59%
Equiniti Group (EQN) 281.63p 2.78%
Dunelm Group (DNLM) 595.50p 2.41%
Ferrexpo (FXPO) 243.00p 2.40%
Sports Direct International (SPD) 418.00p 2.23%
Playtech (PTEC) 791.00p 2.14%
Sanne Group (SNN) 625.00p 2.12%
Renishaw (RSW) 5,555.00p 2.11%

FTSE 250 - Fallers

Superdry (SDRY) 1,313.00p -15.29%
On The Beach Group (OTB) 569.84p -12.33%
TP ICAP (TCAP) 451.00p -6.22%
Stobart Group Ltd. (STOB) 235.25p -4.76%
Provident Financial (PFG) 665.55p -4.32%
Drax Group (DRX) 320.00p -3.67%
Polymetal International (POLY) 705.80p -3.63%
TI Fluid Systems (TIFS) 251.00p -2.71%
Contour Global (GLO) 250.00p -2.34%
SIG (SHI) 137.60p -2.27%