London close: Stocks finish higher after ECB rate hike

London stocks managed a positive finish on Thursday, as investors digested the European Central Bank’s first rate hike in 11 years, waded through an avalanche of corporate updates, and mulled the latest UK borrowing figures.

The FTSE 100 ended the session up 0.09% at 7,270.51, and the FTSE 250 was ahead 1.59% at 19,709.24.

Sterling was in the red, meanwhile, to last trade down 0.03% on the dollar at $1.1970, and weakening 0.28% against the euro to €1.1731.

“Volatility has been the name of the game this afternoon, with Cristine Lagarde announcing an unexpected 50 basis point rate hike in a bid to stabilise the euro and stave off inflation,” said IG senior market analyst Joshua Mahony.

“Unfortunately for euro-dollar bulls, today’s rate rise does still keep us on track to see US-eurozone interest rates diverge given the 83% expectations of a 75-basis point hike from the Fed next week.

“With Lagarde’s predecessor Mario Draghi hitting the news today, it is interesting to see how we are currently in a position where the ECB want to drive the euro higher rather than the bearish jawboning undertaken back in Draghi’s day.”

The European Central Bank announced its biggest rate hike in more than 20 years on Thursday, as it looked to tackle inflation, which hit a record 8.6% in June.

It hiked rates by 50 basis points to 0.0% from a record low, versus expectations for a 25 basis points increase.

That marked the first hike in 11 years, and the biggest since 2000.

The refinancing rate was also lifted by 50bps, to 0.5%, above consensus expectations for a 25bps hike, while the interest rate on the marginal lending facility rate was increased to 0.75% from 0.25%.

"The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalisation path than signalled at its previous meeting," the ECB said in a statement.

"At the Governing Council's upcoming meetings, further normalisation of interest rates will be appropriate."

On home shores, data out earlier from the Office for National Statistics showed that public sector net borrowing rose by £4.1bn to £22.9bn in June - the second-highest for June since monthly records began in 1993.

The figure was above consensus expectations of £22.5bn and higher than the Office for Budget Responsibility’s March forecast of £22.3bn.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said public borrowing was “extremely high” in June due to a record £19.4bn in debt interest payments.

Across the pond, Americans filed new claims for unemployment benefits at an accelerated clip in the week ended 16 July, jumping by 9,000 to 251,000 - well above market expectations for a print of 240,000 and the highest since November 2021.

According to the Labor Department, on a non-seasonally adjusted basis, initial claims rose by 7,853 week-on-week to 248,991, with notable increases in Massachusetts, California, and South Carolina.

Still stateside, factory activity in the US mid-Atlantic region weakened unexpectedly in July as the decline in new orders accelerated its recent fall, according to a key survey.

The Federal Reserve Bank of Philadelphia's manufacturing index retreated from a reading of -3.3 for June to -12.3 in July, against consensus expectations for a reading of 1.7.

Finally, the Bank of Japan kept interest rates unchanged overnight as expected, but lifted its inflation forecast and cut growth estimates.

The Bank maintained its -0.1% target for short-term rates, but lifted its core consumer inflation forecast for 2022 to 2.3% from 1.9%, and for 2023 to 1.4% from 1.1%.

It also cut its growth forecast for 2022 to 2.4% from 2.9% and for next year to 2.0% from 1.9%.

“Although the BoJ has gradually downgraded its growth forecast, the revised outlook still appears to be too optimistic amid growing concerns about a recession in the US and EU,” said analysts at ING.

“ING expects GDP to grow by 0.8% in 2022 and 1.2% in 2023.

“Already, most monthly data suggests that the second-quarter GDP rebound is likely to be limited as pent-up demand has been suppressed by high inflation, and exports have been hit by China’s lockdown measures.”

In London’s equity markers, Dechra Pharmaceuticals slid 3% after it raised around £180m in a discounted share placing for the acquisition of US-based Piedmont Animal Health.

Ocado Group was off 2.79% after the online supermarket’s interim losses grew to £211m from £28m a year earlier.

Anglo-Russian precious metals miner Polymetal tumbled 12.89% after it reported a drop in second-quarter revenues as it said sanctions against Russia have continued to impact sales.

