London midday: Shares pick up as dollar gains on hawkish Fed
London stocks roused themselves from a small early slump on Thursday, helped by a slip in the pound and strong oil prices.
The FTSE 100 index climbed 0.2% to 7,529.81 just after midday. The pound was down 0.2% versus the dollar at 1.3135 and flat against the euro at 1.1216.
Sterling was squashed by a stronger dollar on the back of comments from Federal Reserve chief Jerome Powell and amid a report from The Times that UK Prime Minister Theresa May could be losing cabinet support for her no-deal Brexit proposals in case the EU turns down her Chequers plan.
Conservative MP Amber Rudd, the former home secretary, also said overnight there were a large number of MPs who would not support a Canada-type trade deal, which is also opposed by the Labour party.
Following the US central bank's 25 basis point interest rate hike, Fed head Powell made some upbeat remarks to the press. While the Federal Open Markets Committee stopped describing its policy stance as "accommodative", Powell explained that that was not meant as a signal.
This and Powell's relaxed stance on inflation pressures, saying the FOMC does not see it surprising on the upside, knocked US 10-year yields back to around 3% from above 3.1% ahead of the announcement, sending US financial stocks lower and lifting the dollar, apart from against safe haven currencies the Japanese yen and the Swiss franc.
"Yes, we have a clear path to four more hikes, but the dropping of the phrase ‘accommodative’ and the dot plot indicate we are very close to end of this hiking cycle, although markets seem a little confused about whether we are close to the neutral rate," said market analyst Neil Wilson at Markets.com.
With Powell's relaxed stance on inflation, he added: "All this conspires to suggest that the Fed could be heading for a ‘mistake’ and pushing the yield curve towards inversion. The question is whether this is enough of a worry to force it to slow down the pace of hikes, with perhaps just two next year. With so much focus on inversion and the 10-year failing to break out to the upside, the Fed may be forced into a slower pace of hikes."
Analyst Mike van Dulken at Accendo Markets said there was continued downward pressure coming from US-China trade war concerns, with President Trump defending his protectionist policies against Canada and China in a wide-ranging press conference, where he accused Beijing of meddling in the US midterm elections to weaken him.
Van Dulken said the "hawkish" Fed comments and consequent stronger greenback sent base metals lower and hit the FTSE mining sector, though this was balanced by continued strength of BP and Shell as crude oil prices were back up around recent highs. Airlines easyJet and IAG were also in the red due to fuel price concerns.
Regulator Ofgem came out with directive for the UK’s biggest energy suppliers to improve the process in how they deal with complaints. British Gas owner Centrica was the biggest riser on the FTSE 100.
"While the regulator told the firm to improve in this area and come up with plans to improve complaint handling it stopped short of opening a compliance case," said market analyst David Cheetham at XTB, adding that increased regulatory oversight "may well help the firm going forward, especially if it can position itself towards the better end of a bad bunch".
Elsewhere, shares in TUI rose as the tour operator said the 2018 holiday season was closing as expected with customer numbers increasing despite the heatwave in Northern Europe. Early trading for future seasons is in line with expectations.
Restaurant and pub owner Mitchells & Butlers bubbled up as it said total sales for the year to date had increased 0.5%, impacted by disposals in the previous 12 months.
Equiniti edged higher as the pensions administration specialist said it had extended its contract with the Cabinet Office and was buying out the government department's stake in a joint venture for £8m.
Safety, health and environmental technology group Halma was in the green as it reported all its sectors delivered as-expected organic revenue and profit growth in the six months since the start of April. Order intake was ahead of revenue and also ahead of the same period last year, the company said in a trading update.
Rupert Murdoch and Disney said overnight that they would either accept Comcast's offer for Sky at a price of £17.28 per share or directly sell its 39.12% stake. Comcast had 37.7% of Sky shares at Wednesday's close and said it "does not currently intend to make any further market purchases of Sky shares".
Going south, DCC was the biggest faller on the Footsie as it proposed raising up to £650m to carry out more acquisitions. This came alongside its second North American purchase of the year and a trading statement confirming first-half operating profit will be "well ahead" of the prior year, as expected.
