London close: FTSE ends lower after BoE slashes GDP forecasts

By Sharecast News

Sharecast News | 12 May, 2016

Updated : 16:46

The FTSE 100 finished in the red as the Bank of England slashed its economic growth forecasts and raised concerns about the European Union referendum.

In the BoE’s Quarterly Inflation Report the central bank cut its growth forecast for 2016 gross domestic product to 2% from a previous estimate of 2.2%. It also trimmed its GDP forecast for 2017 to 2.2% from 2.3%, and for 2018 to 2.2% from 2.4%.

The BoE warned there were increasing signs that uncertainty surrounding Britain's EU referendum on 23 June has started to weigh on activity.

"The most significant risks to the MPC’s forecast concern the referendum," the BoE said. "A vote to leave the EU could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy."

The Inflation Report was released alongside the Monetary Policy Committee’s policy announcement which revealed it would keep interest rates at 0.50% and the size of the asset purchase programme at £375bn. The vote was unanimous and was expected by analysts.

Chris Beauchamp, senior market analyst at IG, said: “The Bank of England’s decision to intervene in the Brexit debate, via the usefully neutral medium of its MPC meeting and inflation report, will attract the ire of Brexiteers, but perhaps the more interesting nuggets are that the bank’s forecasts now suggest that there will be just one 25 basis point increase by the second quarter of 2019 and that it may look at cutting rates before engaging in unconventional policy."

In other UK news, a survey showed house price growth in the UK slowed in April as a result of the increase to stamp duty for buy-to-let and second home purchases at the start of the month. The Royal Institute of Chartered Surveyors' house price balance dropped from 42% in March to 41% in April, but nevertheless came in ahead of the 35% forecast by economists.

In the Eurozone, industrial output dropped 0.8% in March compared to a month ago, worse than forecasts for zero growth, Eurostat said. The decline followed falls in industrial output across Germany, France, Italy and the Netherlands.

Stateside, the Labor Department said US weekly jobless claims unexpectedly rose in the latest week. Initial jobless claims climbed to 294,000 in the week to 7 May from 274,000 the previous week, compared to forecasts of 270,000.

Meanwhile, oil prices reversed an earlier rally with Brent crude down 1.2% to $47.03 per barrel and West Texas Intermediate down 0.78% to $45.87 per barrel at 1643 BST.

Earlier in the session, prices were higher after the International Energy Agency said global oil supplies will experience a “dramatic reduction” in the second half of the year.

On the company front, mining stocks led declines as metal prices slumped. Anglo American, Antofagasta and Glencore were the biggest fallers on the FTSE 100.

In contrast, Compass Group rallied a day after the food service group released an encouraging set of interim numbers and as Morgan Stanley said the in-line results masked an excellent performance in the company’s North American business.

Vedanta Resources was in the red after slashing its dividend by more than half as falling commodities prices hammered full-year profits.

Supergroup jumped after the owner of SuperDry lifted its full year profit guidance after a powerful fourth-quarter where retail sales from the street fashion group surpassed last year's strong performance.

Market Movers

FTSE 100 (UKX) 6,101.77 0.00%
FTSE 250 (MCX) 16,645.62 0.00%
techMARK (TASX) 3,042.73 0.00%

FTSE 100 - Risers

Randgold Resources Ltd. (RRS) 6,135.00p 0.00%
Compass Group (CPG) 1,270.00p 0.00%
easyJet (EZJ) 1,460.00p 0.00%
AstraZeneca (AZN) 3,878.00p 0.00%
Rexam (REX) 630.50p 0.00%
Shire Plc (SHP) 4,036.00p 0.00%
Prudential (PRU) 1,277.00p 0.00%
United Utilities Group (UU.) 953.50p 0.00%
British Land Company (BLND) 715.50p 0.00%
Burberry Group (BRBY) 1,141.00p 0.00%

FTSE 100 - Fallers

Randgold Resources Ltd. (RRS) 6,135.00p 0.00%
Compass Group (CPG) 1,271.00p 0.00%
easyJet (EZJ) 1,460.00p 0.00%
AstraZeneca (AZN) 3,878.00p 0.00%
Rexam (REX) 630.50p 0.00%
Shire Plc (SHP) 4,036.00p 0.00%
Prudential (PRU) 1,277.00p 0.00%
United Utilities Group (UU.) 953.50p 0.00%
British Land Company (BLND) 715.50p 0.00%
Burberry Group (BRBY) 1,141.00p 0.00%

FTSE 250 - Risers

City of London Inv Trust (CTY) 369.20p 0.00%
Edinburgh Inv Trust (EDIN) 682.00p 0.00%
Card Factory (CARD) 355.90p 0.00%
Vectura Group (VEC) 167.60p 0.00%
Ibstock (IBST) 194.00p 0.00%
Ophir Energy (OPHR) 65.95p 0.00%
LondonMetric Property (LMP) 161.50p 0.00%
Mitchells & Butlers (MAB) 270.10p 0.00%
Dignity (DTY) 2,479.00p 0.00%
Tritax Big Box Reit (BBOX) 132.60p 0.00%

FTSE 250 - Fallers

London close: FTSE ends lower after BoE slashes GDP forecasts

Last news