London midday: Stocks pare gains ahead of Budget
London stocks had pared gains by midday on Wednesday as investors weighed up an emergency rate cut by the Bank of England against disappointing data releases and looked ahead to the Budget.
The FTSE 100 was up 0.5% at 5,988.89, but well off earlier highs, having rallied at the open after the BoE announced a 50 basis points interest rate cut as it looks to counter the "economic shock" from the coronavirus outbreak. Policymakers voted unanimously to cut rates to an all-time low of 0.25%.
The Bank also announced a new Term Funding plan to help small and medium-sized enterprises, financed by central bank reserves.
It said in a statement: "Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months."
Uninspiring economic growth figures soon took some of the shine off equity markets, however. The latest data from the Office for National Statistics showed that the UK economy stagnated in the three months to January as an uptick in construction failed to offset weakness in manufacturing and services.
Gross domestic product was flat in the rolling three month-period, compared to 0.1% growth in December. GDP was also flat on a month-to-month basis in January, missing forecasts for growth of around 0.2%.
Total production output decreased 1.0% in the three-month period, the ninth consecutive three-month fall in output and the longest run of consecutive periods of weakness since an 11-period run starting in September 2011.
Leading the fall was manufacturing output, which slumped 1.2%. The ONS said there had been "widespread weakness" across the sector, with nine of the 13 sub-sectors providing downward contributions. The largest faller was food, beverages and tobacco, off 2.1%.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "January’s GDP data are weak enough to suggest that the MPC probably would have cut interest rates anyway later this month, had the coronavirus never spread to Britain."
He said activity had not rebounded as business surveys implied.
Up next, all eyes will be on the new Conservative government’s first Budget.
"There will be a major support package in the Budget today," said Markets.com analyst Neil Wilson. "The BoE’s cut is just a small portion of the response - it's not enough to counter the damage alone so we are now looking at a significant stimulus from the government today."
In equity markets, housebuilders were also on the rise, with Taylor Wimpey, Persimmon, Barratt Developments and Berkeley all higher.
Balfour Beatty surged after it reported an 8% increase in annual operating profit as the infrastructure group increased sales and orders.
On the downside, security services company G4S suffered heavy losses a day after posting a drop in full-year pre-tax profit and saying it swung to a loss on a statutory basis as it took a £291m charge related to its UK cash business. The shares were also hit by a rating downgrade at Citi.
Market Movers
FTSE 100 (UKX) 5,988.89 0.48%
FTSE 250 (MCX) 17,688.51 0.81%
techMARK (TASX) 3,540.61 0.25%
FTSE 100 - Risers
Legal & General Group (LGEN) 229.90p 4.12%
SEGRO (SGRO) 841.20p 4.08%
Standard Life Aberdeen (SLA) 253.70p 3.76%
Morrison (Wm) Supermarkets (MRW) 183.00p 3.68%
BT Group (BT.A) 123.50p 3.31%
Persimmon (PSN) 2,548.00p 3.28%
Land Securities Group (LAND) 785.80p 3.18%
Taylor Wimpey (TW.) 191.65p 3.09%
Hikma Pharmaceuticals (HIK) 1,874.00p 3.02%
Standard Chartered (STAN) 485.80p 2.66%
FTSE 100 - Fallers
Aveva Group (AVV) 3,520.00p -4.97%
Informa (INF) 573.20p -4.47%
Burberry Group (BRBY) 1,464.00p -3.72%
Rolls-Royce Holdings (RR.) 537.60p -3.55%
easyJet (EZJ) 969.00p -3.20%
International Consolidated Airlines Group SA (CDI) (IAG) 406.40p -3.19%
Spirax-Sarco Engineering (SPX) 8,080.00p -2.77%
Smiths Group (SMIN) 1,220.50p -2.48%
Compass Group (CPG) 1,404.00p -2.40%
Hargreaves Lansdown (HL.) 1,305.50p -2.28%
FTSE 250 - Risers
Balfour Beatty (BBY) 258.20p 16.94%
Spirent Communications (SPT) 225.00p 6.89%
Quilter (QLT) 141.05p 6.21%
Bakkavor Group (BAKK) 93.10p 6.04%
Ibstock (IBST) 215.40p 5.90%
Hill & Smith Holdings (HILS) 1,379.00p 5.27%
Frasers Group (FRAS) 312.40p 5.04%
Trainline (TRN) 414.50p 4.67%
McCarthy & Stone (MCS) 120.10p 4.34%
Workspace Group (WKP) 1,025.00p 4.22%
FTSE 250 - Fallers
G4S (GFS) 99.68p -24.91%
Finablr (FIN) 24.12p -19.49%
Provident Financial (PFG) 319.60p -7.31%
Capita (CPI) 48.62p -6.46%
Cineworld Group (CINE) 90.48p -5.77%
Hyve Group (HYVE) 45.00p -4.96%
Airtel Africa (AAF) 51.15p -4.21%
Wizz Air Holdings (WIZZ) 3,237.00p -4.12%
PPHE Hotel Group Ltd (PPH) 1,440.00p -4.00%
Euromoney Institutional Investor (ERM) 934.00p -3.71%