London close: Stocks dip as pound gains on 'dovish' Fed
London stocks finished the session little changed despite the head of the US central bank opening the door to interest rate cuts, as his remarks put a bid into Sterling.
In his remarks to American lawmakers, Powell said there were increased risks bearing down on the US economy from overseas and that price pressures remained muted.
The FTSE 100 hit an intraday high of 7,559.69 immediately after Federal Reserve chairman Jerome Powell's prepared remarks were published, but finished 0.08% lower at 7,530.69 as investors listened in on his testimony to the US House Financial Services Committee, and the FTSE 250 ended down by 0.25% to 19,419.38.
Sterling meanwhile was 0.34% higher to 1.25106 against the US dollar on the back of Powell's remarks.
For Capital Economics's chief US economist, Paul Ashworth, the Fed allowed itself to be backed into a corner.
Ashworth's forecasts were for the the US-China trade talks to fail due to the "fundamental" underlying differences between the two countries and US GDP growth to slow to below 1.0% in the back half of 2019, which would lead rate-setters to cut rates three times by March of 2020.
Earlier, according to the Office of National Statistics, gross domestic product expanded at a 0.3% pace over the three months to May and in the same proportion versus April, which was just as expected.
But according to economists at Barclays Research, notwithstanding a record rebound in automobile production, there was "broadbased" weakness across sectors.
And commenting on the outlook for the economy on the back of Wednesday's GDP figures, Dr. Howard Archer, chief economic advisor at EY ITEM Club, said: "Should the UK leave the EU without a 'deal' on 31 October, we suspect that GDP growth is likely to come in at just 0.3% in 2020, with the economy likely suffering stagnation or even mild recession over the first half. Growth is seen picking up to 1.1% in 2021.
"If Brexit is delayed again - possibly to March 2020 - extended uncertainty would likely result in modestly lower GDP growth of 1.3% in 2020 rather than the 1.5% that we currently forecast. Much would depend on how long the delay to the UK’s departure was."
Shares of miners and oilfield services firms paced gains as the US dollar fell back and crude oil and copper futures were in turn bid higher.
Going the other way, stock Micro Focus was sharply lower after Citi and Credit Suisse reiterated their 'sell' ratings on the stock.
Recruitment company PageGroup was under the cosh as well, dragging rival Hays down with it as it said it expects full-year operating profit to be towards the lower end of market expectations, with Brexit worries and weaker macro-economic conditions hitting candidate and client confidence.
Superdry was in the red after the fashion brand said it swung to a pre-tax loss of £85.4m in 2019 from a profit of £65.3m the year before as it took a previously-announced non-cash charge of £129.5m relating to onerous leases and other impairments. The company also said it expects revenues to drop in 2020 as the retail environment remains "difficult".
Barratt Developments on the other hand gained as the housebuilder hailed a "record" full-year performance, with pre-tax profit anticipated to come in ahead of market expectations of £884m, at around £910m.
Pub chain Wetherspoons fizzed higher as it posted a 6.9% rise in comparable sales for the 10 weeks to 7 July and a 6.6% jump in total sales.
DIY group Grafton ended lower after saying first half group revenue increased by 2.4% to £1.48bn, with like-for-like revenue up 3.9%, but management also pointed to signs of weaker UK markets in May and June due to Brexit concerns.
In broker note action, Ashtead was downgraded to ‘equalweight’ at Morgan Stanley, while Boohoo was initiated at ‘buy’ at Societe Generale and Playtech was started at ‘overweight’ by JPMorgan.
Market Movers
FTSE 100 (UKX) 7,530.69 -0.08%
FTSE 250 (MCX) 19,419.38 -0.25%
techMARK (TASX) 3,649.14 -0.68%
FTSE 100 - Risers
Smurfit Kappa Group (SKG) 2,540.00p 3.00%
Antofagasta (ANTO) 862.80p 1.79%
Scottish Mortgage Inv Trust (SMT) 558.50p 1.73%
Imperial Brands (IMB) 2,015.00p 1.72%
Ferguson (FERG) 5,736.00p 1.52%
Tesco (TSCO) 237.10p 1.50%
Glencore (GLEN) 270.15p 1.48%
Barratt Developments (BDEV) 584.20p 1.35%
Pearson (PSON) 855.40p 1.18%
Just Eat (JE.) 641.20p 1.17%
FTSE 100 - Fallers
Micro Focus International (MCRO) 1,753.00p -11.73%
Coca-Cola HBC AG (CDI) (CCH) 2,726.00p -2.01%
WPP (WPP) 961.00p -2.00%
British Land Company (BLND) 540.00p -1.93%
BT Group (BT.A) 192.38p -1.79%
Carnival (CCL) 3,473.00p -1.78%
Land Securities Group (LAND) 837.80p -1.76%
Ocado Group (OCDO) 1,215.00p -1.74%
Fresnillo (FRES) 875.00p -1.73%
Prudential (PRU) 1,727.00p -1.62%
FTSE 250 - Risers
IP Group (IPO) 74.60p 5.07%
Premier Oil (PMO) 78.66p 4.38%
Petrofac Ltd. (PFC) 423.90p 3.07%
Mediclinic International (MDC) 322.20p 3.07%
Playtech (PTEC) 445.20p 3.06%
Hunting (HTG) 542.00p 3.04%
Capita (CPI) 112.40p 3.02%
Future (FUTR) 928.00p 2.65%
Wetherspoon (J.D.) (JDW) 1,444.00p 2.56%
Hochschild Mining (HOC) 201.00p 2.29%
FTSE 250 - Fallers
Pagegroup (PAGE) 428.80p -15.09%
Hays (HAS) 147.80p -5.80%
Howden Joinery Group (HWDN) 478.80p -4.92%
Polymetal International (POLY) 966.40p -4.51%
NewRiver REIT (NRR) 165.40p -4.39%
Grafton Group Units (GFTU) 755.50p -3.51%
Hammerson (HMSO) 281.90p -3.46%
Funding Circle Holdings (FCH) 128.60p -3.45%
Synthomer (SYNT) 360.00p -3.28%
TI Fluid Systems (TIFS) 190.20p -3.26%