London midday: Stocks still higher as housebuilders pare losses
London stocks were still in the green by midday on Friday, recovering from the previous session's drop, with housebuilders paring their losses.
The FTSE 100 was up 0.3% to 7,303.15, while the pound was up 0.1% against the dollar and the euro at 1.3124 and 1.1218, respectively.
In a private Downing Street briefing on Thursday, BoE Governor warned ministers that a "no-deal" Brexit could see house prices crash by a third, according to reports.
Carney laid out three different scenarios the Bank believes could come to pass if Britain leaves the EU without a withdrawal agreement, with the worst-case scenario being Britain going into recession, with a further slump in the value of the pound and a 35% fall in house prices over three years.
This put pressure on housebuilding stocks early on Friday, but by midday most of them had pared their losses.
In a speech at Ireland's central bank later in the morning, Carney said that Britain's largest banks are well prepared for a disorderly Brexit but that uncertainty about the economic outlook is holding back pay growth.
"The Bank of England is well-prepared for whatever path the economy takes, including a wide range of potential Brexit outcomes. We have used our stress test to ensure that the largest UK banks can continue to meet the needs of UK households and businesses even through a disorderly Brexit, however unlikely that may be," Carney said.
"Our job, after all, is not to hope for the best but to plan for the worst. The MPC will respond to any persistent change in the outlook to bring inflation sustainably back to 2% target while doing what it can to support jobs and activity. The appropriate policy response is not automatic and will depend on the balance of the effects on demand, supply, and the exchange rate."
As far as trade relations are concerned, there had been some hope of progress in recent days after Chinese officials welcomed an invitation for new talks from US Treasury Secretary Steve Mnuchin.
However, a tweet from US President Trump on Thursday did little to assuage nerves, as he said: "The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?"
Deutsche Bank said in a note that its economists expect a negotiated settlement between the US and China over the coming quarters, with only a minimal negative impact of tariffs on global GDP growth.
"We note that global PMI new export orders tend to move in line with overall global PMI new orders, which we expect to pick up, helped by improvements in euro area and China PMIs," DB said.
In corporate news, Shire was the standout gainer after Japan’s Takeda Pharmaceuticals' acquisition of the London-listed company was approved by Chinese regulators.
Investec surged after saying interim profit should be ahead of last year and announcing plans to demerge and publicly list it asset management arm.
Russ Mould, investment director at AJ Bell, said Investec's plan to spin off the asset management arm looks sensible and should allow management more freedom to drive that business forward and not be constrained by having to follow the strategy of the current parent which is predominantly a specialist banking business.
"Unbundled companies have the freedom to be more entrepreneurial. From an investment perspective, demerged companies are often valued at a greater sum than when they were combined - which explains why Investec’s share price jumped on the break-up announcement," he said.
"Separation can sometimes entice takeover interest should a predator have been interested in part of a company but was previously put off from making an offer as it didn’t want to swallow the whole group."
Sirius Minerals rallied after it secured a new $250m funding deal with Australia's Hancock Prospecting that would help fund a polyhalite project in Yorkshire.
Close Brothers advanced as it announced the sale of its retail point of sale finance business, Close Brothers Retail Finance, to Swedish payment solutions group Klarna for an undisclosed sum.
JD Wetherspoon was in the red even as it reported profits slightly ahead of forecasts. The pub group's like-for-like-sales rose 5.0%, which was short of the 5.2% expected, but profit before tax rose 6.2% to £107.2m versus forecasts for nearer £106m.
AstraZeneca fell after it and its global biologics research and development arm MedImmune were given approval from the US Food and Drug Administration for a treatment for hairy cell leukaemia.
In broker note action, Safecharge was upgraded to ‘overweight’ by Barclays, while EnQuest was cut to ‘equal-weight’. Whitbread was lifted to ‘overweight’ at JPMorgan.
FTSE 100 - Risers
Shire Plc (SHP) 4,496.50p 2.43%
Reckitt Benckiser Group (RB.) 6,642.00p 2.09%
Kingfisher (KGF) 264.30p 1.97%
Mondi (MNDI) 2,126.00p 1.87%
DCC (DCC) 7,055.00p 1.80%
BT Group (BT.A) 227.65p 1.72%
Burberry Group (BRBY) 2,116.00p 1.58%
TUI AG Reg Shs (DI) (TUI) 1,347.50p 1.58%
Rolls-Royce Holdings (RR.) 968.20p 1.38%
Whitbread (WTB) 4,701.96p 1.36%
FTSE 100 - Fallers
Johnson Matthey (JMAT) 3,450.00p -2.04%
NMC Health (NMC) 3,546.00p -1.39%
Smurfit Kappa Group (SKG) 3,046.00p -1.36%
SSE (SSE) 1,105.50p -1.29%
Paddy Power Betfair (PPB) 6,900.00p -1.22%
Just Eat (JE.) 696.20p -1.16%
Rentokil Initial (RTO) 318.10p -0.90%
Informa (INF) 744.20p -0.85%
GVC Holdings (GVC) 1,049.00p -0.85%
Morrison (Wm) Supermarkets (MRW) 258.10p -0.83%
FTSE 250 - Risers
Investec (INVP) 522.20p 7.74%
Energean Oil & Gas (ENOG) 570.00p 3.26%
Sirius Minerals (SXX) 27.94p 3.18%
Kier Group (KIE) 991.00p 3.18%
BCA Marketplace (BCA) 217.50p 3.08%
Weir Group (WEIR) 1,629.00p 2.58%
Kaz Minerals (KAZ) 479.00p 2.53%
Ashmore Group (ASHM) 360.60p 2.50%
Just Group (JUST) 75.34p 2.50%
Greencore Group (GNC) 199.00p 2.42%
FTSE 250 - Fallers
Premier Oil (PMO) 121.80p -2.56%
Equiniti Group (EQN) 248.00p -1.98%
Tullow Oil (TLW) 226.10p -1.57%
Cairn Energy (CNE) 209.00p -1.51%
CLS Holdings (CLI) 220.50p -1.34%
Wetherspoon (J.D.) (JDW) 1,264.00p -1.25%
Coats Group (COA) 84.70p -1.17%
RPC Group (RPC) 822.60p -1.13%
Alfa Financial Software Holdings (ALFA) 160.00p -1.11%
UDG Healthcare Public Limited Company (UDG) 650.00p -1.07%