London close: Stronger US dollar weighs on Big Oil and miners
The headwind from a rising US dollar proved too much for London listed stocks in the end as falling crude oil and metals' prices more than offset a rally on Wall Street.
Somewhat surprising, the retreat in share prices also came despite the more positive tone to news out overnight regarding the US-China trade talks and a positive surprise on Chinese manufacturing and a dip in the pound's value.
On Wednesday evening, the US central bank decided not to guide towards a long string of interest rate cuts overnight, triggering a slump in US stocks and gains in the Greenback, although according to 'market chatter' some traders felt they had been wrong-footed by Federal Reserve chairman Jerome Powell who later on in his presser clarified that "I never said it was one and done".
Commenting on markets' response to the Federal Reserve's policy guidance, Josh Mahony at IG said: "However, with the Fed making it clear that this is a short-term phase of easing, hopes of a long-winded period of easing have been dashed.
"With the ECB failing to act, and the Fed disappointing, we have seen gold fall dramatically as fears over an impending currency war are allayed."
By the end of trading, the FTSE 100 was down by 0.03% to 7,584.87, even as the pound slipped by 0.17% against the US dollar to 1.2137, while the FTSE 250 ended the day off by 0.16% at 19,634.31.
Nonetheless, both the Footsie and the second-tier index did manage to finish well off their lows of the session.
Helping sentiment, on Thursday morning, a spokesman for China's Commerce Ministry confirmed that teams from Washington and Beijing would hold intensive contacts throughout August in order to lay the groundwork for talks in September.
To a degree, that echoed a statement issued overnight by the White House describing talks during the current week on "forced technology transfer, intellectual-property rights, services, non-tariff barriers, and agriculture" as "constructive".
Against that backdrop, at noon, the Monetary Policy Committee said Bank Rate may have to rise "a bit more" in case of a Brexit deal, instead of repeating that they may need to rise by more than financial markets were anticipating.
On that note, in the August Inflation Report released alongside Thursday's policy decision, Bank marked down its projections for excess demand in the economy by the third quarter of 2020 from +0.25% and now envisaged excess supply of -0.25%.
Nonetheless, a weaker pound saw rate-setters bump up their projections for growth and inflation.
"With Brexit uncertainty set to intensify, we think it is very unlikely the Bank will embark on the tightening that it is still loosely signalling in its statement," said ING developed markets economist James Smith.
"Equally though, we think it's too early to be pencilling in rate cuts, given the likelihood that wage growth will continue to perform solidly over coming months."
On the global manufacturing front, overnight Caixin's China factory PMI surprised to the upside, recovering from 49.4 to 49.9 (consensus: 49.6).
Back on home turf, IHS Markit's UK factory sector PMI printed at 48.0 (consensus: 47.8) which was unchanged from the month before but nonetheless remained the weakest reading for six-and-a-half years.
Barclays hikes dividend, Shell results hit by weak natural gas prices
Barclays reported a large jump in interim profits thanks to the non-recurrence of litigation and conduct charges, higher capital buffers and increased its dividend - despite the risks around Brexit. On the potential impact of the UK's exit from the European Union, Barclays said: "Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown. An interim review cannot be expected to predict the unknowable factors or all possible future implications for a company and this is particularly the case in relation to Brexit."
In parallel, in the wake of its latest quarterly update, traders pushed shares of British American Tobacco back to within a whisker of their March highs.
Going the other way, Royal Dutch Shell was the main drag on the top flight index after the oil major reported second quarter earnings that came in 30% below the analyst consensus, with all divisions having reporting a weaker than expected performance.
Integrated Gas was especially soft, with profits in that area of the group coming in roughly 18% below consensus on the back of weaker realised prices for liquid natural gas combined with slightly lower production.
Also weighing on Shell was a 2.59% drop in front month Brent crude oil futures to $63.41 a barrel on the back of US dollar strength after the Federal Reserve's rate decision the night before.
Miners were another drag as the rising US dollar weighed on metals' prices.
