London close: Stocks positive, sterling takes a beating after BoE decision

The FTSE 100 ended the day up 0.43% at 7,279.91, and the FTSE 250 was 1.53% firmer at 23,471.11.

Sterling, meanwhile, was in the red, last trading down 1.39% on the dollar at $1.3497, and weakening 0.78% against the euro to €1.1693.

“The pound has been hit hard today, after the Bank of England opted against the hotly anticipated first rate hike since 2017,” said IG senior market analyst Joshua Mahony.

“While market expectations for a hike had come in from the lofty 82% seen almost three-weeks ago, the fact that markets had been pricing in a 62% chance of a rate rise today has resulted in a sharp move lower for the pound.”

Mahony said expectations for future rate movements had also shifted in turn, with markets now expecting a first hike in February.

“Looking to the medium-term, predictions that we will see rates at 1.10% by June 2022 have been reigned in, with the BoE now expected to stabilise interest rates at 0.85% in August.”

At lunchtime, the Bank of England’s Monetary Policy Committee stood pat on policy, keeping its interest rate at 0.1%, with fewer of its members calling for an interest rate hike than had been expected.

According to governor Andrew Bailey, inflation was set to peak at 5.0% in April next year and to fall "materially" from the second half, although he did say that some “modest tightening of policy” was likely to be necessary.

Seven out of nine members of the MPC voted in favour of keeping Bank Rate at 0,1%, with the remaining two voting for a hike.

Economists at Barclays Research had anticipated that four MPC members would back calls for an interest rate hike.

Similarly, only six members voted in favour of the Bank continuing with its Gilt purchases, which was down from seven the last time around, with the target for those purchases unchanged at £875bn, whereas all nine had been expected to back no change in purchases.

All nine MPC members did, however, vote to maintain the stock of investment grade corporate bond purchases at £20bn.

On the economic front, growth picked up in the UK construction industry in October, but uncertainties over supplies and prices held up new contracts.

The IHS Markit/CIPS UK construction purchasing managers' index (PMI) rose to 54.6 from 52.6 a month earlier.

A reading of 50 marks the difference between growth and contraction.

Housebuilding replaced commercial construction as the best-performing category with a score of 55.4 - the strongest reading for three months.

Commercial work also picked up with respondents reporting a boost from looser pandemic restrictions, while civil engineering showed a modest increase.

“The volatile price and supply environment added to business uncertainty and continued to impede contract negotiations,” said IHS Markit director Tim Moore.

“There were widespread reports that shortages of materials and staff had disrupted work on site, while rising fuel and energy prices added to pressure on costs.

“Nonetheless, the worst phase of the supply crunch may have passed.”

Retail footfall picked up last month, meanwhile, boosted by the October half term holiday.

According to retail consultancy Springboard, footfall in the four weeks to 30 October was down 13.4% on the same month in 2019, a marked improvement on September’s 17.4% year-on-two year decline.

Within that, footfall on high streets declined 15% against 2019, by 20% in shopping centres and 3.1% in retail parks.

Diane Wehrle, marketing and insights director at Springboard, called the October data "hugely encouraging and in line with Springboard’s forecast for the fourth quarter".

Private new car registrations were lower on the year in October, however, as both supply constraints and demand held back the market.

A total of 58,405 new cars were registered in the UK in October, according to the Society of Motor Manufacturers and Traders (SMMT), down from the 60,422 registered a year ago and the 60,100 new cars recorded in October 2019, pre-pandemic.

Total registrations, including business and fleet sales, totalled 106,265, which was also below the year-ago and two-years-ago numbers, which were 140,945 and 143,300, respectively.

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said new car registrations had been “extremely weak” compared to their pre-Covid level over the past few months, largely due to ongoing supply chain issues.

“The picture remained gloomy in October—private registrations were 17.9% below their average October level in the five years prior to Covid - though there was a decent improvement from September when sales were a whopping 38.6% below,” she said.

Across the pond, the number of Americans filing for unemployment benefits fell more than expected last week, according to figures released on Thursday by the Labor Department.

Jobless claims declined by 14,000 to 269,000 in the week ended 30 October, hitting their lowest level since 14 March 2020.

Analysts had been expecting a figure of 275,000, while the previous week’s level was revised up from 281,000 to 283,000.

In equity markets, BT Group rallied 11.01% after it reported a fall in interim profits due to higher finance costs and partially offset by a rise in adjusted core earnings, but reaffirmed its outlook for 2022 and resumed dividend payments.

