London close: Mining stocks lead equities higher after FOMC rate decision

London stocks closed higher on Thursday, with mining shares leading the gains, as the dollar weakened on the Federal Reserve’s decision to keep interest rates unchanged.

The Federal Open Market Committee on Wednesday decided to keep the range for the Fed funds rate unchanged at between 0.25% and 0.50% and to cut the number of rate increases they expect this year from one to two.

The Fed was split in its decision to leave interest rates unchanged with three members dissenting in favour of an immediate 25 basis point hike.

The FOMC also signalled that the case for a hike later this year has strengthened, saying inflation was on track to reach the 2% target and near-term risks were “balanced”.

Goldman Sachs said its US economics team assigns a cumulative 65% probability to a rate hike by the 14 December FOMC meeting, which is roughly the same as implied by fed fund futures.

Meanwhile, FXTM research analyst Lukman Otunuga said: “Although the decision to keep rates unchanged was warmly welcomed by global equities, the shocking divide between Fed officials is something which remains a cause for concern. With expectations hanging on a thin line over the Fed actually taking action this year, the Dollar could be vulnerable to further losses.”

Traders are now turning their focus to a speech by Bank of England Governor Mark Carney at 1800 BST.

Ahead of his speech, BoE policymaker Kristen Forbes on Thursday said she did not see a case for a further interest rate cut following the Brexit vote on 23 June.

Her remarks put her at odds with the majority of BoE rate-setters who last month said the longer-term outlook for the economy may warrant another rate cut later this year.

Earlier, the central bank’s Financial Policy Committee released a statement acknowledging that while the market has calmed following the immediate volatility after the 23 June Brexit vote, Britain still faces a “challenging period of uncertainty and adjustment”.

In economic data, the Council of Mortgage Lenders revealed that UK gross mortgage lending increased by 6.8% in August to an estimated £225.5bn, from July’s £21.1bn.

CML senior economist Mohammad Jamei said the widely voiced fears recently about the housing market have proved to be wide of the mark as prospects for house buying activity after the EU referendum in June look “slightly subdued” in comparison to late 2015 and early 2016.

The Confederation of British Industry said industrial trends orders remained unchanged in August at -5, in line with expectations.

In the Eurozone, consumer confidence improved in September, according to the European Commission. The Economic Sentiment Indicator rose to negative 8.2 in September, in line with expectations, following negative 8.5 in August, the Commission’s preliminary estimate revealed.

In US data, the Labor Department said jobless claims fell for an 81st consecutive week last week. Initial jobless claims dropped by 8,000 to 252,000, compared to economists’ estimates of 261,000.

US house price rose 0.5% in July following a 0.2% increase in June, according to the monthly house price index by the Federal Housing Finance Agency. Analysts had expected a 0.3% increase.

Separately, US existing home sales fell 0.9% to an annual rate of 5.33 million units in August, the National Association of Realtors said, compared to forecasts for a 1.1% increase. July’s sales were also revised lower to 5.38 million units from a previously reported 5.39 million.

Meanwhile, oil prices jumped after official data on Wednesday showed a surprise drop in US crude inventories last week. Brent crude rose 1.7% to $47.66 per barrel and West Texas Intermediate increased 2.2% to $46.37 per barrel at 1634 BST.

Among corporate stocks, miners were the biggest risers on the FTSE 100, supported by a weaker dollar following the Fed’s policy announcement. A weaker greenback makes dollar-denominated commodities more affordable for holders of other currencies. BHP Billiton, Glencore and Fresnillo led the rally.

Glencore also benefited from an upgrade to ‘hold’ from ‘sell’ by Liberum on the back of improved prospects for thermal coal prices.

On the downside, education publisher Pearson declined after Exane BNP Paribas downgraded the stock to ‘neutral’ from ‘outperform’ and cut the price target to 900p from 1,000p, saying it fears more turbulence ahead following last year’s shock profit warning.

Premier Inn and Costa owner Whitbread was under the cosh as UBS reiterated its ‘neutral’ rating on the stock and assessed whether Costa can crack the Chinese market. The bank said Costa was “not as well positioned as Starbucks, UBC, or McDonald's with lower awareness score, and less loyalty among its customer base".

BBA Aviation edged higher after Barclays initiated coverage of the stock at ‘overweight’ with a 280p price target.

MCarthy & Stone gained ground as Nicholas Hyett, equity analyst at Hargreaves Lansdown, said investors are taking a more positive view in what has so far been a torrid September following a cautious full-year trading update.

Shares in Countrywide fell after the estate agency group said it has sold its remaining stake in property website Zoopla.

Market Movers

FTSE 100 (UKX) 6,911.40 1.12%
FTSE 250 (MCX) 17,987.77 0.30%
techMARK (TASX) 3,538.78 0.53%

FTSE 100 - Risers

Glencore (GLEN) 207.90p 5.48%
Fresnillo (FRES) 1,802.00p 5.20%
Randgold Resources Ltd. (RRS) 8,015.00p 4.36%
Antofagasta (ANTO) 517.50p 4.31%
TUI AG Reg Shs (DI) (TUI) 1,093.00p 4.19%
BHP Billiton (BLT) 1,094.50p 4.14%
Anglo American (AAL) 920.50p 3.58%
Rio Tinto (RIO) 2,490.00p 3.28%
Coca-Cola HBC AG (CDI) (CCH) 1,741.00p 3.14%
Hammerson (HMSO) 585.50p 2.90%

FTSE 100 - Fallers

HSBC Holdings (HSBA) 577.30p -1.94%
Informa (INF) 721.00p -1.30%
Shire Plc (SHP) 5,189.00p -1.07%
Pearson (PSON) 774.00p -1.02%
Whitbread (WTB) 3,970.00p -0.82%
Travis Perkins (TPK) 1,569.00p -0.44%
Direct Line Insurance Group (DLG) 382.50p -0.42%
Hikma Pharmaceuticals (HIK) 2,106.00p -0.33%
ITV (ITV) 194.20p -0.31%
Vodafone Group (VOD) 223.50p -0.22%

FTSE 250 - Risers

Hochschild Mining (HOC) 291.00p 8.18%
Vedanta Resources (VED) 554.50p 7.05%
JRP Group (JRP) 127.00p 5.83%
Evraz (EVR) 161.70p 4.59%
Kaz Minerals (KAZ) 216.70p 3.83%
Big Yellow Group (BYG) 775.00p 3.68%
Amec Foster Wheeler (AMFW) 569.50p 3.55%
BBA Aviation (BBA) 255.70p 3.35%
McCarthy & Stone (MCS) 167.30p 3.14%
Investec (INVP) 477.60p 3.04%

FTSE 250 - Fallers

Ladbrokes (LAD) 140.90p -4.47%
CMC Markets (CMCX) 217.70p -3.93%
Countrywide (CWD) 219.10p -3.18%
Paragon Group Of Companies (PAG) 314.40p -3.05%
Smurfit Kappa Group (SKG) 1,836.00p -2.75%
Softcat (SCT) 314.50p -2.52%
Redrow (RDW) 398.00p -2.44%
International Public Partnerships Ltd. (INPP) 153.60p -2.41%
IP Group (IPO) 183.30p -2.34%
Millennium & Copthorne Hotels (MLC) 436.00p -2.30%