London close: Stocks mixed as ECB shifts guidance
London stocks closed in a mixed state on Thursday, as investors waded through a raft of corporate news and digested the latest policy announcement from the European Central Bank.
The FTSE 100 ended the session down 0.43% at 6,968.30, while the FTSE 250 was 0.6% firmer at 22,677.28.
Sterling was stronger against its major trading pairs, last sitting 0.26% higher on the dollar at $1.3749, and gaining 0.43% against the euro to change hands at €1.1680.
“The FTSE 100 provided one real point of weakness today, left out of the ECB-related excitement and without much in the way of tech to carry it higher,” said IG chief market analyst Chris Beauchamp.
“Again it is oil and mining stocks that have held it back, countering strong gains in a variety of other sectors and seeing it drop below 7,000 once again.
“But given the overall encouraging backdrop for stocks we should see the index recover in due course, even if the outlook for the UK remains clouded by rising cases and an avalanche of ‘pings’ that threatens to undermine UK business just as it hopes to benefit from the nation’s reopening.”
Earlier in the afternoon, the European Central Bank said it would keep interest rates at their current low levels until inflation returned to its new target level "well ahead" of its projection horizon and, in a "durable manner".
The ECB's new guidance after the governing council meeting followed the adoption of a new symmetric inflation target of 2.0% over the medium-term earlier in July.
Previously, rate-setters in Frankfurt had aimed for consumer price inflation of close to, but below, 2.0%.
Implicit in the new guidance on interest rates was that underlying inflation also needed to be evolving consistently in the same direction, the ECB said.
"This may also imply a transitory period in which inflation is moderately above target" policymakers confirmed.
The central bank also reiterated that the current Pandemic Emergency Purchase Programme would run at a "significantly higher" pace over the three months to September, than at the start of 2021.
On home shores, fresh data showed UK factory output rising at a joint-record pace over the last three months, although worries about shortages of materials and labour were at their highest since the 1970s.
Manufacturing output increased in 16 of 17 subsectors and volumes rose at the joint-fastest pace on record in the three months to July as the economy returned to growth, according to the Confederation of British Industry, with growth led by carmakers and transport equipment, as well as food, drink and tobacco.
Total new orders rose at the quickest rate since 1974 as domestic orders grew at the fastest pace on record and export orders registered their first increase since January 2019.
“Record growth in manufacturing output volumes is further evidence that UK industry is reawakening following the economic ravages of the pandemic,” said CBI chief economist Rain Newton-Smith.
“Demand is rising rapidly, leading businesses to hire more staff and plan further investment in plant and machinery and training.
“Yet other challenges lie ahead - acute staff shortages evident across the economy are biting deeply within manufacturing, with skills in short supply and the number of people isolating climbing steeply.”
Finally, on the inflation front, a Bank of England rate setter said rising prices in the UK were likely to be temporary, in remarks that reined in expectations of imminent policy tightening.
Ben Broadbent said in a speech that he thought rising prices in shops were unlikely to persist over the timeframe the Bank used to decide on interest rates and other measures.
“I’m not convinced that the current inflation in retail goods prices should in and of itself mean higher inflation 18 to 24 months ahead, the horizon more relevant for monetary policy,” Broadbent said.
He said price increases were likely to stay above the BoE's 2% target this year but that the effect was likely to be temporary as the economy rebounds from the worst of the pandemic.
The correct policy response "could well be nothing", he said.
In equity markets, Flutter Entertainment jumped 4.47% after an upgrade to ‘outperform’ at RBC Capital Markets.
3i Group racked up gains of 4.21% after saying it made a strong start to the financial year as its Action retail business recovered from the impact of the pandemic.
Morgan Sindall surged 12.53% after saying that full-year results were set to be "significantly ahead" of its previous expectations as trading has been strong across the group since its last update in April.
Online trading platform IG Group rallied 4.06% after it upgraded its medium-term guidance and reported record full-year profit and revenue, as it benefited from high market volatility.
Volution was also on the rise, advancing 5.96%, after it said revenue and earnings for the full year were set to be ahead of market expectations.
On the downside, Unilever slumped 5.87% as the consumer goods conglomerate reported higher-than-expected underlying sales growth for the second quarter but cut full-year operating margin forecasts due to rising costs.
NatWest was in the red by 2.68% after the government announced a new plan to cut its stake in the bank.
Investec, Micro Focus and Persimmon were all weaker as their shares give up rights to dividends, although fellow ex-dividend plays Ninety One and Pennon managed to claw back above the waterline in late trading.
FTSE 100 - Risers
Flutter Entertainment (CDI) (FLTR) 12,985.00p 4.47%
3i Group (III) 1,260.00p 4.21%
Just Eat Takeaway.Com N.V. (CDI) (JET) 5,935.00p 3.70%
Ocado Group (OCDO) 1,844.00p 3.53%
Entain (ENT) 1,850.00p 3.29%
Royal Mail (RMG) 532.40p 3.14%
Taylor Wimpey (TW.) 163.65p 2.86%
Intermediate Capital Group (ICP) 2,184.00p 2.30%
Intertek Group (ITRK) 5,546.00p 2.17%
Rightmove (RMV) 671.80p 2.13%
FTSE 100 - Fallers
Unilever (ULVR) 4,050.50p -5.87%
Persimmon (PSN) 2,881.00p -4.32%
NATWEST GROUP PLC ORD 100P (NWG) 194.20p -2.68%
Reckitt Benckiser Group (RKT) 6,200.00p -2.37%
Rio Tinto (RIO) 5,839.00p -2.09%
Associated British Foods (ABF) 2,051.00p -1.92%
BP (BP.) 284.00p -1.88%
Rolls-Royce Holdings (RR.) 95.28p -1.77%
Royal Dutch Shell 'A' (RDSA) 1,364.60p -1.67%
Pershing Square Holdings Ltd NPV (PSH) 2,605.00p -1.52%
FTSE 250 - Risers
Morgan Sindall Group (MGNS) 2,380.00p 12.53%
Volution Group (FAN) 480.00p 5.96%
NCC Group (NCC) 310.50p 5.08%
Kainos Group (KNOS) 1,644.00p 4.71%
FDM Group (Holdings) (FDM) 1,122.00p 4.42%
Auction Technology Group (ATG) 1,274.00p 4.26%
IG Group Holdings (IGG) 858.50p 4.06%
AJ Bell (AJB) 423.20p 3.73%
Just Eat Takeaway.Com N.V. (CDI) (JET) 5,935.00p 3.70%
National Express Group (NEX) 263.00p 3.68%
FTSE 250 - Fallers
Hammerson (HMSO) 35.93p -4.82%
Investec (INVP) 270.20p -4.11%
Cineworld Group (CINE) 64.56p -3.73%
Babcock International Group (BAB) 284.50p -3.07%
Centrica (CNA) 49.30p -2.80%
Micro Focus International (MCRO) 400.50p -2.60%
Centamin (DI) (CEY) 101.90p -2.49%
CLS Holdings (CLI) 242.00p -2.42%
TI Fluid Systems (TIFS) 295.50p -2.35%
Pennon Group (PNN) 1,245.00p -2.29%