London close: Pound's fall after Bank stands pat boosts FTSE

By the close, the FTSE 100 had put on 0.85% to 7,474.77 as the pound reversed course to trade down 0.6% against the dollar at 1.3144, having hit an 11-month high of 1.3267 earlier after a better-than-expected reading on UK services. Sterling fell 0.8% versus the euro to 1.1066.

The BoE voted 6-2 to keep rates on hold, with dissenters Michael Saunders and Ian McCafferty voting to hike rates to 0.5% - even as Bank cut its forecasts for economic growth and wages - and their fellow hawk Kristin Forbes having left the committee earlier in the summer.

There was a unanimous vote to keep the size of the gilt and corporate bond programs unchanged.

UK gross domestic product is now projected to grow 1.7% this year and 1.6% in 2018, down from 1.9% and 1.7% as previously predicted. The MPC also announced that it won't be extending the Term Funding Scheme, which was part of the Brexit stimulus package.

"The Bank of England might be gloomier about the outlook for the economy, but that gloominess has been transmuted into sterling weakness, and from there into FTSE strength, with the index being the standout winner this afternoon," said Chris Beauchamp, chief market analyst at IG.

"The steady rally in cable had proved a major hindrance to the FTSE 100 since it hit an all-time high back at the beginning of June, but the index has finally got the breathing space it needed to rally."

A survey released earlier showed UK services activity continued to gently improve last month amid the fastest increase in average prices for three months. The Markit/CIPS services purchasing managers' index for July rose to 53.8 from 53.4 in the prior month, slightly above the consensus forecast of 53.6.

This pointed to a sustained increase in business activity across the UK service sector, the survey compiler said, though the rate of expansion remains relatively subdued.

The pace of job creation crawled up to its strongest level for a year-and-a-half and the future activity index picked up a bit from June’s six-and-a-half-year low.

Operating expenses increased, with input cost inflation driven higher by rising food prices, energy bills and salary payments, although the sector also saw the fastest increase in three months in average prices charged by firms.

In corporate news, clothing retailer Next surged as full price sales were up in the second quarter and the company confirmed a third special dividend of 45p and said £307m of surplus cash is expected this year, up from guidance of £255m in May.

IG's Beauchamp noted that the retail bellwether's silver-linings update helped boost shares of its peers as well.

"When combined with the recent weakening in inflation, the effect has been to suggest that UK consumers could have a more enjoyable second half."

London Stock Exchange was on the front foot as it posted a 19.5% rise in first-half profit and lifted its dividend by 20%, while Aviva gained as it lifted its dividend by 13% and reported a big increase in first-half profit.

Randgold Resources shone as it said both profit and production grew in the second quarter, while Serco rallied as it said first-half profit fell but kept its full-year guidance unchanged.

Aerospace and defence group Cobham surged as it said it swung to an operating profit in the first half, with the company’s underlying pre-tax profit of £69.5m and revenue of £1bn both ahead of expectations.

Insurer esure rose on the back of written premiums surging 22.8% in the first half to £393.3m, with in-force policies rising 8.8% to 2.26m.

Going the other way, medical products and technologies company ConvaTec tanked after it posted a decline in first-half operating profit and earnings.

Shire, which put out results in the early afternoon, initially spiked higher before falling into the red on what seemed a strong set of second-quarter results, with product sales up 7% and full year earnings guidance increased. Thanks to strength in hematology and immunology, product sales of $3.59bn were up 55% or 7% on a combined pro forma basis, leading to revenue of $3.75bn - ahead of a consensus forecast of $3.71bn.

Paper and packaging company Mondi was in the red as it reported a fall in first-half profit, mainly due to a significantly lower forestry fair value gain in South Africa and the impact of mill maintenance shutdowns.

Halfords and Berendsen retreated as their stock went ex-dividend.

Market Movers

FTSE 100 (UKX) 7,474.77 0.85%
FTSE 250 (MCX) 19,908.24 0.34%
techMARK (TASX) 3,459.30 0.46%

FTSE 100 - Risers

Next (NXT) 4,401.00p 9.67%
Randgold Resources Ltd. (RRS) 7,235.00p 3.43%
Imperial Brands (IMB) 3,305.50p 3.14%
British American Tobacco (BATS) 5,004.00p 3.09%
London Stock Exchange Group (LSE) 3,880.00p 2.95%
Rio Tinto (RIO) 3,486.50p 2.45%
Anglo American (AAL) 1,254.50p 2.20%
Royal Bank of Scotland Group (RBS) 256.20p 2.11%
Burberry Group (BRBY) 1,768.00p 2.08%
Associated British Foods (ABF) 3,072.00p 2.03%

FTSE 100 - Fallers

Convatec Group (CTEC) 289.30p -6.38%
Mondi (MNDI) 1,948.00p -2.70%
Micro Focus International (MCRO) 2,122.00p -2.66%
Shire Plc (SHP) 4,118.00p -1.95%
Smurfit Kappa Group (SKG) 2,217.00p -1.90%
Babcock International Group (BAB) 851.00p -1.10%
Croda International (CRDA) 3,707.00p -0.94%
Provident Financial (PFG) 2,093.00p -0.90%
RSA Insurance Group (RSA) 648.50p -0.84%
Merlin Entertainments (MERL) 462.80p -0.60%

FTSE 250 - Risers

Cobham (COB) 145.30p 8.43%
Carillion (CLLN) 57.40p 6.89%
Tullow Oil (TLW) 180.00p 6.45%
Just Group (JUST) 147.40p 3.08%
Hastings Group Holdings (HSTG) 324.60p 3.05%
Barr (A.G.) (BAG) 625.50p 2.96%
Redefine International (RDI) 39.12p 2.79%
JD Sports Fashion (JD.) 373.30p 2.75%
Ferrexpo (FXPO) 245.90p 2.63%
BGEO Group (BGEO) 3,572.00p 2.38%

FTSE 250 - Fallers

esure Group (ESUR) 282.40p -4.27%
Inmarsat (ISAT) 759.00p -3.68%
Halfords Group (HFD) 329.70p -3.29%
Dignity (DTY) 2,492.00p -2.81%
FDM Group (Holdings) (FDM) 940.00p -2.66%
Petra Diamonds Ltd.(DI) (PDL) 92.80p -2.62%
UDG Healthcare Public Limited Company (UDG) 820.00p -2.38%
Coats Group (COA) 78.55p -2.06%
Nostrum Oil & Gas (NOG) 389.20p -1.96%
William Hill (WMH) 263.00p -1.87%