LONDON (ShareCast) - (Sharecast News) - London stocks ended higher on Thursday, as investors digested the Bank of England's decision to leave interest rates unchanged, following the US Federal Reserve's move to cut rates.
The FTSE 100 index rose 0.21% to close at 9,228.11 points, while the FTSE 250 gained 0.49% to finish at 21,725.95.

In currency markets, sterling was last down 0.55% on the dollar to trade at $1.3551, as it slipped 0.27% against the euro, changing hands at €1.1504.

"Markets are responding to the US central bank rate decision, which saw the Federal Open Market Committee implement a widely anticipated 25 basis point rate cut on Wednesday, with only new governor Stephen Miran opposing it, advocating for a larger 50 basis point cut," said Patrick Munnelly, market strategy partner at TickMill.

BoE stands pat on rates as consumer sentiment deteriorates

At the top of the economic agenda was the Bank of England, which left interest rates unchanged at 4% as policymakers balanced stubborn inflation with signs of economic weakness.

The Monetary Policy Committee voted seven-to-two to hold borrowing costs, with Swati Dhingra and Alan Taylor favouring a 25 basis point cut.

The Bank had lowered rates three times this year, most recently in August, but said policy was "not on a pre-set path" and that a "gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate".

It also voted seven-to-two to slow the pace of quantitative tightening, cutting its planned gilt sales this year from £100bn to £70bn to ease upward pressure on bond yields.

Munnelly noted that "the UK labour market and inflation data released this week have closely aligned with expectations, leaving minimal room for new guidance on the timing of future rate cuts.

"As a result, attention shifts to the annual gilt QT pace announcement."

The Bank noted GDP grew just 0.2% in the three months to July and said it expected headline growth of about 0.4% in the third quarter.

Inflation remained elevated at 3.8%, though it had eased substantially from its peak.

"The committee remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to 2%," the MPC said.

Steve Clayton at Hargreaves Lansdown said a further cut this year was unlikely as "services prices remain far above the overall 2% target," while ING argued that "there is very little in the latest BoE decision that's likely to rock the boat," adding it still expects "two to three further cuts to come," albeit on a slower path.

Russ Mould, investment director at AJ Bell, said: "While the rate cut machine has whirred back into action for the US, it's expected to remain idle in the UK for a bit longer.

"Sticky inflation at elevated levels is a problem, meaning the Bank might feel it is prudent to continue that fight via keeping rates at relatively high levels, rather than loosening monetary policy like the Fed."

The decision followed the US Federal Reserve's move to cut rates by 25 basis points, its first reduction this year, as it flagged a softening labour market as a greater concern than potential tariff-driven price rises.

In data, consumer sentiment in the UK continued to deteriorate, according to the British Retail Consortium.

Its survey showed 52% of respondents expected the economy to worsen over the next three months, up from 49% in August, pushing the net balance to -36% from -32% and marking the weakest reading in four months.

BRC chief executive Helen Dickinson said "worries about the Budget, combined with the increase in the cost of living, have eroded confidence, with little sign that inflation will come down soon".

Across the Atlantic, US labour market data offered a modestly brighter signal, with initial jobless claims dropping by 33,000 to 231,000 last week, reversing the prior week's surge to the highest level since 2021.

Continuing claims fell by 7,000 to 1.92 million, while the insured unemployment rate held steady at 1.3%.

On the continent, eurozone construction output rebounded by 0.5% in July after two months of declines, with annual growth accelerating to 3.2% from 1.8% in June, Eurostat reported.

In Norway, Norges Bank cut its policy rate by 25 basis points to 4% but signalled a much slower easing trajectory.

Governor Ida Wolden Bache said a "cautious easing of monetary policy will pave the way for returning inflation to target without restraining the economy more than needed," adding the Bank now sees scope for only one cut per year over the next three years.

ING's Francesco Pesole said the guidance implied "the bar for further rate cuts is higher," though he still expects a follow-up move in early 2026.

Next slumps despite sales surge, ex-dividend stocks prove a drag

On London's equity markets, Next slumped 3.54% as investors looked past a surge in first-half sales and earnings to focus on its cautious outlook for the second half.

"Retailer Next has a reputation for straight talking, so its stark take of the prospects for the UK economy will carry weight," said Mould.

"A gloomy assessment allows for some expectation management about Next's future sales, with growth forecast to slow significantly in the second half of its financial year.

"It is worth remembering that the company has got under-promising and over-delivering down to a fine art - a key component of being a successful public company."

