London midday: FTSE extends gains as oil dips; BoE stands pat as expected

(Sharecast News) - London stocks had extended losses by midday on Thursday as investors digested a hawkish outlook from the Federal Reserve, and as the Bank of England stood pat on interest rates as expected.

The FTSE was 1% weaker at 10,398.32, having fallen further before the BoE announcement, while the pound was 0.6% lower against the dollar at 1.3220.

The BoE left interest rates on hold at 3.75%, as widely predicted. The Monetary Policy Committee voted to leave the cost of borrowing unchanged by a majority of 7-2. The rate-setting body said that while global energy prices had fallen, they continued to be both high and volatile. "The impact of the energy shock on the UK economy remains uncertain," it said.

Chris Cheverall, head of UK at CMC Markets, said: "The Bank of England's decision to hold rates reflects the difficult balancing act facing policymakers. Despite yesterday's softer-than-expected inflation data, recent volatility in energy prices and ongoing geopolitical uncertainty mean the inflation outlook remains far from settled.

"Markets have spent much of the past year debating whether the UK faced a renewed inflation problem or a sharper economic slowdown. Today's decision suggests the Bank sees those risks as becoming more balanced, allowing policymakers to remain patient while assessing how recent developments feed through to growth and prices.

"For investors, the more important question is not when the next rate cut arrives, but whether recent progress on inflation proves durable. The Bank appears less concerned about responding to data than avoiding the risk of reacting too quickly to what may yet prove a temporary improvement in the inflation outlook. In that sense, today's decision is as much about buying time as it is about holding rates."

Meanwhile, Brent crude was down 1.2% at $78.60 a barrel and West Texas Intermediate was 1.8% lower at $75.55, retreating after Donald Trump and Iranian President Masoud Pezeshkian digitally signed a 14-point memorandum of understanding.

The US president signed the MOU before a dinner in Versailles, France, with French President Emmanuel Macron and others. Trump said the deal averts a "worldwide depression". The MOU extends the ceasefire between the US and Iran for a minimum of 60 days, allowing a final deal to be negotiated.

"The digital signing of the interim agreement between the US and Iran, ahead of an official ceremony on Friday, is exerting a fresh downward force on [oil] prices, as new supplies are expected to hit the market just as demand has been weakened by rationing and energy-efficiency measures," said Susannah Streeter, chief investment strategist at Wealth Club.

Investors were also mulling the latest policy announcement from the Fed on Wednesday. Although the federal funds rate was left unchanged as expected, interest rate forecasts were revised upwards for the next three years. The dot plot graph showed that nine of the Fed's 18 policymakers expect at least one rate hike before the end of 2026, although new chair Warsh abstained from submitting a projection. Back in March, no Fed participants expected a hike.

In the press conference following the decision, Warsh said policymakers were still "unambiguously and unanimously" committed to bringing inflation back to the Fed's 2% target. However, he added that "the Committee will deliver price stability", which markets took to mean the Fed is prepared to hike rates if necessary.

On home shores, data from the Office for National Statistics showed the unemployment rate unexpectedly eased in April.

The rate was estimated to be 4.9% in the three months to April, up 0.3 percentage points on the year but down 0.3 percentage points on the last quarter. The market had been expecting no change.

Average earnings, meanwhile, ticked higher, rising 4.4% or 3.4% once bonuses were stripped out. Regular earnings increased 5.1% in the public sector, but by a more modest 2.9% in the private sector, the lowest rate in five and a half years.

A number of measures did point to some softening in the labour market, however. Payroll numbers continued to fall, by 0.5% year-on-year, with new recruits at their lowest level in five years. The claimant count for May was also higher, at 1.7m.

But Liz McKeown, director of economic statistics at the ONS, said: "The labour market remained broadly stable in the latest quarter.

"Overall employment was little changed, with some signs of workers moving into self-employment."

In equity markets, Informa shot up as it backed full-year guidance and posted a 6.4% rise in underlying revenue for the five months to the end of May, with continuing strength in both Academic Markets and B2B Live Events.

Intertek gained after agreeing to be taken over by Swedish private equity firm EQT in a �9.5bn deal.

FirstGroup rallied even as it posted a dip in full-year profit, while Tesco fell as it held annual guidance and reported a rise in like-for-like sales in the first quarter.

Persimmon, Land Securities, British Land and 3i Group all fell as they traded without entitlement to the dividend.

Premier Inn owner Whitbread reversed earlier gains to trade lower despite reaffirming its full-year outlook and saying forward bookings in the UK remain ahead of last year, supported by peak leisure bookings.

Market Movers

FTSE 100 (UKX) 10,398.32 -1.05%

FTSE 250 (MCX) 23,201.20 -0.70%

techMARK (TASX) 5,870.10 -0.42%

FTSE 100 - Risers

Informa (INF) 861.20p 2.89%

Melrose Industries (MRO) 482.30p 1.77%

Intertek Group (ITRK) 5,810.00p 1.57%

M&G (MNG) 329.30p 1.17%

IMI (IMI) 3,000.00p 1.01%

Lion Finance Group (BGEO) 11,460.00p 0.97%

Spirax Group (SPX) 7,030.00p 0.93%

International Consolidated Airlines Group SA (CDI) (IAG) 456.30p 0.91%

Rolls-Royce Holdings (RR.) 1,399.80p 0.79%

Standard Life (SDLF) 801.50p 0.75%

FTSE 100 - Fallers

Persimmon (PSN) 1,047.50p -5.83%

Fresnillo (FRES) 3,142.00p -5.17%

Land Securities Group (LAND) 621.50p -4.89%

London Stock Exchange Group (LSEG) 8,516.00p -4.64%

3i Group (III) 2,201.00p -4.60%

British Land Company (BLND) 397.20p -4.48%

Flutter Entertainment (DI) (FLTR) 7,650.00p -4.23%

Entain (ENT) 545.60p -3.95%

ICG (ICG) 1,742.00p -3.81%

Marks & Spencer Group (MKS) 348.20p -3.27%

FTSE 250 - Risers

FirstGroup (FGP) 187.60p 7.86%

Oxford Instruments (OXIG) 3,008.00p 3.72%

Pacific Horizon Inv Trust (PHI) 1,218.00p 3.40%

The Schiehallion Fund Limited NPV (MNTN) 2.15p 2.62%

SDCL Efficiency Income Trust (SEIT) 33.00p 2.33%

Polar Capital Technology Trust (PCT) 733.00p 2.23%

Renishaw (RSW) 5,220.00p 2.15%

SSP Group (SSPG) 182.20p 2.13%

Partners Group Private Equity Limited. (EUR) (PEY) 8.70p 2.11%

Templeton Emerging Markets Inv Trust (TEM) 345.50p 2.07%

FTSE 250 - Fallers

GB Group (GBG) 192.00p -7.02%

Hochschild Mining (HOC) 576.50p -6.64%

Pan African Resources (PAF) 110.90p -6.01%

Ocado Group (OCDO) 180.30p -4.95%

Bridgepoint Group (Reg S) (BPT) 244.00p -4.54%

XPS Pensions Group (XPS) 305.50p -3.93%

Telecom Plus (TEP) 935.00p -3.91%

Fidelity China Special Situations (FCSS) 260.50p -3.87%

Kainos Group (KNOS) 796.50p -3.78%

Baltic Classifieds Group (BCG) 186.90p -3.76%