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London stocks edged lower in early trade on Thursday as investors shifted their attention to the Bank of England, after the US Federal Reserve hiked rates as expected a day earlier.
At 0830 GMT, the FTSE 100 was down 0.3% to 7,019.28, while the pound was flat against the euro at 1.1459 and 0.2% firmer versus the dollar at 1.4168.
The Fed lifted rates by 25 basis points overnight, as widely expected, to a target range of 1.5% to 1.75% and signalled that rates would rise twice more this year and three times in 2019.
Spreadex analyst Connor Campbell said: “The fact that the central bank raised rates was arguably the least interesting thing to happen. No, focus instead lay both on the fact the Fed signalled two, not three, more hikes in 2018, and that Powell suggested American business chiefs were concerned about the current trade tensions.”
With the Fed announcement out of the way, market participants were focused on the policy decision from the Bank of England due at midday, along with the latest BoE minutes. Michael Hewson, chief market analyst at CMC Markets, said that while no change is expected, Wednesday’s wages and unemployment data have shifted the calculus on a possible move on UK rates to the May meeting, when we get the next inflation report.
“By then the gap between wages and headline inflation could well have narrowed further and would be an ideal window for the central bank to edge rates up by another 25 basis points,” Hewson said.
Also in focus will be UK retail sales figures at 0930 GMT.
On the corporate front, it was ‘no deal’ Thursday, as consumer goods giant Reckitt Benckiser said it had ended discussions with Pfizer about buying part of the US company’s consumer healthcare business. The consumer goods company said it did not want to buy the whole business and that it was not possible to buy part of the division. Shares rallied on the decision.
Meanwhile, infrastructure and support services business Stobart said it no longer plans to make a bid for regional airline Flybe after the companies failed to agree on “satisfactory” terms. Shares in Flybe tanked on the news.
No surprises from health and safety technology group Halma, though shares fell as the FTSE 100 newcomer said profits for the year to 31 March would be in line with current market forecasts as growth continued in the second half.
Ted Baker was in the red after it reported a 12% jump in full-year pre-tax profit as revenue grew but the retailer warned that “external” trading conditions will remain challenging. Meanwhile, Sanne retreated despite posting a 49% jump in full-year pre-tax profit.
IG Group rallied as it reported record third-quarter revenue, while Crest Nicholson traded higher as the housebuilder said trading conditions continue to be generally robust with good sales across its areas of operation and strong demand for homes.
The GKN/Melrose drama rumbled on as the engineer told its shareholders in a letter that it continues to view the turnaround specialist’s offer as “entirely opportunistic”. Chairman Mike Turner said in the letter that Melrose’s offer is “wholly inadequate in comparison to the value creation potential inherent” in the group’s planned strategy.
Ultra Electronics gained ground as the defence technology company appointed Simon Pryce, formerly group CEO at BBA Aviation, as its new chief executive.
Interserve shares were surging higher after announcing late the previous day that it had agreed almost £300m of further financing from its lenders.
Elsewhere, Workspace Group edged up after it was granted planning permission for a significant mixed-use redevelopment at its Chocolate Factory and Parma House properties in Wood Green, north London.
In broker note action, Esure was lifted to ‘neutral’ from ‘underweight’ by JPMorgan, while GlaxoSmithKlinewas upgraded to ‘equalweight’ from ‘underweight’ at Morgan Stanley.
Hastings got a boost to ‘overweight’ from ‘neutral’ at JPM, while Reckitt Benckiser was upgraded to ‘buy’ from ‘hold’ at SocGen.
Meanwhile, ex-dividend stocks were taking six points off the FTSE 100 and 21.5 points off the 250. Sky,British American Tobacco, Randgold Resources, Segro, Schroders, Meggitt, Centamin, GVC Holdings, Close Bros, Kier Group, OneSavings Bank, Stobart and Dunelm went ex-dividend.
