London close: Stocks gain as BoE divided on QE
Gains were trimmed by the close of trade on Wednesday as heavy falls in the insurance and mining sectors partially offset earlier optimism about further stimulus from the Bank of England (BoE).
RSA Insurance was leading the fallers on the FTSE 100 after a surprise cut to its dividend, while precious metals miners were sold off as gold prices slumped.
QE speculation gives Footsie a boost
London's benchmark index hit an intraday high of 6,412 this morning after the minutes of the BoE’s latest Monetary Policy Committee's (MPC) meeting. The Footsie had not been at this level since January 2008.
The MPC's decision to hold the size of its quantitative easing (QE) programme unchanged at £375bn on February 6-7th was decided upon by a margin of six votes in favour to three against, surprising analysts who had expected to MPC to vote eight-to-one. Even BoE Governor Sir Mervyn King added his name to the list of those calling for more stimulus.
“While the votes remained against this move […] this sparked the markets into a realisation that such a move is surely not far away, with the March meeting firmly in focus,” said market analyst Craig Erlam from Alpari.
In other economic news, UK jobless claims dropped by 12,500 in January, more than the 7,000 decline expected by the market. Nevertheless, this is what Barclays Research had to say: "Today’s data offer a mixed and somewhat puzzling picture (…) We expect the unemployment rate to fluctuate around the 7.8-8.0% mark this year."
Gold takes a hit
Gold for April delivery was down 1.30% on the day at $1,584.10 by the close in London, having hit a low of $1,578 earlier on, the lowest price for a most-active contract since mid-July 2012.
“With technical signals also pointing to further declines, the direction of travel appears to be for a lower gold price, towards the December 2011 lows at $1,525,” said senior market analyst Michael Hewson from CMC Markets.
“A lot of noise has been made with respect to the ‘death cross’ across the financial and social media today and in some markets it is a very accurate indicator,” he said. The ‘death cross’, as the name suggests, is often treated as a negative sign, where the 50-day moving average crosses below the 200-day moving average.
FTSE 100: RSA plummets after surprise divi cut
Full-year results from insurance giant RSA came in broadly in line with analysts’ estimates, but a 33% reduction in the dividend surprised the market, leading to a 15% drop in the share price by the end of the day.
Chief Executive Officer Simon Lee said that the board’s decision to cut the payout was a “prudent move” and in the best interest of RSA’s shareholders. “It is absolutely the right thing to do for the business given the prospect of prolonged low bond yields,” he said.
Precious metal miners Polymetal, Glencore and Fresnillo were sold off today as the price of gold slid to a seven-month low. Other diversified miners, such as Kazakhmys, ENRC and Xstrata were also lower.
Sector peer BHP Billiton was also lower after announcing a new CEO as its half-year profits dropped 58% on the back of weak commodity prices and a strong Australian dollar.
Royal Bank of Scotland received a boost after Credit Suisse increased its target price from 250p to 260p; though it retained an ‘underperform’ rating. Meanwhile, Barclays was under the weather after Goldman Sachs downgraded its rating for the stock to 'neutral' and cut its target price from 350p to 340p.
Rexam, the consumer packaging group, was a high riser despite saying that pre-tax profits fell 11.9% in 2012. The company raised its dividend by 6.0%.
Natural gas giant BG Group was higher on reports that it has Goldman Sachs to help analyse options for selling part of the infrastructure linked to its Australian liquefied natural gas project.
Telecoms firm Vodafone fell after spending £790m on buying spectrum licences for ultra-fast 4G mobile networks. However, BT, which spent £186m on a different band, was in demand.
FTSE 250: Bumi slumps ahead of meeting
Under-pressure coal miner Bumi was a heavy faller ahead of its extraordinary shareholder meeting to vote on a proposal by founder Nathaniel Rothschild to replace 12 of the 14 members of the board.
Gold miner Centamin, weighed down by the falling price of the precious metal, was also under pressure after Goldman Sachs cut its target price on the stock from 160p to 130p.
Building materials group Travis Perkins fell after saying that "volatile conditions will persist in the short term". Nevertheless, the company was able to increase pre-tax profits by 16.2% in 2012, while revenue rose 1.4%.
Wealth management group Rathbone Brothers was also lower despite saying that funds under management rose 13.4% in 2012.
FTSE 100 - Risers
Rexam (REX) 502.00p +5.31%
Melrose Industries (MRO) 251.30p +3.54%
Royal Bank of Scotland Group (RBS) 354.10p +2.61%
British American Tobacco (BATS) 3,474.00p +2.48%
Rolls-Royce Holdings (RR.) 1,062.00p +1.82%
Schroders (SDR) 2,008.00p +1.67%
Unilever (ULVR) 2,652.00p +1.57%
Hargreaves Lansdown (HL.) 861.50p +1.53%
United Utilities Group (UU.) 736.50p +1.52%
BT Group (BT.A) 281.00p +1.48%
FTSE 100 - Fallers
RSA Insurance Group (RSA) 117.00p -14.16%
Aviva (AV.) 354.00p -4.12%
Polymetal International (POLY) 967.50p -3.92%
Kazakhmys (KAZ) 698.00p -3.59%
Eurasian Natural Resources Corp. (ENRC) 377.40p -2.73%
Antofagasta (ANTO) 1,068.00p -2.47%
Glencore International (GLEN) 382.35p -2.47%
Xstrata (XTA) 1,148.50p -2.46%
BHP Billiton (BLT) 2,183.50p -2.35%
Fresnillo (FRES) 1,512.00p -2.26%
FTSE 250 - Risers
Alent (ALNT) 367.30p +7.52%
Savills (SVS) 540.50p +6.40%
PayPoint (PAY) 901.00p +4.77%
BBA Aviation (BBA) 243.50p +4.24%
Regus (RGU) 135.00p +4.01%
BTG (BTG) 333.50p +3.28%
PZ Cussons (PZC) 408.90p +3.21%
Domino Printing Sciences (DNO) 699.00p +3.02%
Computacenter (CCC) 514.50p +3.00%
Balfour Beatty (BBY) 281.80p +2.92%
FTSE 250 - Fallers
Hochschild Mining (HOC) 400.60p -6.16%
Sports Direct International (SPD) 416.00p -4.81%
Catlin Group Ltd. (CGL) 503.00p -4.28%
Bumi (BUMI) 379.30p -4.22%
Centamin (DI) (CEY) 55.65p -4.13%
Petropavlovsk (POG) 306.80p -4.04%
Direct Line Insurance Group (DLG) 206.00p -3.87%
Ferrexpo (FXPO) 277.00p -3.52%
Lonmin (LMI) 352.80p -2.84%
Travis Perkins (TPK) 1,271.00p -2.83%