London close: Stocks gain as BoE votes to hold interest rates steady

UK equities rallied on Thursday as the Bank of England unanimously agreed to keep interest rates unchanged as it cut economic growth forecasts.

The BoE’s Monetary Policy Committee members all voted in favour of maintaining the benchmark interest rate at 0.50% and the asset purchase programme at £375bn, as anticipated by analysts.

However, many analysts had expected an 8-1 vote with MPC member Ian McCafferty voting in favour of a rate hike.

In the Inflation Report released alongside the monetary policy announcement and the meeting minutes, the BoE cut UK economic growth forecasts. The BoE now expects gross domestic product to rise by 2.2% this year, down from 2.5% in its previous estimates. The central bank also slashed its growth forecasts for 2017 to 2.3%, down from an earlier estimate of 2.6%.

The Inflation Report warned that global growth had slowed further over the past three months, dragged by flagging emerging economies, particularly the slowdown in China.

“Despite these noble intentions, Super Thursday is now much more aptly referred to as Superfluous Thursday, because regardless of the format of the delivery, it is clear that UK interest rates will not be rising any time soon,” said Fidelity International's investment director for personal investing, Maike Currie.

“In fact, many now believe that UK rates will stay at their 300-year low for the whole of 2016 – some even speculate that the Bank of England could follow Japan’s lead in joining the negative interest rate club.”

In economic data, people took advantage of low interest rates in January with high demand in the property market pushing house prices up in January, according to Halifax. UK house prices rose 1.7% in January compared to a month ago, surging past analysts’ expectations for a 0.1% increase. House prices increased 2% month-on-month in December.

On the year, house prices jumped 9.7% in January compared with a 9.5% annual increase in December. Analyst had predicted a 9% gain.

UK car sales enjoyed their strongest January performance for 11 years, with new car registrations rising 2.9% in the month after what was already a record year in 2015. Private registrations fuelled the growth, data for January from the Society of Motor Manufacturers showed, soaring 8.2% to their highest level since 2004 of 73,061 vehicles.

Across the Atlantic, US initial jobless claims rose 8,000 to 285,000 in the week to 30 January, according to the Labor Department. Analysts had been expecting 278,000 claims.

The report comes ahead of Friday’s official monthly non-farm payrolls figures which are expected reveal the US added 190,000 jobs in January, marking a slowdown from the previous month’s 292,000 jobs.

The Federal Reserve is keeping a watch on the health of the labour market as it decides when to next raise interest rates.

“The labour market tightened significantly in 2015, which was the main reason why the Fed raised the target rate in December, as PCE core inflation is still subdued,” according to Danske Bank.

“Since then there has been much uncertainty about the true state of the US economy, as the financial turmoil in the beginning of 2016 partly reflects growth concerns due to monetary tightening and weak data releases.”

Meanwhile, oil prices gained amid reports of potential talks between global oil producers to curb the supply glut. Venezuela's oil minister Eulogio del Pino told Iranian news agency Shana on Wednesday that six producing countries including OPEC members Iran and Iraq and non-members Russia and Oman, supported a meeting.

Brent crude rose 0.90% to $35.36 per barrel and West Texas Intermediate climbed 2.5% to $33.12 per barrel at 1615 GMT.

Among corporate stocks, miners were among the biggest risers of the day as commodity prices increased. Anglo American, Antofagasta, BHP Billiton, Rio Tinto, Glencore and Fresnillo all registered gains.

Royal Dutch Shell rallied despite posting an 80% drop in full year profit, as investors knew last month what was coming and were eyeing up continued dividends.

Investec also had a good day after ratings agency Moody's upgraded the bank’s long-term ratings by one notch.

Astrazeneca dropped after warning that the expiry of the patent on its anti-cholesterol drug Crestor will cut its profits this year as cheaper, generic versions come to the market.

EasyJet shares also dipped after it said its load factor for January, which gauges how many seats were actually taken up on flights, nudged down to 85% from 85.1%.

ICAP slumped as the company saw a big drop in currency trading volumes in January on its EBS system compared to the same month last year. They handled an average of $103.8bn a day in January, which was a 39% rise compared to December, but a 20% drop from the previous year.

Market Movers

FTSE 100 (UKX) 5,901.72 1.11%
FTSE 250 (MCX) 16,082.70 0.56%
techMARK (TASX) 3,057.10 -0.91%

FTSE 100 - Risers

Anglo American (AAL) 326.20p 19.18%
Glencore (GLEN) 99.68p 15.97%
Antofagasta (ANTO) 430.10p 14.51%
BHP Billiton (BLT) 712.80p 10.82%
Rio Tinto (RIO) 1,859.00p 10.33%
Fresnillo (FRES) 785.50p 8.80%
Aberdeen Asset Management (ADN) 241.10p 7.49%
Old Mutual (OML) 162.00p 6.37%
Royal Dutch Shell 'A' (RDSA) 1,528.50p 6.29%
Royal Dutch Shell 'B' (RDSB) 1,525.00p 6.09%

FTSE 100 - Fallers

AstraZeneca (AZN) 4,143.00p -6.10%
Coca-Cola HBC AG (CDI) (CCH) 1,320.00p -5.71%
Imperial Tobacco Group (IMT) 3,606.50p -3.27%
Johnson Matthey (JMAT) 2,338.00p -2.87%
Unilever (ULVR) 2,949.00p -2.35%
Diageo (DGE) 1,829.50p -2.14%
Dixons Carphone (DC.) 448.70p -2.01%
Reckitt Benckiser Group (RB.) 6,138.00p -1.95%
Hargreaves Lansdown (HL.) 1,260.00p -1.95%
International Consolidated Airlines Group SA (CDI) (IAG) 515.00p -1.62%

FTSE 250 - Risers

Tullow Oil (TLW) 179.20p 11.17%
Vedanta Resources (VED) 230.90p 9.22%
Amec Foster Wheeler (AMFW) 413.90p 8.49%
Ophir Energy (OPHR) 90.10p 7.39%
Evraz (EVR) 61.15p 7.19%
AA (AA.) 294.30p 6.79%
Weir Group (WEIR) 839.50p 6.60%
BGEO Group (BGEO) 1,813.00p 6.52%
Countrywide (CWD) 355.70p 6.40%
Investec (INVP) 441.70p 6.25%

FTSE 250 - Fallers

Pendragon (PDG) 35.24p -4.50%
Sophos Group (SOPH) 225.40p -3.96%
CLS Holdings (CLI) 1,510.00p -3.88%
Just Retirement Group (JRG) 135.60p -3.83%
Entertainment One Limited (ETO) 137.70p -3.71%
ICAP (IAP) 454.60p -3.58%
Paddy Power Betfair (PPB) 10,020.00p -3.28%
Tate & Lyle (TATE) 595.50p -2.93%
Rightmove (RMV) 3,824.00p -2.92%
DFS Furniture (DFS) 312.80p -2.86%