London close: Stocks rise as Bank of England raises GDP forecasts
By Renae Dyer
Date: Thursday 02 Feb 2017
(ShareCast News) - London stocks rose on Thursday after the Bank of England raised its economic growth forecasts and left interest rates unchanged.
The FTSE 100 closed up 0.47% to 7,140.75 points.
The pound fell 0.94% versus the dollar to $1.2540 and plunged 1.23% against the euro to €1.23% as Bank of England Governor Mark Carney warned that Brexit poses serious consequences to the economy, while the Inflation Report unexpectedly saw Bank trim its projections for consumer prices.
In the Bank's Quarterly Inflation Report the central bank upgraded its projections for gross domestic product but the figures still indicated an expected slowdown in coming years as the UK begins the formal process of exiting the EU.
The BoE said it now predicts gross domestic product rising 2.0% this year, compared to 1.4% at its November inflation report when it also raised forecasts. The Monetary Policy Committee also raised predictions for growth in 2018 and 2019 to 1.6% and 1.7% respectively, from 1.5% and 1.6% in November. GDP rose 2.0% in 2016, according to official data last week, down from 2.2% in 2015 and 3.1% in 2014.
The Bank anticipates inflation will average 2.7% this year, nudged down slightly from November's projection of 2.8%, while it still expects inflation to rise 2.6% in 2018. The Office for National Statistics revealed in January that inflation rose 1.6% in the year to December 2016.
The upgraded forecasts came as the Bank decided to maintain interest rates at 0.25%, the asset purchase programme at £435bn and corporate bond purchases at up to £10bn. The move was widely expected by economists. The minutes of the policy meeting, released alongside the announcement, showed policymakers voted 9-0 in favour of the decision.
At the same time, the government released its white paper on plans for Brexit. The paper reiterated what Prime Minister Theresa May previously said that Britain would no longer be a member of the European single market and would seek a new customs deal with the EU. However, it stated that European nationals already living in the UK would be protected.
"The UK faces skills and labour shortages so businesses will welcome the opportunity to help design a post-Brexit migration system which works for all sectors," said Carolyn Fairbairn, CBI's director general. "It is critical that business has access to the graduate and non-graduate workers our economy needs to thrive."
On the data front, UK construction sector growth slowed more than expected in January. The Markit construction purchasing managers' index (PMI) for January fell to 52.2 from 54.2 the previous month, worse than the 53.8 consensus estimate and the slowest rate of growth since last summer.
In the US, the Labor Department said initial jobless claims fell to 246,000 in the week ended 28 January from 260,000 the previous week, beating expectations of 250,000.
On the corporate front, Randgold Resources shares gained as gold prices advanced.
Food service company Compass Group was among the standout gainers after it reported growth in first quarter revenue as it maintained its outlook for 2017.
Consumer goods firm Reckitt Benckiser rallied as confirmed that it is in "advanced negotiations" to buy US baby food maker Mead Johnson for around $16.7bn, a move which could bolster its health products business.
Oil giant Royal Dutch Shell was on the front foot even as it reported a decline in full year profits, as investors were cheered by the company's underlying strength and its decision to maintain a dividend. The company said profits in the fourth quarter were hit by the legacy of its BG acquisition and the reassessment of its tax position.
Multinational sports betting and gaming group and owner of the 'Foxy Bingo' brand GVC Holdings shot up as it confirmed it has now repaid in full the outstanding loan of €386m provided by Cerberus Business Finance, through a combination of existing cash resources and the drawdown of the €250m loan from Nomura International.
On the downside, payments processor Worldpay slumped as Ship Global 2, a company jointly owned by funds managed by Advent International and Bain Capital, said it has sold 214m shares in the company at 282.75p each. Also on Thursday, Worldpay announced it has poached Santander's former head of global innovation Peter Jackson to head its UK business, starting on 1 March.
Private equity group 3i was also weaker as it said its portfolio generated an increased level of income in the third quarter and that it remains on track to deliver its target dividend of 7.55p per share.
Aberdeen Asset Management was in the red as Donald Trump's election win derailed a solid start to 2017 leading to £10.5bn of outflows from its emerging markets-focused funds as investors moved into less volatile assets.
Market Movers
FTSE 100 (UKX) 7,140.75 0.47%
FTSE 250 (MCX) 18,252.56 0.07%
techMARK (TASX) 3,253.10 0.21%
FTSE 100 - Risers
Smurfit Kappa Group (SKG) 2,162.00p 4.55%
Reckitt Benckiser Group (RB.) 7,109.00p 4.08%
Randgold Resources Ltd. (RRS) 6,815.00p 3.02%
Compass Group (CPG) 1,439.00p 3.01%
Paddy Power Betfair (PPB) 8,535.00p 2.46%
Bunzl (BNZL) 2,122.00p 2.12%
Hikma Pharmaceuticals (HIK) 1,912.00p 1.70%
Relx plc (REL) 1,438.00p 1.63%
Royal Dutch Shell 'B' (RDSB) 2,256.00p 1.48%
Sage Group (SGE) 621.50p 1.47%
FTSE 100 - Fallers
Worldpay Group (WPG) 279.80p -2.75%
Capita (CPI) 486.90p -2.42%
3i Group (III) 692.50p -2.19%
Johnson Matthey (JMAT) 3,240.00p -1.28%
Legal & General Group (LGEN) 232.80p -1.19%
Land Securities Group (LAND) 992.00p -1.00%
Morrison (Wm) Supermarkets (MRW) 237.50p -0.88%
Intu Properties (INTU) 266.70p -0.82%
Lloyds Banking Group (LLOY) 64.89p -0.81%
easyJet (EZJ) 935.00p -0.80%
FTSE 250 - Risers
GVC Holdings (GVC) 655.00p 6.33%
Centamin (DI) (CEY) 167.40p 4.43%
Acacia Mining (ACA) 436.50p 3.85%
Kaz Minerals (KAZ) 505.50p 3.59%
Rightmove (RMV) 4,162.00p 3.05%
Howden Joinery Group (HWDN) 391.50p 3.03%
Restaurant Group (RTN) 299.00p 2.61%
Hastings Group Holdings (HSTG) 225.60p 2.36%
SSP Group (SSPG) 406.60p 2.32%
NMC Health (NMC) 1,705.00p 2.28%
FTSE 250 - Fallers
Mitchells & Butlers (MAB) 257.40p -5.16%
TalkTalk Telecom Group (TALK) 162.20p -3.68%
Wizz Air Holdings (WIZZ) 1,561.00p -3.40%
Nostrum Oil & Gas (NOG) 460.00p -3.34%
Petra Diamonds Ltd.(DI) (PDL) 147.80p -3.27%
Aberdeen Asset Management (ADN) 249.70p -3.25%
OneSavings Bank (OSB) 340.00p -2.61%
Euromoney Institutional Investor (ERM) 1,081.00p -2.52%
Senior (SNR) 193.00p -2.38%
Cobham (COB) 132.00p -2.29%
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