London close: Stocks buoyed by pound weakness and rate cut speculation
London stocks moved higher on Monday as sterling fell below $1.30 amid growing rate cut expectations following the release of data showing that the UK economy grew at its weakest pace in seven years in November.
The FTSE 100 was up by 29.75 points or 0.39% to 7,617.60, while sterling was down 0.5% against the US dollar at 1.2984 and by 0.8% versus the euro to 1.1657, knocked lower after Bank of England policymaker Gertjan Vlieghe echoed recent dovish remarks from Governor Mark Carney.
On Sunday, Vlieghe told the Financial Times that he would vote for an interest rate cut when rate-setters next met, on 30 January, if key economic data don’t show a recovery in the economy after the general election.
In parallel, the FTSE 250 closed up 150.09 points or 0.70% at 21,716.76.
"Personally I think it’s been a close call, therefore it doesn’t take much data to swing it one way or the other and the next few [MPC] meetings are absolutely live," Vlieghe told the FT. "I really need to see an imminent and significant improvement in the UK data to justify waiting a little bit longer."
Data released earlier by the Office for National Statistics showed that the UK economy unexpectedly shrank in November, with gross domestic product contracting by 0.3% versus October as industrial and manufacturing production declined 1.2% and 1.7%, respectively. However, for the three months to November, the economy grew by 0.1% on the back of upwards revisions to past data, which was better than economists' projections for no change.
Commenting on the latest GDP data, economists at Bank of America said: "We have been highlighting that the data need to rebound "significantly" to prevent a cut and early signs have been disappointing. So the surprise is not the BoE is dovish but rather there urgency to cut. The January meeting is now very much live. As 'insurance cuts' becomes the motivation, the urgency to cut rises."
Across the Pond, all eyes were on the signing of the ‘phase one’ trade deal between the US and China, which was due to take place on Wednesday.
Neil Wilson, chief market analyst at Markets.com, said: "With the phase one deal baked in, what markets want to know is how quickly - if at all - the two sides can move things forward to phase two. There’s no doubt that building on this deal is going to take a lot more effort and compromise. Of course, phase one could unravel at any moment if either side wants to walk. Enforcement is an issue too."
In equity markets, BAE Systems was a standout gainer on the back of an upgrade at Bank of America, while Taylor Wimpey was boosted by upgrades at Merrill and Peel Hunt. Halma was up after an upgrade to ‘buy’ at Goldman Sachs.
Spirent Communications surged to the top of the FTSE 250 after the telecoms equipment company bumped up its full-year profit guidance.
Savills rallied as it said underlying results for the year to the end of December were set to be at the upper end of the board’s expectations following an "excellent" performance in the UK.
Pennon was another high riser following reports that the South West Water owner was preparing to sell off its Viridor waste management business after a bid from US private equity firm KKR.
Ferrexpo meanwhile gained after the iron ore pellet producer said higher prices helped offset cost increases as it reported a slight fall in annual production.
William Hill edged up after saying that adjusted operating profit for 2019 is expected to come in ahead of market and management expectations thanks to favourable sporting results through the year end. It also announced the departure of chief financial officer Ruth Prior.
But the shares finished well off their best levels of the session, hit by news that the Gambling Commission was set to ban bookmakers from taking credit card deposits for betting online, in a bid to protect vulnerable customers. 888 Holdings was under the cosh as well.
St James’s Place and Just Group were hit by downgrades to ‘underperform’ at Credit Suisse, while Homeserve and Mitchells & Butlers were dented by downgrades to ‘neutral’ at JPMorgan. Man Group was weaker after a downgrade to ‘equalweight’ at Barclays.
FTSE 100 - Risers
Evraz (EVR) 412.50p 5.47%
BAE Systems (BA.) 614.00p 3.58%
Antofagasta (ANTO) 970.80p 2.71%
United Utilities Group (UU.) 971.00p 2.53%
Severn Trent (SVT) 2,518.00p 2.40%
Taylor Wimpey (TW.) 202.00p 2.20%
Centrica (CNA) 87.58p 2.15%
Meggitt (MGGT) 697.20p 2.11%
Bunzl (BNZL) 2,081.00p 2.01%
Aveva Group (AVV) 4,830.00p 1.81%
FTSE 100 - Fallers
NMC Health (NMC) 1,256.50p -6.89%
Lloyds Banking Group (LLOY) 58.74p -2.64%
Flutter Entertainment (FLTR) 9,210.00p -2.02%
Associated British Foods (ABF) 2,575.00p -1.76%
St James's Place (STJ) 1,120.00p -1.67%
BT Group (BT.A) 189.40p -1.46%
Royal Bank of Scotland Group (RBS) 232.00p -1.40%
Legal & General Group (LGEN) 302.20p -1.27%
International Consolidated Airlines Group SA (CDI) (IAG) 655.80p -1.23%
London Stock Exchange Group (LSE) 7,566.00p -1.12%
FTSE 250 - Risers
Spirent Communications (SPT) 233.50p 14.18%
Ferrexpo (FXPO) 157.65p 8.28%
Savills (SVS) 1,232.00p 7.22%
Pennon Group (PNN) 1,078.50p 7.10%
Softcat (SCT) 1,218.00p 5.82%
Tullow Oil (TLW) 62.30p 5.59%
Bank of Georgia Group (BGEO) 1,635.00p 4.14%
Wizz Air Holdings (WIZZ) 4,284.00p 4.01%
Helios Towers (HTWS) 152.00p 3.47%
Contour Global (GLO) 193.60p 3.28%
FTSE 250 - Fallers
Just Group (JUST) 75.75p -7.73%
Man Group (EMG) 152.30p -3.91%
Stagecoach Group (SGC) 153.50p -3.15%
Mitchells & Butlers (MAB) 419.00p -2.89%
Restaurant Group (RTN) 146.00p -2.73%
Sanne Group (SNN) 630.00p -2.48%
Marston's (MARS) 118.40p -2.31%
Future (FUTR) 1,390.00p -2.25%
888 Holdings (888) 152.40p -2.12%
Serco Group (SRP) 160.20p -2.02%