Car accessories and bikes retailer Halfords skidded lower as management announced that up to £20m a year extra would be spent on improving stores and integrating services to keep up with changing consumer trends. Pre-tax profit will be broadly unchanged in 2020 from 2019 despite the extra investment and will rise at a rate in mid single digits after that, Halfords said.
Drug developer Indivior fell to a new two-year low after it issued a profit warnings just before the closing bell on Wednesday. Reinstating full year guidance after it had been withdrawn in the summer due to uncertainty about court challenges from rivals, the company said it expected net income to come in at $230-255m at constant exchange rates and excluding exceptional items, down from the $290-320m guidance given at the start of the year.
Online gambling firm 888 Holdings was lower despite reporting a first half swing to profitability as revenues in the UK fell sharply due to a government clamp down on the sector.
Saga slipped as it reported revenue down 1.7% and underlying pre-tax profit down 3.7% due to planned investments and increased in new business acquisition costs, but kept its dividend unchanged.
In broker note action, John Wood Group was upgraded to 'hold' at Jefferies with a price target of 700p, GVC was rated a new 'buy' at Goldman Sachs with a price target of 1,195p and UBS upgraded Thomas Cook to 'neutral' from 'sell' with a target of 60p.
Thursday's ex-dividend stocks included Bovis, Essentra, John Laing, Morrison Supermarkets and Smurfit Kappa.
Market Movers
FTSE 100 (UKX) 7,526.57 0.20%
FTSE 250 (MCX) 20,367.84 -0.34%
techMARK (TASX) 3,502.52 0.03%
FTSE 100 - Risers
TUI AG Reg Shs (DI) (TUI) 1,465.00p 1.88%
Centrica (CNA) 152.05p 1.88%
BT Group (BT.A) 229.00p 1.64%
Pearson (PSON) 894.20p 1.61%
Halma (HLMA) 1,435.86p 1.33%
Compass Group (CPG) 1,692.00p 1.26%
Reckitt Benckiser Group (RB.) 6,907.00p 1.22%
Smiths Group (SMIN) 1,515.50p 1.13%
BP (BP.) 592.60p 1.13%
Ocado Group (OCDO) 905.20p 1.07%
FTSE 100 - Fallers
DCC (DCC) 7,050.00p -3.56%
Melrose Industries (MRO) 202.60p -2.78%
Royal Mail (RMG) 467.30p -2.75%
easyJet (EZJ) 1,324.50p -2.72%
Hargreaves Lansdown (HL.) 2,211.00p -2.60%
Glencore (GLEN) 331.40p -1.95%
Morrison (Wm) Supermarkets (MRW) 256.55p -1.72%
Johnson Matthey (JMAT) 3,543.00p -1.53%
Randgold Resources Ltd. (RRS) 5,244.00p -1.47%
Just Eat (JE.) 682.40p -1.36%
FTSE 250 - Risers
Just Group (JUST) 85.45p 3.45%
Saga (SAGA) 130.00p 3.17%
Greencore Group (GNC) 190.40p 2.67%
Fisher (James) & Sons (FSJ) 1,890.00p 2.61%
Ted Baker (TED) 2,364.00p 2.16%
Mitchells & Butlers (MAB) 262.40p 2.10%
Contour Global (GLO) 209.40p 2.05%
TalkTalk Telecom Group (TALK) 123.63p 1.92%
Cairn Energy (CNE) 230.40p 1.86%
Sirius Minerals (SXX) 29.76p 1.71%
FTSE 250 - Fallers
Indivior (INDV) 175.25p -18.49%
IG Group Holdings (IGG) 642.50p -12.41%
888 Holdings (888) 206.80p -8.01%
Halfords Group (HFD) 314.20p -6.43%
Bovis Homes Group (BVS) 1,090.00p -6.24%
Kier Group (KIE) 932.38p -5.53%
Dechra Pharmaceuticals (DPH) 2,146.00p -3.85%
UDG Healthcare Public Limited Company (UDG) 671.00p -3.73%
Sophos Group (SOPH) 483.84p -3.71%
Wizz Air Holdings (WIZZ) 2,776.00p -3.21%