London midday: Equities slide as BoE keeps interest rates unchanged

UK equities declined as the Bank of England voted 8-1 to keep interest rates unchanged.

The BoE left interest rates at 0.5% and the asset purchase programme at £375bn, as expected by analysts, amid a slowdown in emerging economies, low inflation and a strong pound.

The minutes of the central bank’s policy meeting showed Ian McCafferty was once again the only policymaker to vote in favour of a rate hike. He preferred to see rates rise 25 basis points.

HSBC analysts said potential hawks within the BoE will probably wait to see another month of economic data and the reaction to the Federal Reserve’s decision on policy next week before backing a rate increase.

Craig Erlam, senior market analyst at Oanda, said: “It was only last month that Governor Mark Carney shelved plans to consider raising rates at the turn of the year and instead suggested that the tightening cycle may now begin towards the end of 2016.

“While I believe the UK economy is in a position to withstand a rate hike and recent unemployment and wage data possibly even warrant it, I can understand why the central bank may be reluctant given the number of possible risks to the economy next year.”

In other UK news, the trade deficit widened to £4.1bn in October from £1.1bn the previous month, much more than the £1.8bn forecast. This was mainly due to an 8.2% month-to-month rise in the volume of goods imports, mainly finished manufactured goods, plus a 2.7% decline in the volumes of exports.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the rise in imports is likely to be reversed soon as importers stockpile goods. However, he was less confident of a rebound in exports, which have been much less volatile than imports, as surveys of export orders point to further declines ahead.

"With the real effective exchange rate nearly back to its pre-recession peak, net trade is likely to slow the economic recovery further over the coming quarters."

In the Eurozone, European Central Bank official Erkki Liikanen said the monetary authority was ready to use more measures if needed. His remarks at the Bank of Finland briefing in Helsinki come a week after the ECB decided to cut its deposit rate by 10 basis points and the extend the asset purchase programme until March 2017. Analysts had been expecting the ECB to increase monthly asset purchases to about €75bn but the central bank left it at €60bn.

Meanwhile, OPEC said crude production from its members rose to a three-year high in November and the Middle East oil cartel also raised its 2015 oil demand forecast. Crude output climbed 230,000 barrels per day (bpd) to 31.7m bpd in the last month.

Brent crude rose 0.2% to $40.21 per barrel and West Texas Intermediate fell 0.3% to $37.04 per barrel at 1151 GMT.

Company-wise, Sports Direct plunged after reporting flat revenue in the first half against tough comparators in the same period last year, which was boosted by the World Cup.

Whitbread declined after third quarter sales at its coffee chain Costa missed expectations.

Ocado was sitting lower after reporting a slowdown in its group sales for the 16 weeks to 29 November, citing a “challenging and competitive” grocery retail environment.

John Wood Group jumped after saying it expects to hit all of its targets for the full-year 2015, including a double-digit increase to its dividend.

Glencore advanced after saying it has increased its planned target of reducing debt and preserving capital to the tune of $13bn (£8.6bn).

Lloyds Banking Group gained after the bank said it has won an appeal to buy back high-interest bonds early.

Centrica rallied after saying full year earnings would in-line with forecasts in a pre-close statement at the end of what the British Gas owner admitted was a difficult year.

TUI AG was flying high after posting sizeable growth in its annual report despite a turbulent year for the industry.

Market Movers

FTSE 100 (UKX) 6,089.95 -0.60%
FTSE 250 (MCX) 17,068.39 -0.42%
techMARK (TASX) 3,168.14 -0.04%

FTSE 100 - Risers

Glencore (GLEN) 91.63p 10.29%
TUI AG Reg Shs (DI) (TUI) 1,166.00p 4.01%
Centrica (CNA) 211.10p 2.43%
InterContinental Hotels Group (IHG) 2,542.00p 2.13%
Lloyds Banking Group (LLOY) 71.65p 1.39%
easyJet (EZJ) 1,708.00p 1.36%
Pearson (PSON) 751.00p 1.01%
Royal Bank of Scotland Group (RBS) 291.60p 0.45%
British Land Company (BLND) 801.50p 0.31%
GlaxoSmithKline (GSK) 1,320.00p 0.30%

FTSE 100 - Fallers

Sports Direct International (SPD) 577.00p -13.30%
Old Mutual (OML) 176.10p -9.88%
3i Group (III) 473.10p -2.89%
Smiths Group (SMIN) 959.50p -2.74%
Next (NXT) 7,550.00p -2.33%
Dixons Carphone (DC.) 475.40p -2.22%
Prudential (PRU) 1,486.00p -2.11%
Associated British Foods (ABF) 3,444.00p -1.99%
Royal Dutch Shell 'B' (RDSB) 1,521.50p -1.93%
Marks & Spencer Group (MKS) 473.70p -1.82%

FTSE 250 - Risers

Micro Focus International (MCRO) 1,475.00p 10.82%
Wood Group (John) (WG.) 576.00p 4.25%
Telecom Plus (TEP) 1,100.00p 2.42%
Spectris (SXS) 1,726.00p 2.13%
Capital & Counties Properties (CAPC) 436.70p 1.87%
Essentra (ESNT) 859.00p 1.78%
Rank Group (RNK) 283.80p 1.76%
Just Retirement Group (JRG) 165.00p 1.54%
Lookers (LOOK) 173.40p 1.34%
Evraz (EVR) 74.10p 1.30%

FTSE 250 - Fallers

Investec (INVP) 483.00p -8.61%
Ocado Group (OCDO) 336.40p -6.35%
Acacia Mining (ACA) 179.10p -4.99%
Brown (N.) Group (BWNG) 328.30p -4.56%
Sophos Group (SOPH) 244.60p -3.85%
Provident Financial (PFG) 3,383.00p -3.26%
Tullow Oil (TLW) 171.70p -3.10%
PZ Cussons (PZC) 296.60p -3.01%
Stagecoach Group (SGC) 296.90p -2.56%
Lancashire Holdings Limited (LRE) 605.50p -2.34%