London midday: Stocks steady but pound slips as BoE stands pat

London stocks were steady but the pound lost ground just after midday as the Bank of England left interest rates and its asset purchase programme on hold, as widely expected.

The FTSE 100 was flat at 7,386.39, but the pound slipped 0.4% versus the dollar to 1.2881, having been down a more modest 0.1% ahead of the announcement.

The BoE held interest rates at 0.25%, with the monetary policy committee vote count unchanged at 7 to 1, while the asset purchase programme was left at £435bn and the corporate bond purchase programme at £10bn. Kristin Forbes again voted in favour of an immediate hike in interest rates.

The Bank also said on Thursday that the UK may need tighter policy than the yield curve implies and lifted its 2017 consumer price inflation forecast to 2.7% from 2.4%, but cut its 2019 forecast to 2.2%.

Capital Economics said: "The Bank of England’s May Inflation Report lends some support to our view that interest rates are set to rise sooner than markets expect. Admittedly, no other members joined Kristin Forbes in voting to raise interest rates - some had speculated on the basis of a recent speech that Michael Saunders might also vote for a hike. And the MPC also revised its GDP growth forecast for this year down slightly, from 2% to 1.9%, while its inflation forecasts were largely unchanged. This perhaps explains why the pound fell after the release of the Inflation Report and minutes."

Meanwhile, industrial and manufacturing production figures were also in focus. Industrial output declined 0.5% on the month following a 0.8% drop the month before, falling short of expectations for a smaller 0.3% slip but ahead of the 0.7% drop estimated in the preliminary release of first-quarter gross domestic product. On the year, production rose 1.4%, missing expectations for a 2.1% gain.

Manufacturing production activity shrank 0.60% on the previous month when a flat month had been forecast after the 0.3% fall in February. Manufacturing grew 2.3% in March compared to the same month last year, short of the 2.1% consensus estimate and down from the February's 2.5%.

The ONS also revealed that construction output was down 0.7% month-on-month, which was below the 0.3% drop estimated in its initial first-quarter GDP estimate.

Other figures from the ONS revealed that construction output fell in March, making the third consecutive period of negative month-on-month growth, weighed by repair and maintenance. For the first quarter, however, construction output rose 0.2%, in line with the estimate included in the preliminary gross domestic product data for January to March.

Investors were also digesting the latest survey from the Royal Institution of Chartered Surveyors, which showed the housing market was stagnant in April, with national near-term sales expectations pointing to a flat picture over the summer.

Heavily-weighted miners put in a strong performance, with silver and copper prices on the rise. Fresnillo, Antofagasta, Randgold, Anglo American, Rio Tinto and BHP Billiton were all among the top gainers.

In corporate news, BT Group was in the red as it posted a big drop in annual profits, as expected, an announced it was stepping up its cost cutting programme by axeing 4,000 jobs, while also revealing it was trimming executive pay after a challenging year.

Hikma Pharmaceuticals and Vectura tumbled after saying US regulators have decided not to approve their generic copy of GlaxoSmithKline's lung drug Advair due to "major" issues with its application.

Paper and packing group Mondi was under pressure after it said first-quarter underlying operating profit fell 6% to €252m, while SuperGroup retreated despite reporting a rise in full-year sales and revenues thanks to the weaker pound.

Hill & Smith fell despite saying that trading from 1 January to the end of April was in line with its expectations, with revenue up 7% on an organic basis, while insurer Beazley lost ground as it reported a 2% drop in gross premium written in the three months to the end of March.

Challenger bank Aldermore was lower after it said first-quarter lending grew 6% compared to the previous quarter.

Centrica, Sainsbury's, Admiral, Merlin, BP, Carillion, Saga, Ibstock and Aberdeen Asset Management were all weaker as their stock went ex-dividend.

On the upside, interdealer broker TP ICAP advanced as it posted a rise in revenue for the first four months of the year.

Market Movers

FTSE 100 (UKX) 7,386.39 0.02%
FTSE 250 (MCX) 19,826.17 -0.25%
techMARK (TASX) 3,547.57 -0.22%

FTSE 100 - Risers

Fresnillo (FRES) 1,491.00p 4.19%
Antofagasta (ANTO) 785.50p 3.29%
Standard Chartered (STAN) 751.90p 2.38%
Randgold Resources Ltd. (RRS) 7,025.00p 1.81%
Burberry Group (BRBY) 1,650.00p 1.54%
Anglo American (AAL) 1,057.00p 1.49%
Rio Tinto (RIO) 3,016.50p 1.29%
Royal Dutch Shell 'B' (RDSB) 2,194.00p 1.18%
Royal Dutch Shell 'A' (RDSA) 2,136.00p 1.11%
BHP Billiton (BLT) 1,176.00p 1.03%

FTSE 100 - Fallers

Centrica (CNA) 190.30p -6.35%
Hikma Pharmaceuticals (HIK) 1,840.00p -5.93%
Admiral Group (ADM) 2,034.00p -3.42%
BT Group (BT.A) 301.80p -3.24%
Sainsbury (J) (SBRY) 263.00p -3.20%
Mondi (MNDI) 1,977.00p -2.80%
ITV (ITV) 191.40p -2.45%
Merlin Entertainments (MERL) 499.00p -1.48%
Next (NXT) 4,337.00p -1.45%
Barclays (BARC) 206.90p -1.45%

FTSE 250 - Risers

Hochschild Mining (HOC) 262.60p 4.08%
Renishaw (RSW) 3,611.00p 3.41%
Sanne Group (SNN) 655.50p 3.39%
Acacia Mining (ACA) 408.30p 2.82%
Polymetal International (POLY) 1,022.00p 2.66%
Tritax Big Box Reit (BBOX) 146.10p 2.60%
Ferrexpo (FXPO) 167.70p 2.57%
B&M European Value Retail S.A. (DI) (BME) 352.50p 2.41%
Wood Group (John) (WG.) 789.50p 2.40%
Amec Foster Wheeler (AMFW) 564.50p 2.26%

FTSE 250 - Fallers

Vectura Group (VEC) 131.80p -9.04%
Carillion (CLLN) 209.60p -5.42%
Hill & Smith Holdings (HILS) 1,313.00p -5.34%
Pets at Home Group (PETS) 169.70p -4.66%
Supergroup (SGP) 1,579.00p -4.36%
Aberdeen Asset Management (ADN) 289.90p -3.17%
Saga (SAGA) 206.70p -2.96%
Fidessa Group (FDSA) 2,455.00p -2.66%
Beazley (BEZ) 448.30p -2.54%
Dixons Carphone (DC.) 326.50p -2.36%