London close: Stocks rise as BoE keeps rates on hold

London markets closed higher on Thursday, sustaining gains after the Bank of England adhered to expectations by maintaining interest rates at a 16-year high.

The FTSE 100 rose 1.88%, closing at 7,882.55 points, while the FTSE 250 saw an increase of 1.32%, reaching 19,741.31 points by the end of trading.

In currency markets, sterling was last down 0.94% on the dollar to trade at $1.2665, while it decreased 0.38% against the euro to change hands at €1.1661.

“Markets have continued their euphoric reaction to this week’s central bank events, with the FTSE 100 closing in on 7,900 for the first time since May last year,” said IG chief market analyst Chris Beauchamp.

“UK stocks have lagged far behind, but with the Bank of England now on a path to cutting rates we could see the FTSE 350 make further strides as the flow of investor money finally heads to the UK.”

Beauchamp quipped that a ‘no change’ policy meeting rarely produces “quite the excitement” as Wednesday night’s Fed decision.

“While nodding towards stronger than expected, the Fed’s decision to stick to current plans has resulted in yet more record highs for the Dow, S&P 500 and Nasdaq 100.

“Things do seem to be getting a little excessive in markets, especially since the S&P 500 has yet to register a pullback of more than 3% so far this year.”

BoE maintains interest rates as services sector grows

In economic news, the Bank of England kept interest rates unchanged at 5.25%, as anticipated, following a vote by its Monetary Policy Committee.

The decision, with a majority vote of eight-to-one, marked a continuation of the 16-year high borrowing cost.

External member Swati Dhingra dissented, advocating for a 0.25 percentage point cut.

It contrasted with February's decision, when Catherine Mann and Jonathan Haskel pushed for a 25 basis point hike.

With inflation easing from its peak, currently at 3.4%, the MPC was expected to embark on rate reductions this year.

Governor Andrew Bailey highlighted positive indicators of inflation abatement but maintained a cautious approach.

“The BoE will need to see a lot more moderation in wages and services prices before it starts cutting rates,” said Marion Amiot, senior European economist at S&P Global Ratings.

“We don’t expect that to be before August, as the labour market remains tight.

“While vacancies are falling, the workforce is barely expanding, supporting pay increases that are well above productivity gains and the 2% inflation target.”

Meanwhile, UK public-sector borrowing in February saw a significant drop, continuing a downward trend for the fourth consecutive month.

Net borrowing excluding public-sector banks stood at £8.4bn, £3.4bn lower than February 2023, indicating fiscal resilience amidst economic recovery.

Additionally, the UK service sector exhibited growth in March, though at a slower pace, hinting at an economy potentially emerging from recession.

The S&P Global flash UK composite purchasing managers' index showed a slight dip to 52.9, yet remaining above the expansion threshold of 50.0.

On the continent, eurozone business activity displayed early signs of stabilising, with the latest HCOB flash eurozone composite PMI output index reaching a nine-month high of 49.9, suggesting a tentative return to growth.

Next, Virgin Money in the green, Dowlais out of favour

On London’s equity markets, fashion retailer Next jumped 6.67% after posting a better-than-expected 5% increase in annual profits to £918m, and maintaining guidance for 2024.

Direct Line Insurance Group managed 0.1% gains despite reporting widening of its full-year losses.

The company announced a new £100m cost-saving plan and reinstated its dividend, which contributed to investor confidence.

Virgin Money UK advanced 2.74% after formally agreeing to be acquired by Nationwide in a £2.9bn deal, confirming a preliminary agreement announced earlier in March.

International Airlines Group (IAG), the owner of British Airways and Iberia, saw its shares ascend 2.9% following an upgrade to 'outperform' by RBC Capital Markets.

The upgrade cited potential upside to consensus expectations for 2024.

On the downside, Schroders, British American Tobacco, Crest Nicholson, Hikma Pharmaceuticals, and Beazley all saw decreases, as they traded without entitlement to dividends.

Savings and investment firm M&G fell 3.57% despite beating analysts' forecasts with its 2023 results.

Net client flows, adjusted profits, and operating capital generation improved significantly from the previous year.

Shares in automotive engineering group Dowlais dropped sharply by 9.94% despite announcing a £50m share buyback and pointing to stable revenues in 2024.

Computacenter also experienced a decline of 1.7%, despite reporting record revenue, gross profit, and adjusted earnings per share a day earlier.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,882.55 1.88%
FTSE 250 (MCX) 19,741.31 1.32%
techMARK (TASX) 4,501.89 0.85%

FTSE 100 - Risers

St James's Place (STJ) 461.50p 10.33%
3i Group (III) 2,748.00p 8.83%
Airtel Africa (AAF) 97.75p 7.77%
Melrose Industries (MRO) 664.20p 6.99%
Next (NXT) 9,070.00p 6.98%
Halma (HLMA) 2,362.00p 6.97%
Croda International (CRDA) 5,004.00p 5.93%
JD Sports Fashion (JD.) 117.10p 5.92%
Anglo American (AAL) 1,923.80p 5.62%
Persimmon (PSN) 1,334.00p 5.62%

FTSE 100 - Fallers

Burberry Group (BRBY) 1,191.00p -3.25%
Prudential (PRU) 759.00p -2.77%
Centrica (CNA) 125.20p -2.38%
Smith & Nephew (SN.) 1,033.00p -2.36%
British American Tobacco (BATS) 2,362.00p -2.07%
Hikma Pharmaceuticals (HIK) 1,873.50p -2.06%
Reckitt Benckiser Group (RKT) 4,300.00p -1.56%
Unilever (ULVR) 3,907.00p -0.56%
Schroders (SDR) 378.80p -0.45%
Smurfit Kappa Group (CDI) (SKG) 3,584.00p -0.44%

FTSE 250 - Risers

Close Brothers Group (CBG) 398.00p 14.57%
Hochschild Mining (HOC) 124.70p 10.26%
Johnson Matthey (JMAT) 1,860.00p 8.93%
Marshalls (MSLH) 285.60p 8.59%
Mobico Group (MCG) 73.05p 8.54%
Future (FUTR) 641.00p 8.09%
TI Fluid Systems (TIFS) 169.00p 7.78%
Investec (INVP) 524.00p 6.72%
Shaftesbury Capital (SHC) 141.80p 6.70%
Genus (GNS) 1,829.00p 6.65%

FTSE 250 - Fallers

Computacenter (CCC) 2,696.00p -8.36%
Ferrexpo (FXPO) 43.74p -7.99%
Trustpilot Group (TRST) 192.50p -7.45%
Watches of Switzerland Group (WOSG) 343.60p -6.22%
Octopus Renewables Infrastructure Trust (ORIT) 72.90p -4.83%
Bytes Technology Group (BYIT) 515.50p -4.18%
Moonpig Group (MOON) 161.10p -3.88%
Bakkavor Group (BAKK) 100.50p -3.37%
Crest Nicholson Holdings (CRST) 197.00p -3.24%
Dr. Martens (DOCS) 87.05p -3.12%