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London close: Stocks edge up as BoE stays put and Fed cuts

By Alexander Bueso

Date: Thursday 19 Sep 2019

London close: Stocks edge up as BoE stays put and Fed cuts

(Sharecast News) - London stocks made small gains on Thursday as the Bank of England stood pat on interest rates and the US Federal Reserve cut them further.
The FTSE 100 was up 0.6% at 7,356.42, having turned higher earlier in the session after a marginally weaker open. The pound was also up by 0.1% against the US dollar at 1.2482 and 0.1% lower versus the euro at 1.1302 as the BoE voted unanimously to leave interest rates at 0.75%, as expected, and the size of its asset-purchase programme at £435bn.

In its statement, the BoE said the UK would avoid a recession in 2019 but warned over the impact of slowing growth and Brexit-related uncertainty.

"For most of the period following the EU referendum, the degree of slack in the UK economy has been falling and global growth has been relatively strong," it said.

"Recently, however, entrenched Brexit uncertainties and slower global growth have led to the re-emergence of a margin of excess supply. Increased uncertainty about the nature of EU withdrawal means that the economy could follow a wide range of paths over coming years. The appropriate response of monetary policy will depend on the balance of the effects of Brexit on demand, supply and the sterling exchange rate."

David Cheetham, chief market analyst at XTB, said: "The bank appears to have broadly maintained its prior stance, offering little by the way of any dovish signs despite the recent softness in data.

"All in all this latest message is very much in keeping with what was expected and as such the market reaction has been minimal. Governor Carney and his fellow MPC continue to toe a fairly hawkish line with suggestions that they would be considering higher rates were it not for political uncertainty but we don't expect any significant moves on the policy front while Brexit continues to loom large on decision makers' minds."

Overnight, the Federal Reserve cut interest rates by 25 basis points, as expected, but suggested that further rate cuts weren't on the cards.

Investors were also digesting the latest retail sales data from the Office for National Statistics, which showed an unexpected drop in August as online sales slumped.

Retail sales fell 0.2% following a revised 0.4% increase in July, missing expectations for a flat reading. Non-store retailing, i.e. online sales, were the biggest drag, down 3.2%. On the year, sales were up 2.7%, below the 2.9% rise expected and down from July's increase of 3.4%.

Rhian Murphy, head of retail sales at the ONS, said: "Retail sales grew moderately in the three months to August with online sales still providing the biggest driver, despite falling back in the latest month.

"Shoppers spent less on both food and clothing while department stores resumed their downward trend after a brief rally in July."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said there was no cause for alarm.

"The modest fall in the retail sales volumes in August doesn't change the overall picture of solid momentum in households' spending. The drop primarily reflects mean-reversion in non-store sales, following a big boost in July triggered by Amazon's Prime Day," he said.

Looking ahead, Tombs said the recent deterioration in leading indicators of employment and wage growth has cast doubt over whether consumers can maintain strong growth in the spending next year.

"Households, however, likely will benefit from another big increase in the personal allowance for income tax and the National Living Wage in April, though these changes will be confirmed in the autumn Budget."

In equity markets, British Gas owner Centrica was a high riser after an upgrade to 'buy' at Jefferies.

Shares of online trading platform IG Group surged as it reported flat first-quarter revenues, said it performed well and backed its expectations for a return to revenue growth in FY20.

Shore Capital said steady revenues are "a good outcome given the same period last year included two months of trading before ESMA's leverage restrictions were applied".

On the downside, Next retreated even as the fashion chain said interim profits rose 2.7% as strong online sales offset a fall in retail and the company maintained its outlook for the full year. Neil Wilson, chief market analyst at Markets.com, attributed the drop in the share price to profit taking.

"Highly cash generative still, but there has been no upgrade from the July update so a touch of profit taking going one feels. Shares fell by 4% as investors were perhaps looking for a bit more of a positive outlook, however well they know Lord Wolfson.

"The stock is starting to test the 2018 highs around £62 and the market maybe needs a little bit extra to get it over the line and today didn't deliver that."

Drinks company Diageo edged down after saying it had started the year well but warning that it was not immune to shifting global trade conditions.

Footwear and sports apparel retailer JD Sports Fashion lost ground after the Competition and Markets Authority said it could refer the proposed acquisition of rival Footasylum for a phase 2 investigation as it may hurt competition on the high street.

There were no ex-dividend stocks on the FTSE 100, but on the 250, Drax, Bakkavor, BCA Marketplace, Crest Nicholson, Dunelm, Equiniti, Petrofac, International Public Partnerships, Playtech, Rank, Redrow, Sanne, Sophos and Unite were all in the frame, knocking 19 points off overall.

Market Movers

FTSE 100 (UKX) 7,356.42 0.58%
FTSE 250 (MCX) 20,089.46 0.17%
techMARK (TASX) 3,890.14 0.95%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 466.90p 3.76%
Vodafone Group (VOD) 160.40p 2.69%
AstraZeneca (AZN) 7,127.00p 2.59%
Direct Line Insurance Group (DLG) 305.40p 2.28%
Standard Life Aberdeen (SLA) 275.20p 2.19%
Lloyds Banking Group (LLOY) 54.06p 2.02%
Croda International (CRDA) 4,886.00p 2.00%
BT Group (BT.A) 177.32p 2.00%
Hargreaves Lansdown (HL.) 2,045.00p 1.84%
Experian (EXPN) 2,535.00p 1.77%

FTSE 100 - Fallers

Next (NXT) 5,820.00p -5.67%
Ocado Group (OCDO) 1,295.00p -3.65%
JD Sports Fashion (JD.) 692.00p -2.86%
Fresnillo (FRES) 716.60p -2.74%
Evraz (EVR) 490.70p -2.45%
Just Eat (JE.) 667.00p -2.00%
Anglo American (AAL) 1,883.40p -1.52%
Marks & Spencer Group (MKS) 198.85p -1.51%
Auto Trader Group (AUTO) 518.00p -1.18%
Associated British Foods (ABF) 2,286.00p -1.17%

FTSE 250 - Risers

IG Group Holdings (IGG) 638.00p 10.27%
Sanne Group (SNN) 593.00p 5.52%
Plus500 Ltd (DI) (PLUS) 766.20p 4.96%
Aston Martin Lagonda Global Holdings (AML) 579.60p 4.24%
Intu Properties (INTU) 41.98p 3.63%
TI Fluid Systems (TIFS) 195.80p 3.12%
Metro Bank (MTRO) 292.40p 2.96%
PureTech Health (PRTC) 284.00p 2.90%
Stagecoach Group (SGC) 138.70p 2.89%
Royal Mail (RMG) 223.30p 2.71%

FTSE 250 - Fallers

Sophos Group (SOPH) 405.80p -5.96%
Dechra Pharmaceuticals (DPH) 2,804.00p -5.10%
Dunelm Group (DNLM) 836.50p -4.17%
Pets at Home Group (PETS) 219.40p -3.52%
Ferrexpo (FXPO) 185.60p -3.42%
Hochschild Mining (HOC) 204.60p -3.03%
Redrow (RDW) 606.00p -2.73%
BCA Marketplace (BCA) 235.40p -2.73%
Centamin (DI) (CEY) 124.05p -2.70%
Travis Perkins (TPK) 1,342.50p -2.51%

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