London midday: FTSE flat, sterling up as BoE confirms end of bond-buying programme

London stocks were flat by midday on Wednesday, while sterling shot up after the Bank of England reiterated that its emergency bond-buying programme will end on Friday as expected.

The FTSE 100 was steady at 6,887.46. At the same time, the pound was 1% higher against the dollar at 1.1077, and gilt yields rose.

Although governor Andrew Bailey had said on Tuesday that bond market support would end on Friday, and that pension funds had three days to shore up their portfolios against further shocks - sending sterling lower - a report by the Financial Times suggested the programme could be extended.

The FT said the BoE had indicated privately to bankers that it could extend the bond-buying programme past Friday’s deadline.

Amid the confusion, however, a spokesperson for the Bank said earlier: "As the Bank has made clear from the outset, its temporary and targeted purchases of gilts will end on 14 October.

"The governor confirmed this position yesterday, and it has been made absolutely clear in contact with the banks at senior levels. Beyond 14 October, a number of facilities, including the new TECRF, are in place to ease liquidity pressures on LDIs."

Investors were also digesting the latest data from the Office for National Statistics, which showed the economy unexpectedly contracted in August for the first time in two months, raising the risk of a recession.

GDP fell 0.3% following 0.1% growth in July, and versus expectations of flat reading. July’s growth was revised down from an initial estimate of 0.2%.

The data showed that the UK economy is now 0.5% above its pre-coronavirus level in the fourth quarter of 2019.

Manufacturing production fell 1.6%, while output in the services sector dipped 0.1% and is now 0.2% below pre-Covid levels.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "The nation appears to have officially leapt from stagnation to contraction once again, in the latest instalment of the monthly GDP rollercoaster, with economic activity ebbing and flowing erratically for the last nine months.

"This latest data set unfortunately gels with the IMF’s recent warning that 2023 will feel like a recession for many people, and that the worst of the global growth slowdown is yet to come. Investors are waiting for signs that the recession has arrived, and while on traditional metrics, the UK isn’t there yet, today’s announcement takes us one heavy step closer to that reality."

In equity markets, JD Sports Fashion was the worst performer on the FTSE 100 after it said chief financial officer Neil Greenhalgh plans to step down next year.

Barratt also suffered heavy losses as it said new home sales were falling as higher costs and fewer mortgages amid the cost-of-living crisis were deterring customers. "The outlook for the year is less certain with the availability and pricing of mortgages critical to the long-term health of the UK housing market," the housebuilder said.

Peers Taylor Wimpey, Persimmon and Berkeley also fell.

Banks were under pressure, with Lloyds, Barclays and NatWest all sharply lower.

Synthomer tumbled after the chemicals company said it had suspended dividend payments until the end of 2023, including the payment that is due this November.

Elsewhere, Tullow Oil gushed lower after a downgrade to ‘hold’ at Jefferies.

Market Movers

FTSE 100 (UKX) 6,887.46 0.03%
FTSE 250 (MCX) 16,794.02 -0.65%
techMARK (TASX) 4,108.04 0.07%

FTSE 100 - Risers

AstraZeneca (AZN) 10,044.00p 2.23%
Rentokil Initial (RTO) 484.00p 2.22%
Spirax-Sarco Engineering (SPX) 10,645.00p 1.82%
Bunzl (BNZL) 2,710.00p 1.73%
Pershing Square Holdings Ltd NPV (PSH) 2,680.00p 1.71%
Croda International (CRDA) 6,590.00p 1.14%
British American Tobacco (BATS) 3,314.00p 1.07%
Halma (HLMA) 2,118.00p 1.00%
Burberry Group (BRBY) 1,884.00p 0.99%
Ashtead Group (AHT) 4,199.00p 0.96%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 91.74p -7.76%
Barratt Developments (BDEV) 324.30p -5.45%
Persimmon (PSN) 1,156.50p -4.70%
Lloyds Banking Group (LLOY) 39.88p -3.90%
Barclays (BARC) 134.70p -3.90%
Airtel Africa (AAF) 122.50p -3.69%
B&M European Value Retail S.A. (DI) (BME) 302.40p -3.42%
NATWEST GROUP (NWG) 215.60p -2.71%
Berkeley Group Holdings (The) (BKG) 3,205.00p -2.67%
Frasers Group (FRAS) 620.00p -2.59%

FTSE 250 - Risers

Baltic Classifieds Group (BCG) 150.80p 6.20%
Vietnam Enterprise Investments (DI) (VEIL) 584.00p 3.73%
Ferrexpo (FXPO) 126.30p 3.61%
Carnival (CCL) 521.20p 2.44%
Capricorn Energy (CNE) 248.60p 2.39%
Molten Ventures (GROW) 256.20p 2.32%
Indivior (INDV) 1,439.00p 2.11%
Foresight Solar Fund Limited (FSFL) 106.00p 1.92%
3i Infrastructure (3IN) 298.00p 1.88%
FDM Group (Holdings) (FDM) 639.00p 1.59%

FTSE 250 - Fallers

Synthomer (SYNT) 84.00p -12.86%
ASOS (ASC) 506.50p -6.38%
Target Healthcare Reit Ltd (THRL) 78.35p -5.83%
Tullow Oil (TLW) 38.78p -5.64%
Helios Towers (HTWS) 98.00p -5.50%
Future (FUTR) 1,185.00p -5.12%
Crest Nicholson Holdings (CRST) 177.30p -3.75%
Wood Group (John) (WG.) 113.85p -3.72%
OSB Group (OSB) 392.60p -3.59%
Urban Logistics Reit (SHED) 123.00p -3.53%