London close: Stocks decline as BoE keeps interest rates unchanged

London stocks closed in the red on Thursday as the Bank of England left interest rates unchanged.

The BoE decided to keep interest rates at 0.5% and the asset purchase programme at £375bn, as expected by analysts, amid a slowdown in emerging economies, low inflation and a strong pound.

The minutes of the central bank’s policy meeting showed Ian McCafferty was once again the only policymaker to vote in favour of a rate hike. He preferred to see rates rise 25 basis points.

Many economists see next May as the likely time for the Bank to finally lift rates. Howard Archer, chief UK and European economist at IHS Global Insight, said he expects the BoE to make the move from 0.50% to 0.75% at that point.

“We suspect that decent UK economic growth, a renewed pick up in earnings growth and consumer price inflation gradually trending up will prompt the MPC to act around May,” he said.

“It is also noteworthy that the US Federal Reserve now looks highly likely to raise interest rates in mid-December, which may make it easier for the Bank of England to raise interest rates without leading to an unwanted significant strengthening of the pound.”

Berenberg and Dankse Bank also reiterated that they see the BoE raising interest rates in May.

The pound strengthened against the euro by 0.73% at 1620 GMT.

In other UK news, the trade deficit widened to £4.1bn in October from £1.1bn the previous month, much more than the £1.8bn forecast. This was mainly due to an 8.2% month-to-month rise in the volume of goods imports, mainly finished manufactured goods, plus a 2.7% decline in the volumes of exports.

The rise in imports is likely to be reversed soon as importers stockpile goods, according to Samuel Tombs, chief UK economist at Pantheon Macroeconomics. However, he was less confident of a rebound in exports, as surveys of export orders point to further declines ahead.

"With the real effective exchange rate nearly back to its pre-recession peak, net trade is likely to slow the economic recovery further over the coming quarters."

Elsewhere, European Central Bank official Erkki Liikanen said the monetary authority was ready to use more measures if needed. His remarks at the Bank of Finland briefing in Helsinki come a week after the ECB decided to cut its deposit rate by 10 basis points and the extend the asset purchase programme until March 2017. Analysts had been expecting the ECB to increase monthly asset purchases to about €75bn but the central bank left it at €60bn.

Stateside, jobless claims rose by 13,000 to 282,000 in the week to 5 December, compared with analysts' expectations for a 269,000 reading, according to the Department of Labor.

Separately, the Department of Labor revealed import prices in the US fell 0.4% in November from the prior month as fuel prices slumped 2.5%, following a 0.3% drop in October and compared to forecasts for a 0.8% decrease.

Meanwhile, oil prices slid after OPEC said crude production from its members rose to a three-year high in November and the Middle East oil cartel also raised its 2015 oil demand forecast. Crude output climbed 230,000 barrels per day (bpd) to 31.7m bpd in the last month.

Brent crude fell 0.8% to $39.77 per barrel and West Texas Intermediate fell 0.67% to $36.91 per barrel at 1629 GMT.

Company-wise, Sports Direct plunged after reporting flat revenue in the first half against tough comparators in the same period last year, which was boosted by the World Cup.

Investec tumbled after South Africa President Jacob Zuma on Wednesday evening fired the country’s finance minister, Nhlanhla Nene - a decision that weighed on financial assets from the country. Nene was replaced by David van Rooyen, whom some reports described a little-known backbencher with no previous experience in finance.

Old Mutual, which generates a large chunk of its profits from South Africa, sank as a broker downgrade and weaker rand weighed on the stock.

Glencore advanced after saying it has increased its planned target of reducing debt and preserving capital to the tune of $13bn (£8.6bn).

TUI AG was flying high after posting sizeable growth in its annual report despite a turbulent year for the industry.

Centrica rallied after saying full year earnings would in-line with forecasts in a pre-close statement at the end of what the British Gas owner admitted was a difficult year.

Ocado was sitting lower after reporting a slowdown in its group sales for the 16 weeks to 29 November, citing a “challenging and competitive” grocery retail environment.

John Wood Group jumped after saying it expects to hit all of its targets for the full-year 2015, including a double-digit increase to its dividend.

Micro Focus International was on the front foot after it delivered better-than-expected interim sales growth and operating cost figures.

PZ Cussons was under the cosh after the personal care and beauty products maker maintained a flat performance in the first six months of its financial year but warned that risks remained about its key market of Nigeria.

Market Movers

FTSE 100 (UKX) 6,095.33 -0.51%
FTSE 250 (MCX) 17,089.51 -0.29%
techMARK (TASX) 3,175.52 0.20%

FTSE 100 - Risers

Glencore (GLEN) 89.05p 7.19%
TUI AG Reg Shs (DI) (TUI) 1,172.00p 4.55%
Centrica (CNA) 212.30p 3.01%
Lloyds Banking Group (LLOY) 72.24p 2.22%
Fresnillo (FRES) 674.00p 1.74%
InterContinental Hotels Group (IHG) 2,520.00p 1.25%
Taylor Wimpey (TW.) 197.20p 0.97%
Carnival (CCL) 3,482.00p 0.90%
easyJet (EZJ) 1,699.00p 0.83%
Royal Bank of Scotland Group (RBS) 292.60p 0.79%

FTSE 100 - Fallers

Sports Direct International (SPD) 593.50p -10.82%
Old Mutual (OML) 174.40p -10.75%
Smiths Group (SMIN) 950.50p -3.65%
Next (NXT) 7,505.00p -2.91%
3i Group (III) 476.70p -2.16%
BHP Billiton (BLT) 733.90p -2.07%
Associated British Foods (ABF) 3,443.00p -2.02%
Mondi (MNDI) 1,317.00p -2.01%
Prudential (PRU) 1,488.00p -1.98%
Dixons Carphone (DC.) 476.70p -1.95%

FTSE 250 - Risers

Micro Focus International (MCRO) 1,523.00p 14.43%
Wood Group (John) (WG.) 580.50p 5.07%
Spectris (SXS) 1,746.00p 3.31%
Entertainment One Limited (ETO) 169.10p 3.05%
Petra Diamonds Ltd.(DI) (PDL) 66.00p 3.04%
Rexam (REX) 598.50p 2.66%
Fidessa Group (FDSA) 1,895.00p 2.49%
esure Group (ESUR) 249.40p 2.34%
B&M European Value Retail S.A. (DI) (BME) 289.70p 2.11%
Diploma (DPLM) 750.50p 2.11%

FTSE 250 - Fallers

Investec (INVP) 469.90p -11.09%
PZ Cussons (PZC) 280.40p -8.31%
Ocado Group (OCDO) 337.60p -6.01%
Brown (N.) Group (BWNG) 323.60p -5.93%
Dignity (DTY) 2,303.00p -4.40%
Serco Group (SRP) 101.00p -4.17%
Provident Financial (PFG) 3,358.00p -3.97%
International Personal Finance (IPF) 324.90p -3.96%
Vedanta Resources (VED) 310.30p -3.03%
Redefine International (RDI) 50.20p -3.00%