London midday: Stocks remain sharply lower as BoE stands pat, as expected

London stocks were still firmly in the red just after midday on Thursday as the Bank of England stood pat on interest rates, having opened sharply lower as a hawkish outlook from the Federal Reserve hit sentiment.

The FTSE 100 was down 1.4% at 8,083.66, while sterling was 0.2% higher against the dollar at 1.2600.

The BoE left interest rates unchanged at 4.75%, as widely expected, with six members of the Monetary Policy Committee voting in favour of holding rates, while three opted to cut by 25 basis points.

The MPC has trimmed rates twice this year, each time by a quarter point, after record inflation eased significantly. However, it still remains above the BofE's long-term target of 2%, and rose for the second consecutive month in November, to 2.6%.

In particular, the MPC has long-flagged concerns about sticky service sector inflation, which stood at 5.0% last month.

Stocks had kicked the session off with heavy losses, taking their cue from a selloff on Wall Street, after the Fed cut interest rates by 25 basis points on Wednesday, as expected, but also signalled there would be just two rate cuts next year, down from a previous forecast of four.

Kathleen Brooks, research director at XTB, said: "The Federal Reserve may have cut rates on Wednesday, but the market thinks it could be a while before they cut again.

"The expectation was for a cut and then a pragmatic pause in the Fed’s rate cutting cycle, however, what the Fed delivered was a hawkish cut, which raises the possibility that the next move by the Fed may not be a rate cut."

The shift in expectations weighed heavily on markets in the US, where the Dow tumbled 2.6%, while the S&P 500 and the Nasdaq ended down 3% and 3.6%, respectively.

In equity markets, water companies were the top performers on the FTSE 100 after regulator Ofwat announced its final determination for the five-year period to 2030, saying that average bills would increase by 36% in England and Wales, the equivalent of around £31 per year.

The amount is higher than the 21% Ofwat initially proposed but below the water companies’ request for an average rise of 40%.

United Utilities gained after Ofwat allowed the company to increase bills by 32%, less than the 36% it requested. Severn Trent was also higher as the regulator said it could lift bills by 47%.

Pennon was also a high riser after South West Water was allowed to hike prices by 23%.

Russ Mould, investment director at AJ Bell, said: "The reputation of the water utility industry must be plumbing new depths usually reserved for lawyers and estate agents, and news of further price rises will have done nothing to burnish its standing with the general public.

"The market seems to be more favourable, judging by the increase in the share prices of Pennon, United Utilities and Severn Trent - even if the regulator hasn’t allowed price increases quite on the scale the sector was looking for.

"A 36% average increase through to 2030 is a lot better from the perspective of these companies and their shareholders than the 21% suggested by draft determinations issued in July.

"This news may not trigger a flood of new buyers for water company shares given a lot of the increase in bills will go towards investing in creaking infrastructure. After all, with bills going up but problems around sewage spills and water outages continuing at current levels, some will feel this doesn’t appear a sustainable state of affairs.

"The problem child in a family of delinquents remains Thames Water and the smaller than requested increase in bills it received is unlikely to be sufficient to resolve its financial problems."

Serco rallied as it said underlying operating profit rose 9% on the year to £270m in 2024 and upgraded its cash and net debt guidance. The outsourcer also said that its pipeline of new business opportunities was set to end the year at the highest level in more than a decade.

On the downside, Scottish Mortgage Investment Trust, Barclays, Entain and Ashtead - all of which have large exposure to the US - slumped.

British American Tobacco was weaker as it traded without entitlement to the dividend.

Market Movers

FTSE 100 (UKX) 8,083.66 -1.41%
FTSE 250 (MCX) 20,349.76 -1.22%
techMARK (TASX) 4,592.93 -1.31%

FTSE 100 - Risers

Severn Trent (SVT) 2,592.00p 1.65%
RELX FINANCE BV 3.375% GTD NTS 20/03/33 (BW73) 99.72p 1.10%
United Utilities Group (UU.) 1,070.00p 0.61%
BT Group (BT.A) 147.40p 0.17%
Imperial Brands (IMB) 2,561.00p 0.12%
Frasers Group (FRAS) 609.50p -0.08%
Centrica (CNA) 125.80p -0.36%
Hiscox Limited (DI) (HSX) 1,100.00p -0.36%
Shell (SHEL) 2,408.00p -0.45%
Reckitt Benckiser Group (RKT) 4,800.00p -0.48%

FTSE 100 - Fallers

Intermediate Capital Group (ICG) 2,046.00p -4.12%
Pershing Square Holdings Ltd NPV (PSH) 3,732.00p -3.76%
Experian (EXPN) 3,483.00p -3.49%
Barclays (BARC) 257.80p -3.46%
CRH (CDI) (CRH) 7,430.00p -3.31%
Informa (INF) 801.80p -3.16%
Antofagasta (ANTO) 1,589.00p -2.99%
Halma (HLMA) 2,726.00p -2.95%
Scottish Mortgage Inv Trust (SMT) 928.80p -2.95%
Mondi (MNDI) 1,155.50p -2.82%

FTSE 250 - Risers

Serco Group (SRP) 147.80p 6.56%
Pennon Group (PNN) 605.50p 3.42%
W.A.G Payment Solutions (WPS) 79.80p 2.31%
Mitchells & Butlers (MAB) 243.00p 1.25%
HICL Infrastructure (HICL) 114.60p 0.88%
Energean (ENOG) 978.50p 0.77%
SThree (STEM) 265.00p 0.76%
FirstGroup (FGP) 167.90p 0.72%
Foresight Group Holdings Limited NPV (FSG) 413.00p 0.49%
Lancashire Holdings Limited (LRE) 657.00p 0.46%

FTSE 250 - Fallers

Wizz Air Holdings (WIZZ) 1,420.00p -5.46%
Indivior (INDV) 901.00p -4.71%
Future (FUTR) 945.00p -4.64%
Allianz Technology Trust (ATT) 408.50p -3.88%
Baillie Gifford US Growth Trust (USA) 280.00p -3.61%
Carnival (CCL) 1,791.00p -3.61%
PZ Cussons (PZC) 81.40p -3.21%
Edinburgh Worldwide Inv Trust (EWI) 188.20p -3.09%
Kainos Group (KNOS) 772.00p -3.02%
Monks Inv Trust (MNKS) 1,248.00p -2.95%