London midday: Stocks retreat from six-week high on earnings, BoE outlook

UK equities pulled back from a six-week high on Wednesday as a string of disappointing corporate earnings and a gloomier outlook by the Bank of England dampened sentiment.

News of a massive fine in the banking sector also caused blue-chip lenders to fall sharply on London's stock market.

The FTSE 100 was down 0.4% at 6,602 by midday, snapping a five-day winning streak that sent it to 6,627.4 by Tuesday's close - its highest finish since 29 September.

The focus of the morning's session was firmly on the Bank of England, as policymakers sounded a dovish tone by revising down their forecasts for growth and inflation in their quarterly Inflation Report.

The Monetary Policy Committee believes that consumer-price inflation will dip below 1% within the next six months and will not return to the 2% target until the end of 2017, easing the pressure for an early rise in interest rates. Economic growth in 2015 is also now forecast to be 2.9%, down from an earlier estimate of 3.1%, due to weakness in the Eurozone.

Economist Robert Wood from Berenberg said he expects the first hike in interest rates coming in June 2015, though he acknowledged that this is earlier than the BoE's new forecasts imply. "Central bankers have changed their views markedly over the past few months […] Low inflation means the BoE faces little pressure to raise rates now and is unlikely to face much pressure over the next six months," he said.

In economic data on Wednesday, the UK unemployment rate held steady at 6.0% in September, disappointing those looking for a drop to 5.9%. However, average weekly earnings in the three months to September rose at an annual rate of 1%, well ahead of expectations.

Analysts at Capital Economics said the labour-market figures "provided encouraging signs that the strength of the jobs recovery is finally starting to feed through to a sustained pick-up in real wages".

Capita, Sainsbury, SSE and banks provide a drag

Outsourcing group Capita dropped despite saying it remains on track to achieve at least 8% organic growth for 2014. However, the company did reveal that its finance director Gordon Hurst would be stepping down next year.

After an initial rise, shares in J Sainsbury sank firmly into the red after the supermarket group warned that its full-year profit and dividend would be lower than last year's. Like-for-like sales fell 2.1% in the first half, while underlying profit sank 6.3%.

SSE was also lower after reporting a 6.2% drop in pre-tax profit to £316.6m in its first half, though the utility group did lift its interim dividend by 2.3%.

The banking sector was lower after the Financial Conduct Authority issued its largest ever fine, slapping a £1.1bn penalty on five banks for rigging forex markets, though Barclays has yet to settle as the regulator continues its investigation. Barclays was the worst performer in the sector, with HSBC and RBS registering small losses.

Security firm G4S was higher after trading in the third quarter met expectations with organic revenue growth up 4.2% compared to a year ago.

Tullow Oil was also in demand after saying it is reviewing its costs in light of low international oil prices. It also reassured that its financial performance in the year to date was in line with expectations.

Market Movers
techMARK 2,829.14 -0.07%
FTSE 100 6,601.55 -0.39%
FTSE 250 15,600.10 -0.20%

FTSE 100 - Risers
G4S (GFS) 275.90p +4.31%
Tullow Oil (TLW) 490.40p +1.70%
Anglo American (AAL) 1,360.00p +1.34%
Antofagasta (ANTO) 718.50p +0.98%
SABMiller (SAB) 3,520.00p +0.93%
Rio Tinto (RIO) 3,010.50p +0.82%
Randgold Resources Ltd. (RRS) 4,153.00p +0.80%
Persimmon (PSN) 1,468.00p +0.55%
AstraZeneca (AZN) 4,680.50p +0.49%
Smiths Group (SMIN) 1,224.00p +0.41%

FTSE 100 - Fallers
Sainsbury (J) (SBRY) 254.10p -5.57%
Capita (CPI) 1,066.00p -4.91%
Aberdeen Asset Management (ADN) 427.60p -4.13%
Tesco (TSCO) 189.40p -2.85%
SSE (SSE) 1,537.00p -2.72%
Hargreaves Lansdown (HL.) 999.00p -2.06%
Barclays (BARC) 229.90p -2.00%
Centrica (CNA) 296.90p -1.92%
easyJet (EZJ) 1,558.00p -1.83%
Admiral Group (ADM) 1,203.00p -1.72%

FTSE 250 - Risers
Bwin.party Digital Entertainment (BPTY) 117.90p +9.37%
Senior (SNR) 278.90p +2.88%
Just Eat (JE.) 318.50p +2.74%
IP Group (IPO) 202.20p +2.64%
Fenner (FENR) 294.40p +2.61%
BTG (BTG) 774.00p +2.58%
Ladbrokes (LAD) 121.60p +2.53%
Essentra (ESNT) 731.50p +2.52%
Alent (ALNT) 344.70p +2.28%
Taylor Wimpey (TW.) 124.90p +2.21%

FTSE 250 - Fallers
SIG (SHI) 145.80p -7.43%
Playtech (PTEC) 620.50p -7.39%
NMC Health (NMC) 462.10p -5.69%
Ocado Group (OCDO) 302.70p -4.81%
Morgan Advanced Materials (MGAM) 287.10p -3.66%
Supergroup (SGP) 803.00p -2.84%
PayPoint (PAY) 934.50p -2.66%
RPS Group (RPS) 231.30p -1.87%
Aberforth Smaller Companies Trust (ASL) 1,070.00p -1.83%
Rightmove (RMV) 2,166.00p -1.81%