London midday: FTSE maintains small gains as BoE stands pat on rates, cuts growth forecasts

London stocks maintained small gains after the Bank of England voted 6-2 to keep interest rates on hold and cut its growth forecasts for this year and the next, while the pound dipped against the dollar and the euro.

At midday, the FTSE 100 was up 0.2% to 7,427.23, while the pound reversed course to trade down 0.3% against the dollar at 1.3183, having hit an 11-month high of 1.3267 earlier after the UK services PMI came in better than expected. Sterling fell 0.3% versus the euro to 1.1122.

Michael Saunders and Ian McCafferty voted to hike rates to 0.5%.

The BoE voted unanimously to keep its gilt and corporate bond programs unchanged and cut its forecasts for economic growth and wages, now projecting 1.7% growth this year and 1.6% in 2018, down from 1.9% and 1.7% previously. It also announced that it won't be extending the Term Funding Scheme, which was part of the Brexit stimulus package.

Dennis de Jong, managing director at UFX.com, said: "Sluggish economic growth and slowing inflation paints a bleak economic picture at present, and with historic lows in the savings rate, the case for maintaining the Bank’s current monetary policy is strong.

“In addition, uncertainty surrounding the UK’s future relationship with the EU remains rife. Turbulence caused by Brexit negotiations could weigh on growth over the coming months, leaving policymakers cautious over the possibility of any rate hikes."

A survey released earlier showed UK services activity continued to gently improve last month amid the fastest increase in average prices for three months. The Markit/CIPS services purchasing managers' index for July rose to 53.8 from 53.4 the prior month, slightly above the consensus forecast of 53.6.

This pointed to a sustained increase in business activity across the UK service sector, Markit said, though the rate of expansion remains relatively subdued.

The pace of job creation crawled up to its strongest level for a year-and-a-half and the future activity index picked up a bit from June’s six-and-a-half-year low.

Higher operating expenses, as input cost inflation was driven by rising food prices, energy bills and salary payments, the sector saw the fastest increase in average prices charged by service sector firms for three months.

In corporate news, clothing retailer Next surged as full price sales were up in the second quarter and the company confirmed a third special dividend of 45p and said £307m of surplus cash is expected this year, up from guidance of £255m in May.

London Stock Exchange was on the front foot as it posted a 19.5% rise in first-half profit and lifted its dividend by 20%, while Aviva gained as it lifted its dividend by 13% and reported a big increase in first-half profit.

Randgold Resources shone as it said both profit and production grew in the second quarter, while Serco rallied as it said first-half profit fell but kept its full-year guidance unchanged.

Aerospace and defence group Cobham surged as it said it swung to an operating profit in the first half, with the company’s underlying pre-tax profit of £69.5m and revenue of £1bn both ahead of expectations .

Going the other way, medical products and technologies company ConvaTec tanked after it posted a decline in first-half operating profit and earnings.

Paper and packaging company Mondi was in the red as it reported a fall in first-half profit, mainly due to a significantly lower forestry fair value gain in South Africa and the impact of mill maintenance shutdowns.

Halfords and Berendsen retreated as their stock went ex-dividend.

Market Movers

FTSE 100 (UKX) 7,427.23 0.21%
FTSE 250 (MCX) 19,883.86 0.21%
techMARK (TASX) 3,457.79 0.41%

FTSE 100 - Risers

Next (NXT) 4,379.00p 9.12%
Randgold Resources Ltd. (RRS) 7,225.00p 3.29%
Aviva (AV.) 549.50p 2.14%
Royal Bank of Scotland Group (RBS) 255.80p 1.95%
Lloyds Banking Group (LLOY) 66.80p 1.89%
Marks & Spencer Group (MKS) 330.30p 1.57%
Associated British Foods (ABF) 3,055.00p 1.46%
London Stock Exchange Group (LSE) 3,821.00p 1.38%
CRH (CRH) 2,658.00p 1.26%
AstraZeneca (AZN) 4,555.50p 1.23%

FTSE 100 - Fallers

Convatec Group (CTEC) 287.70p -6.89%
Micro Focus International (MCRO) 2,130.00p -2.29%
Standard Chartered (STAN) 785.70p -1.17%
Merlin Entertainments (MERL) 460.20p -1.16%
Mondi (MNDI) 1,980.00p -1.10%
Mediclinic International (MDC) 723.00p -1.03%
Babcock International Group (BAB) 853.00p -0.87%
HSBC Holdings (HSBA) 758.50p -0.80%
Croda International (CRDA) 3,713.00p -0.77%
Paddy Power Betfair (PPB) 7,815.00p -0.76%

FTSE 250 - Risers

Carillion (CLLN) 58.30p 8.57%
Cobham (COB) 141.60p 5.67%
Hill & Smith Holdings (HILS) 1,445.00p 3.81%
JD Sports Fashion (JD.) 374.50p 3.08%
Tullow Oil (TLW) 173.90p 2.84%
Serco Group (SRP) 116.10p 2.74%
Hastings Group Holdings (HSTG) 323.30p 2.63%
Indivior (INDV) 392.30p 2.35%
Smith (DS) (SMDS) 489.20p 1.81%
Barr (A.G.) (BAG) 619.50p 1.72%

FTSE 250 - Fallers

Inmarsat (ISAT) 759.00p -3.68%
Halfords Group (HFD) 331.70p -2.70%
Kier Group (KIE) 1,218.00p -2.33%
UDG Healthcare Public Limited Company (UDG) 821.50p -2.20%
Petra Diamonds Ltd.(DI) (PDL) 93.40p -1.99%
William Hill (WMH) 263.00p -1.87%
Hunting (HTG) 456.70p -1.78%
Wood Group (John) (WG.) 610.50p -1.61%
Dairy Crest Group (DCG) 587.00p -1.26%
Rank Group (RNK) 237.10p -1.21%