London midday: FTSE maintains gains, sterling slumps as BoE lifts rates to 13-year high
By Michele Maatouk
Date: Thursday 05 May 2022
(Sharecast News) - London stocks were still firmly in the black by midday on Thursday, while sterling slumped, as the Bank of England hiked interest rates to the highest level in 13 years.
The FTSE 100 was up 1.2% at 7,579.29, while sterling was down 1.2% against the dollar at 1.2485, extending earlier losses after the Monetary Policy Committee lifted the key Bank Rate to 1% from 0.75%, in line with expectations, as it looks to tackle rising inflation.
Victoria Scholar, head of Investment at Interactive Investor, said: "The Bank of England has voted to raise rates by 25 basis points from 0.75% to 1%, its highest level since 2009 at the height of the financial crisis and the fourth rate rise in a row. It follows similar moves from the Reserve Bank of Australia and the Federal Reserve which also raised interest rates this week as global central banks attempt to reign in the post-pandemic re-birth of global inflation, a problem that has been largely dormant since the 1970s.
"The Monetary Policy committee voted 6-3 in favour of the hike, with more members dovishly dissenting this time by electing for no change to the bank rate. At the previous meeting in March, only Deputy Governor Jon Cunliffe voted to keep rates on hold, suggesting that the central bank is becoming increasingly concerned about tipping the UK economy into recession. The Governor Andrew Bailey himself said the bank is walking a 'narrow path' between growth and inflation as both macro indicators journey in the opposite and wrong directions."
Earlier, a survey showed that growth in the UK services sector slowed last month as cost pressures built.
The S&P Global CIPS UK Services PMI Business Activity Index was 58.9 in April, ahead of both consensus and the flash estimate of 58.3. It was, however, down on March's 62.6 and the softest rise in activity since January.
Respondents said they had benefited from the removal of Covid-19 restrictions and greater demand for international travel during the month. But strong inflationary pressures and the war in Ukraine limited the pace of expansion, with new business growth slowing sharply and business confidence slumping to a year-and-a-half low.
Input costs rose to the greatest extent since July 1996, with significant rises in energy, fuel and wages.
As result, the S&P Global CIPS UK Composite PMI Output Index - a weighted average of the comparable manufacturing and services PMI indices - eased to 58.2 from 60.9 a month earlier, a three-month low although it was also ahead of consensus expectations of 57.6.
In equity markets, Endeavour Mining surged as it reported a strong start to the year and said both production and all-in sustaining costs were well positioned to meet full-year guidance.
Paper and packaging group Mondi rose after reporting a strong first-quarter performance late on Wednesday and announcing plans to sell its Russian assets.
Shell gushed higher after it posted record first-quarter profits driven by surging oil and gas prices which have been inflated by the Ukraine war.
Biotech PureTech Health shot up as it announced a $50m share buyback programme, while Melrose advanced after a well-received trading statement.
Gambling software development company Playtech rallied as it said adjusted EBITDA for the first three months of the year topped €100m and pointed to some progress in takeover talks with investor group TTB.
Housebuilder Barratt Developments also gained after saying it was on track to meet its expectations as it highlighted strong demand.
On the downside, Hikma Pharmaceuticals tumbled after it cut guidance for its generics business, citing a delay to the launch of a narcolepsy treatment.
Virgin Money, Domino's and Hiscox all lost ground after updates.
Market Movers
FTSE 100 (UKX) 7,579.29 1.15%
FTSE 250 (MCX) 20,535.93 1.57%
techMARK (TASX) 4,408.65 0.74%
FTSE 100 - Risers
Endeavour Mining (EDV) 2,106.00p 8.50%
Mondi (MNDI) 1,582.50p 5.36%
Aveva Group (AVV) 2,287.00p 4.57%
Anglo American (AAL) 3,645.00p 3.92%
Fresnillo (FRES) 795.00p 3.70%
Scottish Mortgage Inv Trust (SMT) 913.60p 3.70%
Land Securities Group (LAND) 745.80p 3.35%
SEGRO (SGRO) 1,200.50p 3.27%
Shell (SHEL) 2,296.00p 3.19%
Dechra Pharmaceuticals (DPH) 3,468.00p 3.09%
FTSE 100 - Fallers
Hikma Pharmaceuticals (HIK) 1,709.00p -7.75%
Admiral Group (ADM) 2,393.00p -4.01%
BAE Systems (BA.) 749.00p -2.17%
ITV (ITV) 73.82p -1.44%
BT Group (BT.A) 182.35p -1.14%
Whitbread (WTB) 2,828.00p -0.42%
British American Tobacco (BATS) 3,314.50p -0.39%
Sainsbury (J) (SBRY) 233.10p -0.26%
Aviva (AV.) 433.70p -0.16%
HSBC Holdings (HSBA) 514.80p -0.12%
FTSE 250 - Risers
PureTech Health (PRTC) 186.20p 10.70%
Morgan Advanced Materials (MGAM) 298.50p 9.14%
Trainline (TRN) 302.00p 8.67%
Ferrexpo (FXPO) 171.30p 7.47%
XP Power Ltd. (DI) (XPP) 3,215.00p 5.93%
Helios Towers (HTWS) 115.70p 5.09%
Chrysalis Investments Limited NPV (CHRY) 153.80p 5.05%
LondonMetric Property (LMP) 252.60p 4.55%
IMI (IMI) 1,409.00p 4.45%
Oxford Biomedica (OXB) 543.00p 4.22%
FTSE 250 - Fallers
Virgin Money UK (VMUK) 165.95p -6.51%
Domino's Pizza Group (DOM) 320.40p -3.67%
Hiscox Limited (DI) (HSX) 922.20p -3.62%
Lancashire Holdings Limited (LRE) 414.00p -2.36%
QinetiQ Group (QQ.) 347.20p -2.31%
Polymetal International (POLY) 257.00p -1.49%
Fidelity Emerging Markets Limited Ptg NPV (FEML) 648.10p -1.20%
BH Macro Ltd. GBP Shares (BHMG) 4,230.00p -1.17%
TP Icap Group (TCAP) 127.10p -1.17%
OSB Group (OSB) 560.00p -0.88%
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