London close: Stocks mixed as Bank of England keeps policy steady
London stocks closed in a mixed state on Thursday, after an afternoon that saw investors poring over the latest policy announcement from the Bank of England.
The FTSE 100 ended the session down 0.05% at 7,120.43, while the FTSE 250 was 0.68% higher at 23,506.11.
Sterling was in positive territory, last trading 0.32% stronger on the dollar at $1.3934, and gaining 0.26% against the euro to €1.1764.
“The FTSE 100 proved to be the one negative outlier in an otherwise positive day across European and US markets,” said IG senior market analyst Joshua Mahony.
“The rise in sterling highlights how we are seeing a shift from the expectations that the Bank of England remain dovish despite rising prices.
“Instead, the BoE sees inflation peaking at a higher level than previously anticipated, with the monetary policy committee seeing CPI peaking out at 4%.”
Mahony said that, while the Bank saw above-target inflation as “largely transitory”, there was a strong possibility that some monetary tightening would be required to bring price growth back down towards 2%.
“With the pound gaining ground off the back of today's BoE meeting, it should come as no surprise to see the FTSE 100 lose traction due to the damaging impact a stronger pound has upon international earnings.”
The Bank of England left monetary policy unchanged in its latest decision on Thursday, even as it predicted inflation would rise higher than previously expected.
Its monetary policy committee voted unanimously to leave interest rates at their record low of 0.1% and voted 7-1 to maintain the £875bn target for government bond purchases.
Michael Saunders, an external member of the MPC, voted to reduce the bond-buying target to £830bn, after Saunders and another member, Dave Ramsden, gave speeches recently expressing concern about inflation.
“The committee’s central expectation is that current elevated global and domestic cost pressures will prove transitory," the Bank of England said.
“Nonetheless, the economy is projected to experience a more pronounced period of above-target inflation in the near term than expected in the May [inflation] report.”
Growth in the UK construction sector, meanwhile, eased in July amid shortages of staff and supplies, as the IHS Markit/CIPS construction purchasing managers’ index fell to 58.7 from June’s 24-year high of 66.3.
It was below consensus expectations for a reading of 64.0 and signalled the slowest overall increase in construction output since February, but was still above the 50.0 mark that separates contraction from expansion.
“July data marked the first real slowdown in the construction recovery since the lockdown at the start of this year,” said Tim Moore, economics director at IHS Markit.
“It was unsurprising that UK construction companies were unable to maintain output growth at the 24-year high seen in June, especially with widespread supply shortages and constrained capacity to take on additional orders.
“The loss of momentum spanned all major categories of construction work and was most pronounced in the house building sector.”
In other data, new car registrations fell 29.5% across the UK in July as supply shortages weighed on the automotive sector's recovery.
According to the Society of Motor Manufacturers and Traders, 123,296 new cars were registered last month as the industry recorded its weakest July performance since before the millennium.
Private new car registrations totalled 59,800 in July, below July 2020's 79,900 reading, and lower than July 2019's figure of 66,300.
On the retail front, footfall worsened further compared to pre-pandemic numbers in July, even after the number of shoppers improved between the second and third week of the month when restrictions were lifted in England.
Retail analysts Springboard said footfall worsened over the month as a whole to -24.2% when compared to July 2019, from -22.2% in June.
It said footfall declined from the year before the outbreak of Covid-19 by -30.5% in high streets, -30.2% in shopping centres and -4.2% in retail parks.
Finally, across the pond, first time jobless claims in the United States were little changed during the latest week, but so-called continuing claims registered a large drop.
According to the US Department of Labor, in seasonally adjusted terms the number of initial unemployment claims fell by 14,000 to reach 385,000 over the week ending on 31 July.
Economists had been anticipating a print of 384,000, while the four-week moving average of initial claims drifted lower to 394,000.
In equity markets, miners were among the worst performers, with Anglo American down 5.04%, Rio Tinto off 4.21%, and BHP Group 3.8% weaker.
Lloyds Banking Group closed down 2.96% after a downgrade to ‘sell’ at Goldman Sachs, which also downgraded NatWest to 'buy' from ‘conviction buy’.
NatWest managed to close 0.29% higher by the close, while Virgin Money UK was on the back foot by 0.84% as Goldman Sachs cut its price target on the ‘neutral’ rated stock.
Frasers Group lost 0.24% after it confirmed that plans were in place for Mike Ashley to step down as chief executive, with Michael Murray - his future son-in-law - set to take over the role in May next year, and reported a drop in full-year profit and revenue due to the impact of Covid-related closures.
Centamin fell 3.21% after the gold miner posted a 39% decline in first-half pre-tax profit.
On the upside, engine maker Rolls-Royce rallied 5.87% after saying it swung to an interim profit as it continued to cut costs and looked to turn cash-flow positive during the second half of the year.
Paper and packaging group Mondi was ahead 3.3% after its first-half EBITDA came in ahead of analysts’ expectations.
WPP was 2.74% firmer after the advertising group upgraded its outlook and boosted shareholder returns as it swung back to profit in the first half of 2021.
Savills surged 7.76% after the estate agent lifted annual guidance and reported a rise in first-half profits on the back of a booming UK property market.
FTSE 100 - Risers
Rolls-Royce Holdings (RR.) 110.68p 5.87%
Whitbread (WTB) 3,221.00p 4.24%
Informa (INF) 518.20p 3.79%
International Consolidated Airlines Group SA (CDI) (IAG) 176.66p 3.56%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,451.00p 3.35%
Mondi (MNDI) 2,067.00p 3.25%
WPP (WPP) 966.80p 2.74%
Smiths Group (SMIN) 1,454.50p 2.50%
InterContinental Hotels Group (IHG) 4,766.00p 2.41%
Pearson (PSON) 804.80p 2.37%
FTSE 100 - Fallers
Anglo American (AAL) 3,270.50p -5.04%
Rio Tinto (RIO) 6,027.00p -4.21%
BHP Group (BHP) 2,280.00p -3.80%
Lloyds Banking Group (LLOY) 45.90p -2.96%
Glencore (GLEN) 324.00p -1.61%
Antofagasta (ANTO) 1,505.50p -1.54%
Evraz (EVR) 601.00p -1.41%
Reckitt Benckiser Group (RKT) 5,598.00p -1.15%
Royal Mail (RMG) 498.00p -1.11%
Polymetal International (POLY) 1,548.50p -1.09%
FTSE 250 - Risers
Cairn Energy (CNE) 158.50p 26.19%
Savills (SVS) 1,248.00p 7.59%
Trustpilot Group (TRST) 390.00p 5.58%
Rank Group (RNK) 172.40p 4.99%
Greggs (GRG) 2,855.00p 4.92%
Carnival (CCL) 1,477.80p 4.26%
Cineworld Group (CINE) 65.48p 4.17%
Capita (CPI) 36.07p 3.92%
Network International Holdings (NETW) 350.30p 3.92%
Restaurant Group (RTN) 120.20p 3.80%
FTSE 250 - Fallers
CMC Markets (CMCX) 433.00p -4.84%
Hammerson (HMSO) 35.71p -4.77%
Centamin (DI) (CEY) 102.65p -3.21%
Diversified Energy Company (DEC) 102.60p -2.84%
Auction Technology Group (ATG) 1,352.00p -2.45%
Spire Healthcare Group (SPI) 223.00p -2.41%
Ferrexpo (FXPO) 438.20p -2.41%
Hochschild Mining (HOC) 155.40p -2.26%
Syncona Limited NPV (SYNC) 218.00p -1.80%
Avon Protection (AVON) 2,780.00p -1.70%