The high street retailer reported strong international sales, helped by sunny weather and disruption at Marks & Spencer, but warned that trading conditions could become tougher.

Mould added that "while its share price fell on the latest update, Next may not mind a little heat coming out of the stock too much given it had been trading close to recent all-time highs.

"The group is clearly looking to give itself an easier bar to clear in the coming months by leaving full-year guidance unchanged despite the first-half beat."

Elsewhere, Pets at Home Group plunged 15.5% after announcing the immediate departure of chief executive Lyssa McGowan and cutting its full-year profit guidance.

C&C Group also came under pressure, falling 4.58% as it said chief financial officer Andrew Andrea would leave to join Domino's Pizza and reiterated its full-year earnings guidance despite what it called a "challenging" macroeconomic backdrop.

Associated British Foods dipped 1.55% after the Competition and Markets Authority said it was seeking feedback on its planned acquisition of Hovis.

Dividend-related moves weighed on several stocks, with Centrica down 1.36%, Energean off 2.66%, IG Group Holdings down 1.78%, Foresight Group Holdings 1.18% lower, JPMorgan European Growth & Income slipping 0.1%, and Patria Private Equity Trust down 0.18% as they traded without entitlement to their latest payouts.

On the upside, Jupiter Fund Management jumped 12% after Peel Hunt upgraded the shares to 'buy' from 'add' and raised its price target to 156p from 90p.

Renishaw rose 10.02% after reporting record full-year revenues and higher adjusted profits despite macroeconomic headwinds and restructuring costs.

Inchcape added 3.09% as UBS began coverage of the stock with a 'buy' rating and a 920p price target, citing 40% upside potential.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 9,228.11 0.21%
FTSE 250 (MCX) 21,725.95 0.49%
techMARK (TASX) 5,412.14 0.52%

FTSE 100 - Risers

Croda International (CRDA) 2,701.00p 4.69%
Halma (HLMA) 3,362.00p 3.36%
ICG (ICG) 2,298.00p 3.09%
Scottish Mortgage Inv Trust (SMT) 1,141.00p 2.65%
Relx plc (REL) 3,540.00p 2.61%
Experian (EXPN) 3,858.00p 2.14%
3i Group (III) 3,908.00p 2.01%
Informa (INF) 929.40p 1.99%
Prudential (PRU) 1,036.00p 1.86%
Spirax Group (SPX) 7,075.00p 1.80%

FTSE 100 - Fallers

Next (NXT) 11,575.00p -3.54%
WPP (WPP) 381.40p -2.44%
Vodafone Group (VOD) 84.64p -1.70%
Associated British Foods (ABF) 1,977.00p -1.55%
Tesco (TSCO) 433.30p -1.46%
Centrica (CNA) 166.90p -1.36%
AstraZeneca (AZN) 11,248.00p -1.30%
Compass Group (CPG) 2,508.00p -1.26%
Sainsbury (J) (SBRY) 318.60p -1.24%
Diageo (DGE) 1,815.50p -1.14%

FTSE 250 - Risers

Jupiter Fund Management (JUP) 142.00p 12.00%
Renishaw (RSW) 3,515.00p 10.02%
Auction Technology Group (ATG) 346.00p 6.10%
Kier Group (KIE) 210.00p 4.87%
Spire Healthcare Group (SPI) 216.50p 4.09%
Raspberry PI Holdings (RPI) 408.60p 3.71%
Senior (SNR) 197.80p 3.56%
AO World (AO.) 99.20p 3.55%
Polar Capital Technology Trust (PCT) 435.50p 3.44%
Inchcape (INCH) 683.00p 3.09%

FTSE 250 - Fallers

Pets at Home Group (PETS) 194.00p -15.50%
C&C Group (CDI) (CCR) 150.80p -4.58%
Endeavour Mining (EDV) 2,760.00p -3.93%
Hochschild Mining (HOC) 299.20p -3.77%
Watches of Switzerland Group (WOSG) 351.20p -3.76%
Energean (ENOG) 838.50p -2.66%
Mitie Group (MTO) 139.60p -2.36%
W.A.G Payment Solutions (EWG) 101.00p -1.96%
SDCL Efficiency Income Trust (SEIT) 55.30p -1.95%
Telecom Plus (TEP) 1,830.00p -1.81%

Email this article to a friend

or share it with one of these popular networks:

• DIGG
• FACEBOOK
• STUMBLEUPON
• MIXX
• YAHOO BUZZ
• DELICIOUS
• REDDIT
• NEWSVINE