London midday: Stocks hold on to solid gains as BoE stands pat

Equity markets in London held on to solid gains at midday after the Bank of England stood pat on monetary policy, as expected.

The FTSE 100 was up 0.9% to 7,436.26, having earlier hit a record intraday high, while the pound was firmer, trading up 0.5% to $1.2339.

The Bank of England held interest rates at 0.25%, keeping its government bond purchases at £435bn and its corporate bond purchases at £10bn. The MPC voted 8-1 to keep interest rates at an all-time low. Kristen Forbes was the only member to back a rate hike and this was the first time since July 2016 that the vote to maintain rates was not unanimous.

Tom Stevenson, investment director for personal investing at Fidelity International, said: "Even with inflation expected to breach the central bank’s 2% target this year and unemployment at its lowest since the 1970s, the Bank is keen to keep rates low ahead of Article 50 and two years of uncertain Brexit negotiations. The danger this presents is the Bank getting behind the curve as price pressures increase. When it comes to inflation, you can’t put the toothpaste back in the tube.

“In this environment of lower for longer interest rates and rising inflation, it is even more important to find alternatives to the meagre returns currently offered by cash. With global economic growth picking up, shares offer investors a much more attractive potential combination of growth and income."

Stocks in London were mirroring gains in Europe, where relief set in as Dutch Prime Minister Mark Rutte won an election victory, fighting off far-right rival Geert Wilders.

Heavily-weighted miners provided much of the upside, boosted by earlier weakness in the dollar, which makes greenback-denominated commodities cheaper for holders of other currencies.

The dollar was hit by comments from the Federal Reserve, which took a more dovish stance than expected on Wednesday regarding the future path of rate hikes.

The US central bank lifted the funds rate to between 0.75% and 1.00%, as expected. However, it indicated that further rate rises would be “gradual” and officials stuck to their outlook for two more rate hikes this year and three the next. Many market participants had been expecting the Fed to sound a more hawkish note.

Shares in Anglo American surged on news that Volcan Investments, the family trust of the founder of India’s largest mining company, is investing £2bn in the miner.

Kaz Minerals rocketed after JP Morgan Cazenove bumped the stock up to ‘overweight’ from ‘neutral’. Randgold Resources and Acacia Mining were boosted by the same note, as JPM said they were its top picks in the precious metals sector. Precious metals stocks were also underpinned by a jump in gold prices on the back of the more dovish Fed statement.

International services company Serco Group advanced after announcing that it was named ‘preferred bidder’ to operate the New Grafton Correctional Centre (NGCC) in New South Wales, Australia.

On the downside, infrastructure group Balfour Beatty fell despite saying it has returned to the black, posting full year pre-tax profits of £8m from a loss of £199m.

Sainsbury’s also retreated after revealing that like-for-like retail revenue fell in the fourth quarter but total group sales rose thanks to a strong showing from Argos.

OneSavings Bank reversed earlier gains to trade lower after it hiked its dividend 21% as it reported a 29% increase in profit before tax as its loan book accelerated growth in the second half alongside an improvement in the net interest margin.

Merlin Entertainments was under the cosh after a downgrade by Berenberg, while Hikma Pharmaceuticals was hit by a downgrade from JP Morgan Cazenove.

Direct Line, Hammerson, British American Tobacco, Crest Nicholson, Essentra, Assura, Millennium and Copthorne and LondonMetric were all in the red as their stock went ex-dividend.

Market Movers

FTSE 100 (UKX) 7,436.26 0.92%
FTSE 250 (MCX) 19,053.53 0.47%
techMARK (TASX) 3,482.06 0.38%

FTSE 100 - Risers

Anglo American (AAL) 1,295.00p 8.41%
Fresnillo (FRES) 1,540.00p 5.99%
Antofagasta (ANTO) 848.50p 5.21%
BHP Billiton (BLT) 1,349.50p 5.06%
Glencore (GLEN) 340.95p 4.88%
Rio Tinto (RIO) 3,509.00p 4.86%
Randgold Resources Ltd. (RRS) 7,245.00p 4.09%
Mediclinic International (MDC) 770.00p 2.19%
Mondi (MNDI) 1,951.00p 2.04%
Royal Dutch Shell 'B' (RDSB) 2,234.00p 1.99%

FTSE 100 - Fallers

Hikma Pharmaceuticals (HIK) 2,182.00p -5.01%
Merlin Entertainments (MERL) 476.90p -3.91%
Direct Line Insurance Group (DLG) 333.50p -3.70%
Paddy Power Betfair (PPB) 8,750.00p -0.96%
Tesco (TSCO) 188.05p -0.71%
British American Tobacco (BATS) 5,150.00p -0.68%
Carnival (CCL) 4,495.00p -0.64%
Sainsbury (J) (SBRY) 269.70p -0.63%
Dixons Carphone (DC.) 301.90p -0.63%
Hammerson (HMSO) 572.50p -0.43%

FTSE 250 - Risers

Kaz Minerals (KAZ) 525.00p 9.12%
Vedanta Resources (VED) 907.00p 8.69%
Hochschild Mining (HOC) 290.00p 8.13%
Polymetal International (POLY) 1,000.00p 5.10%
Ferrexpo (FXPO) 166.30p 4.99%
Evraz (EVR) 215.00p 4.93%
Acacia Mining (ACA) 485.20p 4.34%
Centamin (DI) (CEY) 179.60p 4.24%
Tullow Oil (TLW) 242.40p 3.19%
Weir Group (WEIR) 1,921.00p 3.00%

FTSE 250 - Fallers

Riverstone Energy Limited (RSE) 1,288.00p -3.16%
Crest Nicholson Holdings (CRST) 545.00p -2.68%
Essentra (ESNT) 526.50p -2.50%
Millennium & Copthorne Hotels (MLC) 454.00p -2.11%
Balfour Beatty (BBY) 278.50p -1.90%
OneSavings Bank (OSB) 412.10p -1.72%
PayPoint (PAY) 967.00p -1.58%
BTG (BTG) 579.50p -1.53%
Rank Group (RNK) 209.30p -1.51%
JRP Group (JRP) 141.90p -1.46%