London midday: Stocks gain as investors weigh BoJ policy, eye Fed

The BoJ kept its negative interest rate of -0.1% and its quantitative easing programme at 80trn yen a year but said it would aim to keep yields on 10-year government bonds at around current levels of 0%.

Japan’s 10-year sovereign bond yields rose four basis points to 0.027% following the announcement, the first positive reading since March. The Japanese yen rose 0.25% against the dollar.

“As expected, the BoJ has offered an interesting policy update for markets to digest and is a good effort at dispelling uncertainty about global central banks losing potency and running out of ammo,” said Mike van Dulken and Henry Croft at Accendo Markets.

The attention now turns to the Federal Reserve, which announces its policy decision at 1900 BST. With analysts expecting no change to interest rates, the focus will instead be on the tone of the policy statement for any hints on future measures.

“…the FOMC’s accompanying statement will certainly be the main talking point, as investors will be alert to any hint regarding the future of the Fed’s monetary policy,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group.

“The main question is whether or not the Fed could hike the interest rates by at least once before the end of the year. The odds for a December Fed rate hike advanced to 58%.”

On this side of the pond, a Bank of England survey showed economic growth in Britain has slowed in the three months since the UK voted to leave the European Union on 23 June. The report added that business investment and employment are likely to be flat over the coming year.

Meanwhile, UK public sector borrowing fell less than expected in August, official data showed. The Office for National Statistics said public sector borrowing, excluding public sector banks, dropped by £0.9bn to £10.5bn in August compared to the same month a year ago. Analysts had pencilled in £10.2bn.

Elsewhere, oil prices climbed after data showed a surprise drop in US crude inventories. The American Petroleum Institute revealed a 7.5 million barrel fall in US crude inventories to 507.2 million barrels last week, compared to an estimated increase of 2.8 million barrels.

The Energy Information Agency releases its US weekly crude inventories report at 1530 BST.

Brent crude increased 1.9% to $46.79 per barrel and West Texas Intermediate edged up 2.08% to $44.99 per barrel at 1151 BST.

On the company front, banking shares led the charge on the BoJ’s news. “By setting a yield curve target and shying away from cutting interest rates, the Bank of Japan is trying to engineer a profitable environment for banks. Bank shares are rallying on hope that it works,” said Jasper Lawler, market analyst at CMC Markets.

Majestic Wine shares tumbled after the company said it expects 2017 profits to be below current market expectations due to lower-than-expected sales in its commercial business and investment in the US division of Naked Wines.

Ocado Group was on the back foot after Deutsche Bank downgraded its rating to ‘sell’ from ‘hold’ and reiterated a target price of 220p, citing the supermarket’s cautious outlook on margins in a trading update issued last week.

Anglo American rallied after Barclays upgraded the stock to ‘equalweight’ from ‘underweight’ and lifted the price target to 845p from 550p on strong valuation support and solid earnings momentum.

Kaz Minerals was also lifted by Barclays raising its rating to 'equalweight’ from ‘underweight’ and increasing the target price to 210p from 130p.

Diageo shares climbed after the producer of Smirnoff, Guinness and Baileys said it is set to deliver a “stronger” performance for the 2017 financial year

Market Movers

FTSE 100 (UKX) 6,857.37 0.39%
FTSE 250 (MCX) 18,010.21 0.61%
techMARK (TASX) 3,538.66 0.15%

FTSE 100 - Risers

Barclays (BARC) 172.55p 3.66%
Persimmon (PSN) 1,814.00p 2.72%
Legal & General Group (LGEN) 220.40p 2.65%
Aviva (AV.) 448.30p 2.49%
Standard Life (SL.) 356.60p 2.41%
Kingfisher (KGF) 377.20p 2.28%
Sainsbury (J) (SBRY) 249.80p 2.17%
Lloyds Banking Group (LLOY) 57.64p 2.13%
Anglo American (AAL) 875.50p 2.09%
Barratt Developments (BDEV) 488.10p 1.96%

FTSE 100 - Fallers

Imperial Brands (IMB) 3,929.50p -1.93%
Burberry Group (BRBY) 1,360.00p -1.38%
Relx plc (REL) 1,449.00p -1.29%
BAE Systems (BA.) 538.50p -1.10%
InterContinental Hotels Group (IHG) 3,244.00p -1.10%
Merlin Entertainments (MERL) 475.60p -0.92%
Reckitt Benckiser Group (RB.) 7,184.00p -0.91%
National Grid (NG.) 1,063.00p -0.89%
Ashtead Group (AHT) 1,206.00p -0.82%
Unilever (ULVR) 3,552.50p -0.74%

FTSE 250 - Risers

AO World (AO.) 165.00p 4.76%
Hunting (HTG) 436.10p 4.38%
Evraz (EVR) 154.40p 4.18%
CLS Holdings (CLI) 1,628.00p 4.03%
RPC Group (RPC) 944.00p 3.85%
Virgin Money Holdings (UK) (VM.) 309.00p 3.34%
Kaz Minerals (KAZ) 208.00p 3.23%
Paragon Group Of Companies (PAG) 324.60p 3.11%
Ibstock (IBST) 165.50p 3.05%
BGEO Group (BGEO) 3,049.00p 2.83%

FTSE 250 - Fallers

DFS Furniture (DFS) 255.60p -2.81%
Mitie Group (MTO) 188.50p -2.33%
Ocado Group (OCDO) 263.20p -2.08%
Hochschild Mining (HOC) 254.30p -1.97%
Rank Group (RNK) 209.30p -1.74%
UDG Healthcare Public Limited Company (UDG) 616.50p -1.60%
Caledonia Investments (CLDN) 2,483.00p -1.47%
Safestore Holdings (SAFE) 376.00p -1.42%
CYBG (CYBG) 253.40p -1.32%
Brown (N.) Group (BWNG) 187.70p -1.21%