London pre-open: Stocks set to recover from BoE-fuelled losses
London stocks were set to bounce back at the open after heavy losses in the previous session, when a more hawkish stance than expected from the Bank of England sent the pound higher.
The FTSE 100 was expected to open 15 points higher at 7,434.
Although the BoE stood pat on interest rates at 0.25%, as anticipated, the vote revealed a 5-3 split versus the previous and expected 7-1 split, catching investors off guard.
CMC Markets analyst Michael Hewson said: “With political uncertainty still rippling through UK markets and economic data coming in on the weak side, the Bank of England caught everyone on the hop yesterday despite its decision to keep interest rate policy unchanged. The consensus expectation was for an almost unanimous decision to keep rates unchanged, however in an unexpected development we got a significant split open up amongst policymakers about whether to hold or whether to hike rates.
“Three policymakers voted to raise rates, all of them external members, Michael Saunders, Ian McCafferty who joined Kristin Forbes in looking to raise rates. It is true that Kristin Forbes is leaving at the end of the month, which means that the dissenters should drop back to two at the next meeting, but that does tend to assume that any new candidate will vote with the status quo. That is by no means certain given that there does seem to be rising concern on the committee about the recent jump in inflationary pressure.”
There are no major UK data releases due.
In corporate news, in spite of tough conditions for the retail industry, Tesco romped off to a strong start to its new financial year, with the grocer delivering first quarter UK sales ahead of City expectations.
UK like-for-like food sales up 2.7% and UK total LFL sales up 2.3%, versus a consensus forecast of 1.9%, saw group LFL sales increase 1.0%.
Ken MacKenzie has been elected to succeed Jac Nasser as chairman of BHP Billiton with effect from 1 September following Nasser’s retirement.
The appointment follows a formal chairman succession process led by senior independent director, Shriti Vadera.
MacKenzie – who has extensive international business experience gained during his 23 years at global packaging company Amcor – joined the BHP board as a non-executive director in September 2016 and is a member of the Sustainability Committee.
Rolls-Royce issued a pre-close trading update, as it prepared to meet investors over the next fortnight at the Paris Airshow - and ahead of its half year results on 1 August - claiming it had started the year “well”, with all businesses performing in line with expectations.
The FTSE 100 company said that as a result, group expectations for first half revenue, profit and free cash flow remained unchanged from that provided at its annual general meeting in May.