London close: Stocks firmer, pound stronger after BoE rate hike surprise

by | Dec 16, 2021

London stocks closed in positive territory on Thursday, as the pound rallied against its major trading pairs, after the Bank of England surprised markets by hiking interest rates by 15 basis points.
The FTSE 100 ended the session up 1.25% at 7,260.61, and the FTSE 250 was ahead 0.95% at 22,647.96.

Sterling was also in the green, last trading up 0.44% on the dollar at $1.3321, and strengthening 0.3% against the euro to change hands at €1.1780.

“Markets have taken today’s Bank of England rate rise in their stride, with the pound gaining ground as a result,” said IG senior market analyst Joshua Mahony.

“The decision to raise rates in the face of an ongoing Omicron surge does serve to highlight the feeling that this wave could be much shorter than previous occasions.

“Banks are on the front foot today, whereas Boohoo’s profit warning has hindered sentiment for the wider sector.”

Earlier, the Bank of England voted for a surprise increase in interest rates to 0.25% in a bid to stop inflation taking hold, with prices rising faster than expected.

At its last meeting of 2021, the BoE’s monetary policy committee voted 8-1 for rates to rise from their record low of 0.1%.

External member Silvana Tenreyro voted to keep rates unchanged, while the MPC voted unanimously to stick to its targets for buying bonds.

“Although the Omicron variant is likely to weigh on near-term activity, its impact on medium-term inflationary pressures is unclear at this stage,” the Bank’s minutes read .

It came after recent data showed inflation at a 10-year high, while unemployment had fallen despite the end of furlough support.

“The MPC’s decision to hike Bank Rate today, before it knows the full extent of the economic damage wrought by the surging Omicron variant, underlines how worried it is about the outlook for inflation and the risk that inflation expectations would de-anchor if it did nothing,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Elsewhere, data released earlier showed UK economic activity slowing sharply, hit by tighter pandemic restrictions and growing uncertainty over the spread of Omicron.

The flash IHS Markit/CIPS UK composite output index for December plunged to a 10-month low, coming at 53.2 against 57.6 in November.

It was also well below consensus expectations of 56.3.

Chris Williamson, chief business economist at IHS Markit, said the economy was once again being hit by Covid-19.

“With infections set to rise further in the coming weeks, due to the spread of the Omicron variant, and more restrictions being introduced, the pace of economic growth looks likely to continue to weaken as we head into 2022,” he said.

“The bigger uncertainty will be on how rising infection rates both at home and abroad might cause further supply and labour shortages.”

On the political front, Chancellor Rishi Sunak was set to hold talks with representatives of the hospitality and business leaders, raising hopes of government support for sectors hit by the Omicron variant.

Sunak planned to speak to business leaders by video link from California, where he was on a four-day official trip, the Financial Times reported.

Unions and the Labour opposition had accused him of going missing with pubs, restaurants and other businesses facing cancellations at what should be their busiest trading time.

The government has not ordered hospitality venues to close but its warnings about the potential severity of the Omicron strain have prompted office parties to be called off and drinkers and eaters to stay at home.

Chief medical officer Chris Whitty on Wednesday advised people to limit socialising to essentials such as family.

In equity markets, banks were in the green on the back of the Bank of England’s announcement, with Lloyds Banking Group up 4.63%, Standard Chartered ahead 3.89%, HSBC rising 3.69%, and Barclays 3.21% firmer.

Takeaway master franchisee Domino’s Pizza Group jumped 22.14% to a record high, after the company settled a long-running dispute with its franchisees, opening the way for more stores and the adoption of new technology at the fast-food chain.

UK fund manager Schroders gained 2.01% after confirming it was in talks with renewable energy investor Greencoat Capital about taking a “significant” stake in the company.

Sky News previously reported that Schroders was set to splash out £360m to buy a 75% stake in Greencoat.

Homeware retailer Dunelm was boosted 5.56% by an upgrade to ‘buy’ from ‘neutral’ at UBS.

On the downside, IntegraFin slumped 14.04% even after it reported a rise in full-year profits after a 27% jump in funds under direction.

Ascential fell 2.62% after selling its MediaLink division in a $125m cash deal.

MediaLink, a US-based consultancy to the media and marketing sectors, was sold to United Talent Agency, a US entertainment and sports group.

B&M European Value Retail was down 2.31%, AB Foods lost 0.4%, Mitie Group was 1% weaker and United Utilities slid 2.5% as they traded without entitlement to the dividend.

Market Movers

FTSE 100 (UKX) 7,260.61 1.25%
FTSE 250 (MCX) 22,647.96 0.95%
techMARK (TASX) 4,418.82 1.01%

FTSE 100 – Risers

Hargreaves Lansdown (HL.) 1,367.50p 4.87%
Lloyds Banking Group (LLOY) 46.41p 4.63%
Standard Chartered (STAN) 430.10p 3.89%
Ocado Group (OCDO) 1,697.00p 3.79%
HSBC Holdings (HSBA) 448.25p 3.69%
Smiths Group (SMIN) 1,547.00p 3.65%
Antofagasta (ANTO) 1,353.00p 3.44%
Royal Mail (RMG) 499.10p 3.23%
Barclays (BARC) 182.14p 3.21%
Ashtead Group (AHT) 6,140.00p 3.19%

FTSE 100 – Fallers

SEGRO (SGRO) 1,380.50p -2.68%
United Utilities Group (UU.) 1,091.00p -2.42%
JD Sports Fashion (JD.) 200.00p -1.96%
B&M European Value Retail S.A. (DI) (BME) 619.60p -1.81%
British Land Company (BLND) 507.80p -1.44%
National Grid (NG.) 1,043.80p -1.44%
Bunzl (BNZL) 2,888.00p -1.33%
Hikma Pharmaceuticals (HIK) 2,198.00p -1.30%
SSE (SSE) 1,592.00p -1.30%
Entain (ENT) 1,567.00p -1.04%

FTSE 250 – Risers

Domino’s Pizza Group (DOM) 422.60p 22.14%
Cineworld Group (CINE) 30.43p 10.65%
Ferrexpo (FXPO) 303.00p 6.02%
Endeavour Mining (EDV) 1,595.00p 5.63%
Dunelm Group (DNLM) 1,385.00p 5.56%
Centamin (DI) (CEY) 85.04p 5.33%
Harbour Energy (HBR) 360.00p 5.14%
Petropavlovsk (POG) 20.86p 4.77%
Wood Group (John) (WG.) 186.15p 4.70%
Mitchells & Butlers (MAB) 223.80p 4.09%

FTSE 250 – Fallers

IntegraFin Holding (IHP) 517.50p -14.04%
Capita (CPI) 33.61p -2.89%
Watches of Switzerland Group (WOSG) 1,350.00p -2.74%
Ascential (ASCL) 394.00p -2.62%
Ibstock (IBST) 196.20p -2.19%
LXI Reit (LXI) 143.80p -1.91%
Big Yellow Group (BYG) 1,648.00p -1.61%
Safestore Holdings (SAFE) 1,372.00p -1.44%
Derwent London (DLN) 3,307.00p -1.37%
Workspace Group (WKP) 780.00p -1.33%

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