London stocks were still in the black by midday on Thursday, while sterling rallied after the Bank of England hiked interest rates by 15 basis points.
The FTSE 100 was 1.3% higher at 7,261.78, while the pound was 0.7% firmer against the dollar at 1.3354 after the BoE voted 8-1 to lift interest rates from a historic low of 0.1% to 0.25%.
This marks the first time the Bank has raised interest rates since the start of the pandemic and comes a day after figures from the Office for National Statistics showed that consumer price inflation surged to a 10-year high of 5.1% in November, coming in at more than double the Bank’s 2% target.
The BoE voted unanimously to maintain the amount of quantitative easing at £895bn.
XTB market analyst Walid Koudmani said: “While inflation spikes do not guarantee a rate hike, some forward guidance from BoE on rates was welcome and allowed investors to assess the ongoing economic outlook of the central bank.
“Despite the UK meeting the conditions for a rate hike it set last month, the emergence of a new highly transmissible coronavirus variant, Omicron, was a cause of potential concern as it could have been used to delay further action.
“The British pound reacted positively to today’s BoE announcement and is up against most other currencies while UK stocks pulled back slightly as they continued to benefit from the post-FOMC rally experienced by the broader market. Despite concerns related to rising inflation and the new variant, today’s announcement was somewhat expected and could ultimately have limited long term effects.”
Investors were also digesting a survey released earlier, which showed that UK economic activity slowed sharply in December, 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.
Within that, the services business activity index fell to 53.2 from 58.5, also a 10-month low and well below consensus for 57.0. The UK manufacturing purchasing managers’ index eased to 57.6 from 58.1. Only the manufacturing output index edged higher, rising to 53.3 from 52.7 a month earlier.
IHS Markit said respondents had reported a “negative impact” on consumer demand following the introduction of tighter Covid-19 and travel restrictions. Manufacturing, meanwhile, continued to be constrained by both raw material and labour shortages.
In equity markets, Domino’s Pizza shares jumped 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 after confirming it was in talks with renewable energy investor Greencoat Capital about taking a “significant” stake in the company. Sky News had reported that Schroders was set to splash out £360m to buy a 75% stake in Greencoat.
Homeware retailer Dunelm was boosted by an upgrade to ‘buy’ from ‘neutral’ at UBS.
On the downside, IntegraFin slumped even as it reported a rise in full-year profits after a 27% jump in funds under direction.
B&M European Value Retail, AB Foods, Mitie, Sirius Real Estate, United Utilities and Tritax EuroBox were all weaker as they traded without entitlement to the dividend.
Market Movers
FTSE 100 (UKX) 7,261.78 1.27%
FTSE 250 (MCX) 22,778.54 1.54%
techMARK (TASX) 4,439.33 1.48%
FTSE 100 – Risers
Darktrace (DARK) 423.80p 6.32%
Flutter Entertainment (CDI) (FLTR) 11,060.00p 3.75%
Ocado Group (OCDO) 1,695.00p 3.67%
Antofagasta (ANTO) 1,353.50p 3.48%
International Consolidated Airlines Group SA (CDI) (IAG) 130.14p 3.45%
Melrose Industries (MRO) 145.85p 3.37%
Rightmove (RMV) 769.80p 3.22%
Intermediate Capital Group (ICP) 2,186.00p 3.16%
Smiths Group (SMIN) 1,539.50p 3.15%
Aveva Group (AVV) 3,371.00p 3.06%
FTSE 100 – Fallers
B&M European Value Retail S.A. (DI) (BME) 620.00p -1.74%
Rentokil Initial (RTO) 516.80p -1.00%
SEGRO (SGRO) 1,405.50p -0.92%
United Utilities Group (UU.) 1,109.00p -0.81%
Croda International (CRDA) 10,280.00p -0.53%
Relx plc (REL) 2,368.00p -0.25%
Experian (EXPN) 3,560.00p -0.20%
Meggitt (MGGT) 735.60p -0.08%
Land Securities Group (LAND) 744.60p -0.05%
Associated British Foods (ABF) 1,890.50p -0.03%
FTSE 250 – Risers
Domino’s Pizza Group (DOM) 432.60p 25.03%
Cineworld Group (CINE) 31.53p 14.65%
Restaurant Group (RTN) 78.90p 7.06%
Auction Technology Group (ATG) 1,448.00p 6.31%
Dunelm Group (DNLM) 1,393.00p 6.17%
Volution Group (FAN) 525.00p 5.00%
Kainos Group (KNOS) 1,866.00p 4.95%
Harbour Energy (HBR) 358.20p 4.61%
Ferrexpo (FXPO) 298.80p 4.55%
easyJet (EZJ) 508.00p 4.55%
FTSE 250 – Fallers
IntegraFin Holding (IHP) 550.00p -8.64%
Ascential (ASCL) 399.80p -1.19%
Ibstock (IBST) 198.60p -1.00%
Future (FUTR) 3,522.00p -0.96%
LXI Reit (LXI) 145.40p -0.82%
Britvic (BVIC) 912.50p -0.82%
Big Yellow Group (BYG) 1,663.00p -0.72%
Cranswick (CWK) 3,642.00p -0.71%
OSB Group (OSB) 523.00p -0.66%
Safestore Holdings (SAFE) 1,383.00p -0.65%
