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London close: Stocks finish firmer on Bank of England optimism

Thu 06 May 2021 16:07 | A A A

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FTSE 100 | FTSE 250 | Paris CAC 40 | Dow Jones | NASDAQ

7134.06 | Positive 45.88 (0.65%)
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Prices delayed by at least 15 minutes

(Sharecast News) - London stocks closed in the green on Thursday, after the Bank of England sated market expectations by standing pat on monetary policy.

The FTSE 100 ended the session up 0.52% at 7,076.17, and the FTSE 250 was 0.47% firmer at 22,491.36.

Sterling was in negative territory, however, last trading 0.12% weaker against the dollar at $1.3888, and falling 0.54% on the euro to €1.1522.

"The FTSE 350 has outperformed its mainland European counterparts today, with a bullish Bank of England helping to lift sentiment around the UK economic outlook," said IG senior market analyst Joshua Mahony.

"The Bank of England meeting gave plenty of grounds for optimism, with the bank raising forecasts to predict the best year of growth since the second world war.

"With BoE member Haldane calling for a reduction in the asset purchase scheme, there is no doubt that the successful vaccination programme has helped to stifle any fears over a third wave in the UK."

Mahony noted that there was also another downward revision to the unemployment forecast for the year, highlighting the impact felt by Rishi Sunak's extended furlough scheme.

"From a monetary standpoint, traders will be keeping a close eye on inflation levels, with increased UK-EU trade friction adding further price pressures in a year that is already expected to bring a sharp rise in inflation."

At lunchtime, the BoE voted to leave interest rates on hold at their current record low of 0.1% and keep its bond-buying programme at £895bn.

Outgoing chief economist Andy Haldane voted to reduce the size of the bond purchase, however and the Bank said the pace of bond purchases can be "slowed somewhat".

"But this is not a signal about the strength of the economy," noted analysts at Capital Economics, adding that the Monetary Policy Committee had maintained its aim to finish the £150bn of quantitative easing announced in November around the end of 2021, so the pace of asset purchases was always going to slow at some point.

"That said, the new, more optimistic, economic forecasts support our view that the MPC won't announce any further QE.

"Indeed, Andy Haldane, the most hawkish member of the MPC who is leaving after June's meeting, even voted to reduce the QE target by £50bn.

"The MPC's annual GDP growth forecast for 2021 was revised up from 5.0% in February to 7.25% now, but growth was revised down in 2022."

As a result, the BoE now expected GDP to return to the pre-crisis peak in the fourth quarter of 2021, rather than in the first quarter of 2022, Capital Economics explained.

Earlier, a survey showed the service sector surged in April, buoyed by the loosening of lockdown restrictions and growing consumer confidence.

The IHS Markit/CIPS UK services PMI business activity index reached 61.0 in April, up from 56.3 in March and the highest since October 2013.

It was also ahead of both consensus and the flash estimate of 60.1.

The composite PMI output index - a weighted average of the comparable manufacturing and services indices - also rose, to 60.7 from 56.4 a month earlier.

That figure for April was above both analyst forecasts and the flash reading of 60.0.

In the services sector, order volumes increased for the second consecutive month and was the fastest rate of expansion since December 2013.

Job creation also improved, with the sector recording the fastest increase in employment for five and half years.

"A surge of pent-up demand has started to flow through the UK economy following the loosening of pandemic restrictions," said Tim Moore, economics director at IHS Markit.

"The roadmap for reopening leisure, hospitality and other customer-facing activities resulted in a sharp increase in forward bookings and new project starts.

"If the rebound in order books continues along its recent trajectory during the rest of the second quarter, then output growth looks very likely to surpass the survey record high seen back in April 1997."

In equity markets, education publisher Pearson rose 2.35% after an upgrade to 'outperform' at Exane, which also hiked its price target to 950p from 700p.

Next advanced 1.82% after upgrading its guidance for annual pre-tax profit by £20m to £720m after sales beat expectations in the first quarter.

Housebuilder Barratt Developments gained 1.85% after saying it expects full year results to be "modestly above" prior expectations following a strong start to the new year.

Melrose Industries managed a rise of 0.76% after saying it was trading modestly above expectations, while Morgan Advanced Materials rocketed 14.19% after it lifted its guidance for full-year organic constant currency sales growth.

Wealth manager Rathbone Brothers grew 5.41% after it posted a rise in first-quarter funds under management and income as it hailed a strong performance from its funds business.

On the downside, Admiral was down 4.69% and Croda lost 1.78%, as both stocks traded without entitlement to the dividend.

Trainline slumped 6.92% as the online ticket platform said annual losses had widened as passenger demand plunged during the Covid-19 pandemic.

Mondi was 1.18% weaker even as it reported strong demand for its packaging as online shopping surged and customers looked for more eco-friendly products in the first quarter.

Market Movers

FTSE 100 (UKX) 7,076.17 0.52%

FTSE 250 (MCX) 22,491.36 0.47%

techMARK (TASX) 4,333.61 0.11%

FTSE 100 - Risers

Fresnillo (FRES) 906.20p 6.24%

British American Tobacco (BATS) 2,803.00p 3.20%

Imperial Brands (IMB) 1,584.50p 3.02%

Legal & General Group (LGEN) 281.30p 2.78%

National Grid (NG.) 933.80p 2.60%

Land Securities Group (LAND) 735.80p 2.39%

Pearson (PSON) 826.40p 2.35%

Evraz (EVR) 680.60p 2.25%

Burberry Group (BRBY) 2,182.00p 2.15%

United Utilities Group (UU.) 984.20p 1.99%

FTSE 100 - Fallers

Admiral Group (ADM) 2,960.00p -4.69%

Ocado Group (OCDO) 1,900.00p -3.16%

Renishaw (RSW) 6,115.00p -2.32%

Pershing Square Holdings Ltd NPV (PSH) 2,640.00p -2.22%

Scottish Mortgage Inv Trust (SMT) 1,209.00p -2.18%

WPP (WPP) 976.20p -2.18%

London Stock Exchange Group (LSEG) 7,100.00p -1.83%

Mondi (MNDI) 1,952.50p -1.81%

Croda International (CRDA) 6,746.00p -1.78%

Reckitt Benckiser Group (RKT) 6,347.00p -1.72%

FTSE 250 - Risers

John Laing Group (JLG) 379.80p 19.58%

Morgan Advanced Materials (MGAM) 346.00p 14.19%

Vesuvius (VSVS) 581.00p 5.64%

Centamin (DI) (CEY) 116.30p 5.54%

Rathbone Brothers (RAT) 1,792.00p 5.41%

Workspace Group (WKP) 875.00p 4.17%

Provident Financial (PFG) 245.40p 4.13%

Crest Nicholson Holdings (CRST) 422.60p 3.78%

Hochschild Mining (HOC) 195.20p 3.50%

Ferrexpo (FXPO) 468.20p 3.49%

FTSE 250 - Fallers

Trainline (TRN) 419.40p -6.92%

Baillie Gifford US Growth Trust (USA) 299.50p -4.31%

AO World (AO.) 243.40p -3.57%

Shaftesbury (SHB) 619.50p -3.13%

Pets at Home Group (PETS) 433.00p -2.96%

Allianz Technology Trust (ATT) 276.40p -2.81%

Edinburgh Worldwide Inv Trust (EWI) 326.50p -2.68%

Cairn Energy (CNE) 173.90p -2.37%

PureTech Health (PRTC) 387.00p -2.27%

Carnival (CCL) 1,589.00p -2.19%

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