London open: Stocks rise after dovish Fed; BoE announcement eyed

London stocks rose in early trade on Thursday as a dovish tone from the Federal Reserve overnight spurred hopes of a rate cut, and as investors looked ahead to the latest policy announcement from the Bank of England.

At 0830 BST, the FTSE 100 was up 0.4% at 7,431.68, while the pound was trading up 0.5% against the dollar at 1.2704, as the greenback took a hit after the Fed's policy announcement on Wednesday. Against the euro, sterling was 0.1% lower at 1.1254.

Spreadex analyst Connor Campbell said: "The Federal Reserve will no longer be ‘patient’ in its approach to monetary policy, the disappearance of that word opening the door to a 2019 interest rate cut.

"Describing the US economy as rising at a ‘moderate’ rate versus the previously used ‘solid’, while bemoaning that inflation is ‘running below’ its 2% target, the central bank said that it will ‘act as appropriate’ to sustain growth in the face of ‘uncertainties and muted inflation pressures’.

"There were some FOMC members that wanted a cut right now, namely St Louis Fed President James Bullard, who voted to slash rates this month. Whether or not the central bank does go ahead and reduce rates in July - as is the expectation - may be partially dependent on what happens in Osaka next week, when Donald Trump and Xi Jinping meet at the month’s G20 meeting."

On home shores, an interest rate announcement is due from the BoE at midday. Before that, retail sales figures for May will be released at 0930 BST.

The BoE is widely expected to keep interest rates on hold, but could signal an increase later this year. Ipek Ozkardeskaya, senior market analyst at London Capital Group, said: "There is no clear consensus about what the BoE should do next. Both the hawkish and the dovish camps have valuable reasons to think that the UK rates should move up or down respectively.

"The hawks believe that the softer pound should continue pushing the consumer prices above the bank’s 2% target and that the BoE should tighten its policy to maintain the price stability. The doves, on the other hand, believe that the actual dovish shift across the G7 central banks combined with the Brexit uncertainties require an accommodative monetary policy for a longer period."

In equity markets, homewares group Dunelm rallied after saying it expects pre-tax profits for the year to 29 June 2019 to be ahead of expectations, driven by good weather and strong trading across its businesses. The company forecast pre-tax profits to be in the range of £124 - £126m compared with £102m in 2018.

On the downside, Dixons Carphone tumbled as it reported a slump in full-year profit and warned of further falls in the current trading year.

Richard Hunter, head of markets at Interactive Investor, said: "The mobile business in particular is on life support, draining capital and resources prior to its integration with the electricals business. The rapidly evolving nature of this segment has threatened to leave Dixons behind and thus, as a matter of urgency, the company has renegotiated its network contracts, although such benefits will take time to wash through. Elsewhere, tepid group revenue growth, lower free cash flow, higher net debt and a previously slashed dividend are far from being cause for celebration."

Evraz was under the cosh after the steel maker's chair and chief executive sold a 1.7% stake in the company.

Ex-dividends also weighed, with B&M European Value Retail, Big Yellow, Cineworld, Compass, ITE, Land Securities, Stobart, Tate & Lyle and United Utilities all in the frame.

In broker note action, Whitbread was cut to 'reduce' at Oddo, while Paragon was downgraded to 'underperform' at RBC Capital Markets and CYBG was lifted to 'outperform' at RBC.

Assura was lifted to 'overweight' at JPMorgan.

Market Movers

FTSE 100 (UKX) 7,432.68 0.39%
FTSE 250 (MCX) 19,330.57 0.44%
techMARK (TASX) 3,646.95 0.40%

FTSE 100 - Risers

Fresnillo (FRES) 862.60p 4.79%
Just Eat (JE.) 634.40p 3.22%
Ashtead Group (AHT) 2,139.00p 1.81%
Melrose Industries (MRO) 177.80p 1.80%
Spirax-Sarco Engineering (SPX) 8,970.00p 1.64%
BHP Group (BHP) 1,955.40p 1.62%
easyJet (EZJ) 881.60p 1.59%
DCC (DCC) 7,096.00p 1.57%
Johnson Matthey (JMAT) 3,170.00p 1.41%
BP (BP.) 549.20p 1.40%

FTSE 100 - Fallers

Evraz (EVR) 647.60p -4.17%
United Utilities Group (UU.) 786.40p -4.10%
Berkeley Group Holdings (The) (BKG) 3,508.00p -1.24%
Reckitt Benckiser Group (RB.) 6,424.00p -1.20%
Whitbread (WTB) 4,571.00p -1.17%
Compass Group (CPG) 1,878.50p -1.03%
Land Securities Group (LAND) 830.00p -0.79%
Royal Bank of Scotland Group (RBS) 220.80p -0.76%
Barclays (BARC) 152.12p -0.72%
BT Group (BT.A) 205.40p -0.63%

FTSE 250 - Risers

Kier Group (KIE) 129.43p 5.48%
Saga (SAGA) 34.64p 4.78%
Hochschild Mining (HOC) 183.59p 4.55%
Premier Oil (PMO) 76.24p 4.35%
Dunelm Group (DNLM) 942.68p 4.28%
Centamin (DI) (CEY) 109.31p 4.01%
Tullow Oil (TLW) 210.40p 3.44%
Cairn Energy (CNE) 161.50p 3.00%
Kaz Minerals (KAZ) 588.00p 2.98%
Hunting (HTG) 536.50p 2.98%

FTSE 250 - Fallers

Dixons Carphone (DC.) 105.00p -15.70%
Cineworld Group (CINE) 266.70p -5.09%
Paragon Banking Group (PAG) 429.80p -4.23%
Tate & Lyle (TATE) 730.40p -2.61%
NewRiver REIT (NRR) 186.93p -2.23%
Stobart Group Ltd. (STOB) 106.04p -1.81%
TalkTalk Telecom Group (TALK) 110.30p -1.52%
Big Yellow Group (BYG) 1,008.00p -1.47%
Contour Global (GLO) 185.80p -1.17%
Games Workshop Group (GAW) 4,803.50p -1.16%