SSE was 2.41% weaker even after it said its first-quarter performance slightly exceeded its expectations, with continued progress on key energy infrastructure projects.

Carnival cruised 9.44% lower after it announced plans to sell an additional $1bn of stock, with proceeds to be used for general corporate purposes.

Investec Group lost 0.71% and Pennon Group was off 0.69%, as both stocks traded without entitlement to the dividend.

On the upside, kitchen supplier Howden Joinery rallied 4.23% after it posted a jump in first-half profit and revenue as it said it was trading "well ahead" of pre-Covid levels and backed its outlook for the year.

JD Sports Fashion rose 1.97% following reports it was looking to sell the Footasylum chain to Aurelius Group.

Frasers Group rocketed 26.6% after lifting its full-year profit outlook despite a "challenging" backdrop.

The company said it now expected adjusted pre-tax profit for the full year to be between £450m and £500m, up from previous guidance of £300m to £350m.

Moneysupermarket advanced 12.86% after it said its first-half performance was ahead of expectations, with a stronger return to growth in travel insurance and travel than expected and "exceptional" trading in the money division in the second quarter.

Elsewhere, 3i Group gained 4.18% after saying it had made a good start to the new financial year, with both portfolios trading "resiliently".

IG Group advanced 10.05% after it posted slightly better than expected annual profits, while Diploma and Volution Group added a respective 5.39% and 4.31% on the back of their own trading updates.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Iain Gilbert and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,270.51 0.09%
FTSE 250 (MCX) 19,709.24 1.59%
techMARK (TASX) 4,390.73 0.93%

FTSE 100 - Risers

Howden Joinery Group (HWDN) 655.60p 4.23%
3i Group (III) 1,247.00p 4.18%
Spirax-Sarco Engineering (SPX) 11,330.00p 3.99%
Intermediate Capital Group (ICP) 1,472.00p 3.92%
Halma (HLMA) 2,247.00p 3.22%
Taylor Wimpey (TW.) 125.80p 2.99%
Intertek Group (ITRK) 4,510.00p 2.80%
Experian (EXPN) 2,835.00p 2.75%
RS Group (RS1) 1,005.00p 2.66%
Barratt Developments (BDEV) 497.50p 2.65%

FTSE 100 - Fallers

Harbour Energy (HBR) 332.00p -5.65%
Dechra Pharmaceuticals (DPH) 3,618.00p -3.00%
Avast (AVST) 511.80p -2.88%
Ocado Group (OCDO) 753.20p -2.79%
BAE Systems (BA.) 783.20p -2.49%
SSE (SSE) 1,721.00p -2.41%
International Consolidated Airlines Group SA (CDI) (IAG) 113.46p -2.16%
National Grid (NG.) 1,081.00p -1.82%
GSK (GSK) 1,746.80p -1.66%
Glencore (GLEN) 419.80p -1.47%

FTSE 250 - Risers

Frasers Group (FRAS) 949.50p 26.60%
Moneysupermarket.com Group (MONY) 216.80p 12.86%
IG Group Holdings (IGG) 783.00p 10.05%
Abrdn Private Equity Opportunities Trust (APEO) 485.00p 9.98%
Molten Ventures (GROW) 484.20p 8.05%
Genus (GNS) 2,642.00p 7.17%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,225.00p 7.08%
Bytes Technology Group (BYIT) 446.20p 6.09%
Countryside Partnerships (CSP) 265.80p 5.39%
Diploma (DPLM) 2,698.00p 5.39%

FTSE 250 - Fallers

Polymetal International (POLY) 194.00p -12.89%
Carnival (CCL) 707.80p -9.44%
Wizz Air Holdings (WIZZ) 1,877.00p -3.84%
Petrofac Ltd. (PFC) 106.40p -3.80%
Pennon Group (PNN) 966.50p -3.35%
TUI AG Reg Shs (DI) (TUI) 133.50p -3.01%
Trainline (TRN) 371.00p -2.65%
easyJet (EZJ) 382.90p -1.92%
Beazley (BEZ) 477.00p -1.85%
Aston Martin Lagonda Global Holdings (AML) 529.60p -1.78%