London midday: Stocks maintain gains, sterling falls back as BoE hikes rates
London stocks were off highs but still in the black by midday on Thursday after the Bank of England lifted interest rates by 25 basis points, as expected.
The FTSE 100 up 0.2% at 7,307.80, while sterling was flat against the dollar at 1.314,5, giving back some earlier gains, after the Monetary Policy Committee voted 8-1 to lift rates to 0.75%, with only deputy governor Jon Cunliffe voting against a hike.
This marked the third time the Bank has upped interest rates in four months as it looks to combat surging inflation and leaves rates at their highest level since the start of the pandemic in March 2020.
Inflation is currently at a 30-year high of 5.5%, versus the Bank’s target of 2%.
The BoE lifted its forecast for inflation. "Regarding inflation, the invasion of Ukraine by Russia has led to further large increases in energy and other commodity prices including food prices. It is also likely to exacerbate global supply chain disruptions, and has increased the uncertainty around the economic outlook significantly," it said.
"Global inflationary pressures will strengthen considerably further over coming months, while growth in economies that are net energy importers, including the United Kingdom, is likely to slow.
"Inflation is expected to increase further in coming months, to around 8% in 2022 Q2, and perhaps even higher later this year."
Victoria Scholar, head of investment at Interactive Investor, said: "At the previous meeting the MPC was divided over whether to carry out a 0.25% hike or go for a double 0.5% rate hike, narrowly favouring the former. However last month’s hawkish dissenters fell back into line at today’s meeting, after the war in Ukraine prompted a more cautious approach amid fears of an economic slowdown."
She noted that for flexible rate mortgage holders, the cost of borrowing is on the rise, making repayments more expensive.
"For savers, ordinarily this would mean a greater rate of return on cash deposited in the bank. However unfortunately with inflation at a 30-year high of 5.5%, savings are being wiped out by rising price levels with the real rate of return on savings in the bank still in decline," she said.
Overnight, the US Federal Reserve hiked rates by 25 basis points as expected, marking the first rate increase since 2018. The Fed also pencilled in a 25 basis points rate hike at each of the six remaining meetings this year.
More broadly, the Russia-Ukraine conflict remained in focus.
In equity markets, specialist lending and retail savings group OSB surged to the top of the FTSE 250 after it reported record full-year profits and announced a £100m share buyback.
Trainline gained after it said that ticket sales and revenues improved in 2022 as it recovered from the impact of the pandemic.
Landscaping products manufacturer Marshalls rose after saying it had delivered record sales and adjusted profitability in 2021, reflecting sustained heightened demand post Covid-19 lockdowns.
On the downside, NatWest, M&G, Anglo American, Hikma and Crest Nicholson were all on the back foot as they traded without entitlement to the dividend.
Online supermarket Ocado slid after it said retail revenue fell in the first quarter of 2022 and warned about uncertainty caused by the rising cost of living.
Cineworld was in the red despite saying it had narrowed full-year losses as Covid lockdowns eased globally and that it expected a strong return to trading in March after a hit from the Omicron strain of the virus at the start of 2022.
Market Movers
FTSE 100 (UKX) 7,307.80 0.22%
FTSE 250 (MCX) 20,893.02 -0.06%
techMARK (TASX) 4,283.22 -0.42%
FTSE 100 - Risers
Entain (ENT) 1,626.00p 2.85%
Smurfit Kappa Group (CDI) (SKG) 3,490.00p 2.47%
Scottish Mortgage Inv Trust (SMT) 980.00p 1.96%
Halma (HLMA) 2,464.00p 1.94%
Diageo (DGE) 3,662.00p 1.93%
Experian (EXPN) 3,000.00p 1.76%
St James's Place (STJ) 1,445.50p 1.72%
Rio Tinto (RIO) 5,504.00p 1.59%
BP (BP.) 365.95p 1.47%
Rightmove (RMV) 664.20p 1.40%
FTSE 100 - Fallers
Ocado Group (OCDO) 1,109.50p -7.81%
M&G (MNG) 214.70p -4.87%
NATWEST GROUP PLC ORD 100P (NWG) 213.60p -3.52%
Rolls-Royce Holdings (RR.) 91.79p -2.74%
Anglo American (AAL) 3,607.50p -2.64%
Associated British Foods (ABF) 1,733.50p -2.01%
Pearson (PSON) 809.60p -1.99%
Reckitt Benckiser Group (RKT) 5,673.00p -1.68%
International Consolidated Airlines Group SA (CDI) (IAG) 142.74p -1.68%
Ferguson (FERG) 10,865.00p -1.59%
FTSE 250 - Risers
OSB Group (OSB) 541.50p 13.86%
TBC Bank Group (TBCG) 1,072.00p 7.20%
Trainline (TRN) 211.00p 5.82%
Essentra (ESNT) 302.00p 5.78%
Auction Technology Group (ATG) 1,022.00p 4.61%
Marshalls (MSLH) 671.00p 4.27%
Fidelity China Special Situations (FCSS) 263.00p 3.75%
Harbour Energy (HBR) 410.40p 3.53%
Network International Holdings (NETW) 240.00p 3.45%
Centamin (DI) (CEY) 91.96p 3.35%
FTSE 250 - Fallers
Helios Towers (HTWS) 125.80p -6.95%
Wizz Air Holdings (WIZZ) 2,694.00p -6.30%
Syncona Limited NPV (SYNC) 176.20p -5.27%
TI Fluid Systems (TIFS) 177.20p -5.04%
Petropavlovsk (POG) 2.10p -4.55%
Marks & Spencer Group (MKS) 160.15p -4.07%
Crest Nicholson Holdings (CRST) 287.20p -3.95%
BlackRock World Mining Trust (BRWM) 702.00p -3.31%
Bodycote (BOY) 702.50p -3.30%
easyJet (EZJ) 534.80p -2.80%