London Stock Exchange shares hit a fresh record high after shareholders in Refinitiv gave the thumbs-up to a $27.0bn all-share tie-up with the operator of London's largest trading venue.
Refinitiv's shareholders, a consortia of investment funds affiliated with Blackstone, will own 37% of the LSE Group and less than 30.0% of the voting rights in the LSE. They also agreed to a complete lock-up for two years following the transaction complete date that was expected to occur in the back half of 2020.
Mondi stock fell after delivering interim profit before tax growth of 29% despite facing increasingly challenging trading conditions, with revenue remaining flat as higher average selling prices were largely offset by the impact of planned mill maintenance shuts.
The packaging and paper specialist said it was confident of continuing to deliver a strong and industry-leading performance over the full year but admitted concern over softening demand and ongoing macro-economic uncertainty.
GlaxoSmithKline completed a transaction with Pfizer to combine their consumer healthcare businesses into a joint venture, it announced on Thursday. The FTSE 100 pharmaceuticals giant said it had a controlling equity interest of 68%, with Pfizer holding an interest of 32%.
The pharma giant said the joint venture was bringing together two “highly complementary” portfolios of consumer health brands, including GSK's Sensodyne, Voltaren and Panadol and Pfizer's Advil, Centrum and Caltrate.
Market Movers
FTSE 100 (UKX) 7,584.87 -0.03%
FTSE 250 (MCX) 19,634.31 -0.16%
techMARK (TASX) 3,898.07 0.71%
FTSE 100 - Risers
British American Tobacco (BATS) 3,155.50p 6.89%
London Stock Exchange Group (LSE) 7,058.00p 6.52%
Intertek Group (ITRK) 5,962.00p 4.45%
Smith & Nephew (SN.) 1,924.50p 3.52%
Standard Chartered (STAN) 699.20p 3.31%
Burberry Group (BRBY) 2,322.00p 2.79%
Rentokil Initial (RTO) 447.00p 2.76%
Imperial Brands (IMB) 2,149.50p 2.60%
Schroders (SDR) 3,047.00p 2.49%
Diageo (DGE) 3,526.00p 2.40%
FTSE 100 - Fallers
Mondi (MNDI) 1,707.00p -5.35%
Royal Dutch Shell 'B' (RDSB) 2,472.00p -5.01%
Royal Dutch Shell 'A' (RDSA) 2,466.00p -4.93%
Glencore (GLEN) 254.45p -4.50%
Anglo American (AAL) 1,952.00p -4.27%
Antofagasta (ANTO) 902.40p -3.92%
Rio Tinto (RIO) 4,539.50p -3.37%
Centrica (CNA) 73.94p -2.81%
Smith (DS) (SMDS) 347.30p -2.64%
ITV (ITV) 108.05p -2.61%
FTSE 250 - Risers
Convatec Group (CTEC) 184.00p 17.87%
Capita (CPI) 136.75p 17.33%
Games Workshop Group (GAW) 4,780.00p 5.25%
Mitchells & Butlers (MAB) 316.50p 4.11%
Pets at Home Group (PETS) 215.40p 3.65%
Spirent Communications (SPT) 163.60p 3.54%
Sabre Insurance Group (SBRE) 270.50p 2.46%
Network International Holdings (NETW) 628.00p 2.45%
Bovis Homes Group (BVS) 1,074.00p 1.99%
Stagecoach Group (SGC) 132.10p 1.85%
FTSE 250 - Fallers
Amigo Holdings (AMGO) 147.60p -10.55%
Intu Properties (INTU) 44.52p -6.96%
Premier Oil (PMO) 79.18p -6.07%
IP Group (IPO) 65.00p -5.25%
Hill & Smith Holdings (HILS) 1,075.00p -4.78%
Kaz Minerals (KAZ) 550.60p -4.74%
Metro Bank (MTRO) 342.60p -4.52%
Vivo Energy (VVO) 115.00p -4.17%
Mediclinic International (MDC) 329.40p -4.05%
CYBG (CYBG) 165.90p -3.57%