London close: Stocks gain as Bank of England policy eyed

London stocks gained on Wednesday as Theresa May succeeded David Cameron as Prime Minister and as investors awaited the Bank of England’s policy decision.

Cameron urged May to ensure Britain remains close as possible to the EU after Brexit as he delivered his final Prime Minister's Questions on Wednesday.

The Conservative Party leader was to go to the Buckingham Palace later to officially tender his resignation to the Queen. May followed him to the Palace to be formally appointed his successor.

The pound reversed its earlier jump, falling 0.49% against the dollar at $1.3182.

“After all the political dramatics of late, it feels as though we have reached a conclusion with the appointment of Theresa May,” said Joshua Mahony, market analyst at IG.

“However, the work starts now for May, who has arguably one of the shortest campaigns in British history, with the UK going from Cameron’s resignation to Mays appointment in the space of 19 days. Markets will be watching carefully at the appointments being made, most notably for whether a new chancellor is appointed, with anti-Brexit hawk Phillip Hammond being touted.”

The attention now turns to the Bank of England’s policy decision on Thursday with many analysts expecting 25 basis point interest rate cut after the Brexit vote weakened the UK economic outlook.

Following Britain's decision to leave the European Union on 24 June, Governor Mark Carney said some easing of monetary policy may be needed over the summer to cushion the blow.

“To us, there seems little reason to wait on an interest rate cut front,” said Howard Archer, chief UK and European economist at IHS Global Insight.

In economic data, China’s trade surplus narrowed to $48.11bn in June from $49.98bn a month earlier as exports fell. Exports dropped 4.8% in June compared to a year ago following a 4.1% drop in May, according to the General Administration of Customs. Economists had expected a 5% decline. Imports decreased 8.4% year-on-year in June, more than the 6.2% slide expected by analysts, following a 0.4% fall in May.

Eurozone industrial production dropped 1.2% from April versus expectations of a 0.8% decline, according to Eurostat. Figures for April were revised up to show a 1.4% increase from a previous estimate of 1.1%.

US import prices rose less than expected in June as rising costs for petroleum products were offset by falling consumer and capital goods prices, according to the Labor Department. Import prices increased 0.2% last month after an unrevised 1.4% jump in May. Economists had expected a 0.5% increase.

Meanwhile, Dallas Fed President Robert Kaplan suggested a "slow, gradual, careful" approach to raising interest rates is very appropriate during a speech in Houston.

In commodities, oil prices fell as the Energy Information Agency revealed US weekly crude inventories fell less than expected. The EIA US crude supplies fell by 2.5m barrels for the week ended July 8, below the decline of 3.25m barrels expected by analysts polled by S&P Global Platts.

Separately, the International Energy Agency said a global supply glut was threatening market recovery.

On the company front, Burberry rallied after reporting a 3% like-for-like drop in retail sales in the first quarter, beating the 5% fall that had been forecast by market.

Rolls-Royce was another riser as news emerged from the Farnborough Airshow. Chief executive Warren East said the engine maker could boost its profitability by £1bn if tough targets, in addition to cost cuts already identified by the company, can be hit.

Housebuilder Barratt Developments was one of the big fallers, caught up in a sector-wide retreat, as it told Reuters it could reduce the rate at which it builds houses due to a possible slowdown from Brexit.

Playtech gained as it said it was buying 90% of sports betting software maker Best Gaming Technology for €138m in cash.

Transport operator Go-Ahead was under the cosh a day after London mayor Sadiq Khan called for the Southern Rail franchise to be withdrawn from the company after months of delays and cancellations.

Market Movers

FTSE 100 (UKX) 6,670.40 -0.15%
FTSE 250 (MCX) 16,774.38 -0.19%
techMARK (TASX) 3,305.64 0.25%

FTSE 100 - Risers

Burberry Group (BRBY) 1,279.00p 6.32%
Antofagasta (ANTO) 506.00p 4.12%
Rolls-Royce Holdings (RR.) 750.00p 3.59%
CRH (CRH) 2,238.00p 2.43%
Centrica (CNA) 232.70p 2.29%
Admiral Group (ADM) 2,046.00p 2.10%
Paddy Power Betfair (PPB) 8,630.00p 1.83%
St James's Place (STJ) 840.00p 1.76%
Hikma Pharmaceuticals (HIK) 2,549.00p 1.76%
Kingfisher (KGF) 329.10p 1.73%

FTSE 100 - Fallers

GKN (GKN) 275.30p -3.06%
ITV (ITV) 184.90p -3.04%
Berkeley Group Holdings (The) (BKG) 2,620.00p -2.67%
Schroders (SDR) 2,507.00p -2.64%
Royal Bank of Scotland Group (RBS) 177.40p -2.53%
Barclays (BARC) 145.10p -2.32%
Anglo American (AAL) 814.70p -1.90%
easyJet (EZJ) 1,123.00p -1.66%
Lloyds Banking Group (LLOY) 55.32p -1.65%
Legal & General Group (LGEN) 185.80p -1.64%

FTSE 250 - Risers

Playtech (PTEC) 848.50p 3.98%
Ladbrokes (LAD) 124.00p 3.33%
Moneysupermarket.com Group (MONY) 270.70p 3.28%
Shawbrook Group (SHAW) 169.80p 3.16%
NMC Health (NMC) 1,151.00p 2.77%
DFS Furniture (DFS) 216.30p 2.76%
Evraz (EVR) 162.00p 2.34%
Rank Group (RNK) 233.30p 2.32%
Drax Group (DRX) 355.70p 1.98%
Dignity (DTY) 2,837.00p 1.98%

FTSE 250 - Fallers

CLS Holdings (CLI) 1,332.00p -7.50%
International Personal Finance (IPF) 313.60p -3.92%
Euromoney Institutional Investor (ERM) 1,021.00p -3.77%
Kaz Minerals (KAZ) 139.00p -3.74%
Millennium & Copthorne Hotels (MLC) 407.00p -3.67%
P2P Global Investments (P2P) 815.50p -3.49%
JRP Group (JRP) 107.20p -3.42%
Go-Ahead Group (GOG) 1,884.00p -3.24%
Marshalls (MSLH) 258.40p -3.22%
Polypipe Group (PLP) 239.00p -3.04%