London close: More hawkish BoE sends sterling higher and pushes FTSE down

London stocks were diving amid a cruel sea of tumbling UK equities indices after the Bank of England held its benchmark interest rate but surprised with a more hawkish stance than expected.

At the end of Thursday trade, the FTSE 100 was down 0.74% to 7,419.36, and the FTSE 250 was down a massive 2.11% to 19,553.66. European indices were also down, as were those on Wall St.

BoE policymakers voted 5-3 in favour of holding rates. They also held the asset-purchase programme at £435bn. Views were for a 7-1 split among policymakers in the Monetary Policy Committee.

Sterling raced ahead on the news, something it was rather unfamiliar with following last year's non-binding Brexit referendum.

This came after the US Federal Reserve raised its benchmark rate last night, and flagged it was going to start reducing its balance sheet.

"Central banks have played havoc with the FTSE 100 today," opined David Madden, market analyst at CMC Markets UK.

"The market was caught off guard by the (MPC) voting breakdown, as the disappointing UK earnings figures yesterday led traders to believe that the BoE would be dovish today."

There was also the matter of the UK's hung parliament, after PM Theresa May's Tories performed far worse than expected at the ballot last week.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said said the BoE looked out of step to be seriously considering raising interest rates, when economic data is pointing towards a consumer slowdown.

"Indeed the central bank has itself highlighted weaker consumer spending as a key risk to the UK economy, so now this particular chicken is coming home to roost, it’s strange that the BoE is thinking about releasing the foxes.

"For the moment the balance of power still rests with the doves in the MPC however, and it’s worthy of note that expectations of an interest rate rise have been confounded for many years now."

Sticking with politics, the Leader of the House of Commons has confirmed the opening of parliament and Queen's speech had been pushed back to 21 June.

With talks over a potential agreement between the Tories and the DUP stumbling, commentators suggested the announcement on the Queen's speech was intended as a message that the Tories were prepared to form a minority government without a deal if the talks broke down.

Disappointing UK retail sales also took their toll, with data from the Office for the National Statistics showing sales shrank much more than expected in May.

On specific stocks, DFS furniture warned full-year earnings would be below market expectations due to a weakened trading environment, hurting its shares and those of Next, Kingfisher, Marks & Spencer, Tesco. Next was also hit by a downgrade at Credit Suisse.

Persimmon, Severn Trent and Restaurant Group retreated as their stock went ex-dividend, while InterContinental Hotels was knocked lower by a downgrade from Morgan Stanley.

Sky said itself and Liberty Global's Virgin Media were forming a strategic partnership that would enable businesses of varying sizes to benefit further from "advanced television advertising,", across both the Virgin TV and Sky platforms.

Precious metals miners Fresnillo and Randgold Resources were falling as gold prices declined following the Fed's interest-rate hike and more hawkish than expected tone last night.

Later this evening, Chancellor Philip Hammond's annual Mansion House speech was expected to argue the case for a softer, more pragmatic Brexit that would protect jobs and economic growth.

He would also, according to reports, outline Treasury's plans to ensure infrastructure projects and business start-ups that currently received support from EU funds would be able to get UK support instead.

Market Movers

FTSE 100 (UKX) 7,419.36 -0.74%
FTSE 250 (MCX) 19,553.66 -2.11%
techMARK (TASX) 3,551.18 -1.28%

FTSE 100 - Risers

Ashtead Group (AHT) 1,600.00p 1.46%
HSBC Holdings (HSBA) 686.70p 0.88%
Royal Bank of Scotland Group (RBS) 251.50p 0.64%
London Stock Exchange Group (LSE) 3,655.00p 0.63%
Prudential (PRU) 1,773.50p 0.31%
Unilever (ULVR) 4,250.00p 0.19%
Lloyds Banking Group (LLOY) 67.99p 0.13%
Sage Group (SGE) 698.00p -0.00%
GlaxoSmithKline (GSK) 1,684.00p -0.03%
Reckitt Benckiser Group (RB.) 7,860.00p -0.06%

FTSE 100 - Fallers

Fresnillo (FRES) 1,558.00p -7.26%
Persimmon (PSN) 2,259.00p -6.73%
Next (NXT) 4,037.00p -6.14%
Anglo American (AAL) 995.10p -6.03%
Randgold Resources Ltd. (RRS) 7,100.00p -4.89%
Marks & Spencer Group (MKS) 351.80p -4.74%
Mediclinic International (MDC) 779.50p -3.65%
International Consolidated Airlines Group SA (CDI) (IAG) 584.00p -3.39%
Severn Trent (SVT) 2,402.00p -3.26%
Tesco (TSCO) 179.95p -3.20%

FTSE 250 - Risers

CLS Holdings (CLI) 209.30p 6.79%
Petrofac Ltd. (PFC) 421.00p 3.92%
IP Group (IPO) 139.90p 3.02%
Daejan Holdings (DJAN) 6,335.00p 1.90%
Metro Bank (MTRO) 3,724.00p 1.09%
Syncona Limited NPV (SYNC) 152.00p 0.99%
TalkTalk Telecom Group (TALK) 177.00p 0.91%
P2P Global Investments (P2P) 908.00p 0.83%
Barr (A.G.) (BAG) 644.50p 0.70%
HarbourVest Global Private Equity Limited A Shs (HVPE) 1,275.00p 0.63%

FTSE 250 - Fallers

Marshalls (MSLH) 378.40p -8.22%
Crest Nicholson Holdings (CRST) 551.00p -6.45%
Petra Diamonds Ltd.(DI) (PDL) 115.40p -6.33%
Dunelm Group (DNLM) 600.50p -6.17%
Wizz Air Holdings (WIZZ) 2,277.00p -6.10%
Hochschild Mining (HOC) 264.10p -6.05%
Restaurant Group (RTN) 329.30p -5.91%
Pets at Home Group (PETS) 154.90p -5.72%
Evraz (EVR) 175.50p -5.65%
Ted Baker (TED) 2,345.00p -5.63%