London midday: Equities rise after Fed keeps interest rates unchanged

UK equities advanced on Thursday after the Federal Reserve decided to keep interest rates unchanged and cut the number of rate increases they expect this year from one to two.

The Fed was split in its decision to leave interest rates unchanged on Wednesday evening and signalled that the case for a hike later this year has strengthened.

The Financial Open Market Committee said inflation was on track to reach the 2% target and near-term risks were “balanced” but it would hold on interest rates until it sees further evidence of progress toward its objectives.

“Against a backdrop of firming activity and a steady rise in inflation we should be on track for a December rate rise of 25 basis points,” said Schroders.

“However, this call could be derailed by the presidential election on 8 November, or even the Italian referendum later that same month."

Traders are now turning their focus to a speech by Bank of England Governor Mark Carney at 1800 BST. Ahead of his speech, the central bank’s Financial Policy Committee released a statement acknowledging that while the market has calmed following the immediate volatility after the 23 June Brexit vote, Britain still faces a “challenging period of uncertainty and adjustment”.

BoE Deputy Governor Jon Cunliffe is also due to speak at 1400 BST. At the same time European Central Bank President Mario Draghi will speak.

In economic data, the Council of Mortgage Lenders revealed that UK Gross mortgage lending increased by 6.8% in August to an estimated £225.5bn, from July’s £21.1bn. CML senior economist Mohammad Jamei said the widely voiced fears recently about the housing market have proved to be wide of the mark as prospects for house buying activity after the EU referendum in June look “slightly subdued” in comparison to late 2015 and early 2016.

The Confederation of British Industry said industrial trends orders remained unchanged in August at -5, in line with expectations.

Still to come, US initial jobless claims are at 1330 BST, the US housing price index is at 1400 BST, US existing home sales are at 1500 BST, and eurozone consumer confidence is at 1500 BST.

Meanwhile, oil prices gained after official data on Wednesday showed a surprise drop in US weekly crude inventories last week. Brent crude rose 0.88% to $47.25 per barrel and West Texas Intermediate increased 1.02% to $45.81 per barrel.

Among corporate stocks, miners were the biggest risers on the FTSE 100 as the dollar weakened following the Fed’s policy announcement. BHP Billiton, Glencore and Fresnillo led the gains.

Kier Group rallied after its full-year numbers met analysts’ expectations.

Pub group Mitchells & Butlers gained ground after it reported a drop in full year sales but a rise in the most recent eight weeks of trading, as it reiterated that full-year margins will be below the previous year.

BBA Aviation got a boost as Barclays initiated coverage of the stock at 'overweight’ with a 280p price target.

Rolls Royce was on the back foot after it appointed Stephen Daintith of the Daily Mail as chief financial officer from 2017.

Education publisher Pearson was also weaker after Exane BNP Paribas downgraded the stock to ‘neutral’ from ‘outperform’.

Market Movers

FTSE 100 (UKX) 6,918.08 1.22%
FTSE 250 (MCX) 18,037.26 0.58%
techMARK (TASX) 3,540.29 0.58%

FTSE 100 - Risers

BHP Billiton (BLT) 1,099.50p 4.61%
Glencore (GLEN) 205.80p 4.41%
Anglo American (AAL) 922.50p 3.80%
Fresnillo (FRES) 1,777.00p 3.74%
Randgold Resources Ltd. (RRS) 7,965.00p 3.71%
Rio Tinto (RIO) 2,499.00p 3.65%
Antofagasta (ANTO) 514.00p 3.61%
Burberry Group (BRBY) 1,417.00p 3.58%
Polymetal International (POLY) 1,078.00p 3.06%
Mondi (MNDI) 1,651.00p 3.06%

FTSE 100 - Fallers

HSBC Holdings (HSBA) 579.80p -1.51%
Shire Plc (SHP) 5,202.00p -0.82%
Pearson (PSON) 777.00p -0.64%
Informa (INF) 728.00p -0.34%
Lloyds Banking Group (LLOY) 56.94p -0.28%
ITV (ITV) 194.50p -0.15%
Whitbread (WTB) 3,999.00p -0.10%
BAE Systems (BA.) 533.50p -0.00%
Hikma Pharmaceuticals (HIK) 2,114.00p 0.05%
SABMiller (SAB) 4,442.50p 0.11%

FTSE 250 - Risers

Amec Foster Wheeler (AMFW) 574.50p 4.45%
JRP Group (JRP) 125.20p 4.33%
McCarthy & Stone (MCS) 169.20p 4.25%
Investec (INVP) 482.00p 3.99%
Hunting (HTG) 455.00p 3.88%
Evraz (EVR) 160.60p 3.88%
Vedanta Resources (VED) 538.00p 3.86%
Hochschild Mining (HOC) 278.90p 3.68%
Kaz Minerals (KAZ) 216.20p 3.59%
Big Yellow Group (BYG) 771.00p 3.14%

FTSE 250 - Fallers

Drax Group (DRX) 301.80p -4.19%
Countrywide (CWD) 217.90p -3.71%
DFS Furniture (DFS) 257.40p -2.17%
John Laing Infrastructure Fund Ltd (JLIF) 130.10p -2.11%
International Public Partnerships Ltd. (INPP) 154.20p -2.03%
CMC Markets (CMCX) 222.00p -2.03%
Riverstone Energy Limited (RSE) 1,063.00p -1.94%
Ascential (ASCL) 268.50p -1.72%
Ladbrokes (LAD) 145.10p -1.63%
P2P Global Investments (P2P) 825.50p -1.55%