London open: Stocks gain as sterling hit by Bailey comments

London stocks rose in early trade on Thursday, benefiting from a weaker pound and rate cut hopes, but investors remained cautious overall amid the escalating conflict in the Middle East.

At 0830 BST, the FTSE 100 was up 0.3% at 8,313.45, while sterling was 0.8% lower against the dollar at 1.3169 after Bank of England governor Andrew Bailey told the Guardian that the central bank could become a "bit more aggressive" in cutting interest rates as long as news on inflation continued to be good.

A weaker sterling tends to lift the FTSE 100 index as around 70% of its constituents derive their earnings from abroad. Indeed, the UK index was outperforming its European peers, all of which were weaker, with the benchmark Stoxx 600 index down 0.3%.

Bailey told the Guardian he has been encouraged by the fact that cost of living pressures had not been as persistent as the BoE thought they might be. He said in an interview that if the news on inflation remained positive there was a chance the Bank could become "a bit more activist" in its rate-cutting approach.

Inflation currently stands at 2.2%, which is just above the BoE’s 2% target.

Kathleeen Brooks, research director at XTB, said: "The pound was already selling off before Bailey’s comments, and GBP/USD is down more than 1% so far this week, it is down from $1.34 at the start of this week to below $1.31 this morning.

"It has found decent support at $1.3170, however, this has been a bruising week for the pound, and $1.35 seems like a mountain to climb from here."

She said that part of the pound’s selloff is due to external factors.

"As geopolitical risks in the Middle East have risen, the US dollar has caught a bid. The currencies that were most extended versus the USD have sold off rapidly, as investors have sought the safety of the USD.

"Hence, the pound and the yen were in the sellers’ sights, as the markets scrambled to buy dollars. The pound is still the best performing currency in the G10 FX space so far this year, thus, if tensions escalate further, then we could see another leg lower for GBP/USD."

In equity markets, housebuilders were among the top performers, with Persimmon, Barratt, Taylor Wimpey and Vistry all up. The sector was boosted by rate cut hopes and data from Zoopla which showed that house sales rose in September at the fastest rate since the post-lockdown rebound.

Tesco gained as it lifted its annual profit guidance despite a slight slowdown in underlying sales growth in the second quarter.

Due to stronger-than-expected volumes in the first half, which the grocer put down to its ongoing investments in "value, quality and service", retail adjusted operating profit for the year ending 24 February was now expected to be £2.9bn, up from earlier guidance of at least £2.8bn and higher than last year’s £2.76bn.

Telecom Plus - which trades at Utility Warehouse - also advanced as it backed its full-year guidance and reported a rise in customer numbers.

SSP Group was in the red as it said it expected to deliver a large jump in full-year profits, despite weaker trading in Continental Europe, especially in France where demand during the Olympics was lower than anticipated.

The company, which operates food outlets at train stations and airports, said core profits for the year to September would come in at £350-360m, up from the £280m reported a year earlier and lower than planning assumptions of £375m at the top end.

British Land lost ground after saying it had raised £301m in an equity placing to help fund the acquisition of a portfolio of seven "high quality" retail parks.

Phoenix Group, Smith & Nephew, TBC Bank and Hargreaves Lansdown all fell as they traded without entitlement to the dividend.

Market Movers

FTSE 100 (UKX) 8,313.45 0.27%
FTSE 250 (MCX) 20,827.63 0.21%
techMARK (TASX) 4,848.39 -0.03%

FTSE 100 - Risers

Persimmon (PSN) 1,663.50p 2.43%
JD Sports Fashion (JD.) 143.35p 2.14%
Taylor Wimpey (TW.) 165.70p 1.59%
Barratt Developments (BDEV) 482.20p 1.58%
Tesco (TSCO) 360.40p 1.55%
Pershing Square Holdings Ltd NPV (PSH) 3,550.00p 1.49%
SSE (SSE) 1,901.00p 1.44%
Vistry Group (VTY) 1,303.00p 1.32%
Marks & Spencer Group (MKS) 372.90p 1.22%
HSBC Holdings (HSBA) 682.90p 1.02%

FTSE 100 - Fallers

Phoenix Group Holdings (PHNX) 526.00p -5.31%
Diploma (DPLM) 4,356.00p -1.76%
Smith (DS) (SMDS) 459.00p -1.54%
British Land Company (BLND) 432.00p -1.32%
Smurfit Westrock (DI) (SWR) 3,611.00p -1.23%
Prudential (PRU) 712.00p -1.17%
GSK (GSK) 1,480.00p -1.04%
British American Tobacco (BATS) 2,680.00p -1.00%
WPP (WPP) 770.00p -0.90%
Weir Group (WEIR) 2,138.00p -0.83%

FTSE 250 - Risers

AJ Bell (AJB) 458.00p 3.39%
4Imprint Group (FOUR) 5,070.00p 2.94%
Fidelity China Special Situations (FCSS) 239.50p 2.79%
RS Group (RS1) 819.50p 2.44%
Telecom Plus (TEP) 1,816.00p 2.37%
FirstGroup (FGP) 143.80p 2.28%
Hays (HAS) 92.20p 2.27%
Me Group International (MEGP) 198.20p 2.16%
PureTech Health (PRTC) 145.00p 1.83%
Ninety One (N91) 179.00p 1.70%

FTSE 250 - Fallers

Dr. Martens (DOCS) 53.00p -2.93%
Hargreaves Lansdown (HL.) 1,082.50p -2.65%
Mony Group (MONY) 206.20p -2.46%
TBC Bank Group (TBCG) 2,510.00p -2.33%
Aston Martin Lagonda Global Holdings (AML) 106.10p -2.21%
RHI Magnesita N.V. (DI) (RHIM) 3,275.00p -1.95%
Burberry Group (BRBY) 649.60p -1.81%
Close Brothers Group (CBG) 365.60p -1.67%
Helios Towers (HTWS) 107.20p -1.65%
Murray International Trust (MYI) 252.50p -1.37%