JD Sports Fashion also gained, rising 3.74% even after the Competition and Markets Authority ordered it to sell Footasylum after an in-depth investigation identified competition concerns.

Electrical retailer Currys jumped 8.84% after it announced a £75m share buyback as group organic sales jumped 15% from pre-pandemic 2019 levels on the back of continued demand for products such as laptops and video games during lockdowns.

Tate & Lyle was 4.93% sweeter after it reported a rise in first-half profit and revenue following a particularly strong performance in the food & beverage solutions business.

TI Fluid Systems reversed earlier losses to close up 0.93%, after it posted a drop in third-quarter revenues amid chip shortages and supply chain issues.

Smith & Nephew advanced 2.55% even after it warned annual results would be at the low end of its guidance after Covid-19 and product shortages affected its orthopaedics business in the third quarter.

Venture capital outfit Draper Esprit gained 6.33% after saying it expected its half-year gross portfolio value to be at least £1.3bn, compared with £702m a year ago.

On the downside, J Sainsbury fell 2.46% despite sticking to its full-year guidance and reporting a 23% increase in first-half profit, boosted by higher grocery sales and cost cuts.

Aveva was knocked 0.48% lower by a rating downgrade at Barclays, while Unilever and Ashmore Group were in the red by 0.22% and 2.98%, respectively, as they traded without entitlement to the dividend.

Banks NatWest, Lloyds and Barclays were under the cosh, falling 5.6%, 4.46% and 4.02%, after the Bank of England kicked the interest rate can down the road.

Susannah Streeter, senior market analyst at Hargreaves Lansdown, said banks had been holding out for some relief from the record low rates, which had eaten into their lending margins.

Hikma lost 1.3% even after it reiterated full-year guidance as the company reported solid trading across its business.

Market Movers

FTSE 100 (UKX) 7,279.91 0.43%
FTSE 250 (MCX) 23,471.11 1.53%
techMARK (TASX) 4,640.27 1.33%

FTSE 100 - Risers

BT Group (BT.A) 157.80p 11.01%
JD Sports Fashion (JD.) 1,123.50p 3.74%
Sage Group (SGE) 739.60p 3.67%
British Land Company (BLND) 509.60p 3.26%
Vodafone Group (VOD) 110.16p 3.01%
SEGRO (SGRO) 1,346.50p 2.96%
Spirax-Sarco Engineering (SPX) 16,485.00p 2.71%
Coca-Cola HBC AG (CDI) (CCH) 2,583.00p 2.66%
Experian (EXPN) 3,480.00p 2.65%
Pershing Square Holdings Ltd NPV (PSH) 3,000.00p 2.56%

FTSE 100 - Fallers

Hargreaves Lansdown (HL.) 1,494.00p -7.23%
NATWEST GROUP PLC ORD 100P (NWG) 212.50p -5.60%
Lloyds Banking Group (LLOY) 48.32p -4.46%
Barclays (BARC) 191.50p -4.02%
Pearson (PSON) 587.60p -3.29%
Standard Chartered (STAN) 447.40p -3.06%
HSBC Holdings (HSBA) 433.50p -2.47%
Sainsbury (J) (SBRY) 282.00p -2.46%
Schroders (SDR) 3,633.00p -1.81%
Flutter Entertainment (CDI) (FLTR) 12,625.00p -1.79%

FTSE 250 - Risers

Currys (CURY) 133.00p 8.84%
IMI (IMI) 1,772.00p 8.78%
Draper Esprit (GROW) 1,042.00p 6.33%
Electrocomponents (ECM) 1,207.00p 6.06%
Big Yellow Group (BYG) 1,534.00p 5.36%
Herald Investment Trust (HRI) 2,520.00p 5.22%
Coats Group (COA) 67.50p 5.14%
NCC Group (NCC) 243.00p 4.97%
Tate & Lyle (TATE) 681.00p 4.93%
Baltic Classifieds Group (BCG) 218.00p 4.81%

FTSE 250 - Fallers

Virgin Money UK (VMUK) 177.85p -9.12%
Ashmore Group (ASHM) 322.40p -6.39%
Contour Global (GLO) 192.20p -3.90%
Diversified Energy Company (DEC) 106.00p -3.11%
Ferrexpo (FXPO) 286.40p -2.26%
Wizz Air Holdings (WIZZ) 4,720.00p -2.01%
PZ Cussons (PZC) 207.50p -1.90%
Rank Group (RNK) 157.80p -1.38%
OSB Group (OSB) 492.60p -1.36%
Capita (CPI) 45.12p -1.33%