London close: Stocks finish red after BoE rate hike

by | Mar 23, 2023

London stocks closed lower on Thursday following the decision by the Bank of England to hike interest rates by 25-basis points to 4.25%, in a bid to combat rising inflation.
The FTSE 100 was down 0.89% at 7,499.60, while the FTSE 250 saw a decline of 0.15% to 18,729.96.

Sterling was in the green, rising 0.33% on the dollar to last trade at $1.2309, and increasing 0.09% against the euro to change hands at €1.1311.

The Monetary Policy Committee voted 7-2 for the rate increase in its decision released at lunchtime, marking the 11th consecutive increase by the Bank.

It came after data from the Office for National Statistics on Wednesday showed a rise in consumer price inflation to 10.4% in the year to February, up from 10.1% in January.

Analysts had been anticipating a decline to 9.9%.

“A slew of ex-dividends and gains for sterling have meant the FTSE 100 hasn’t joined in the more optimistic afternoon session,” said IG chief market analyst Chris Beauchamp.

“However, this is likely to be a temporary development – the outlook for the global economy has improved even from where it was on Monday.

“This should see some renewed strength for banks and miners in the medium term, making the FTSE 100 an interesting play on global growth.”

Bank of England joins global peers in latest rate rise

At the top of the agenda was the Bank of England’s 25-basis point interest rate hike to 4.25%, in line with market expectations.

The Bank cited stronger-than-anticipated global growth and the need to ensure that inflation returned to the 2% target sustainably in the medium term in its decision.

It said it was still expecting consumer price inflation to fall sharply over the rest of the year, despite Wednesday’s surprise jump in data.

The Financial Policy Committee also judged that the UK banking system’s capital position was “robust” and liquidity positions “strong”.

“As in February’s minutes, the MPC no longer has a presumption of further rate increases, and while we can’t rule out one final 25-basis point hike, we think the Committee likely will be reassured sufficiently by inflation developments over the next seven weeks to keep Bank Rate on hold at its next meeting in May,” noted Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

On the continent, the Swiss National Bank increased its key policy rate by 50 basis points to 1.50%, marking the fourth consecutive hike.

The Bank said it was looking to tackle “the renewed increase in inflationary pressure” and that further rate hikes could not be ruled out to ensure price stability in the medium term.

It also noted the liquidity assistance it had provided to Credit Suisse following the bank’s recent troubles.

Elsewhere in data, eurozone consumer confidence remained little changed in March, with the European Commission’s consumer confidence index edging down slightly to -19.2, below economists’ expectations.

Across the pond, meanwhile, weekly unemployment claims figures continued to point to a tight jobs market, with the number of initial jobless claims falling to 192,000, beating economists’ expectations.

However, new home sales stateside grew more slowly than anticipated last month, increasing at a month-on-month pace of 1.1% to reach 640,000, below economists’ forecasts.

Ex-dividend plays a drag, PureTech surges on royalty interest sale

On London’s equity markets, shares of Schroders, Prudential, Pearson, and Close Brothers all fell on Thursday as they traded without entitlement to the dividend.

Schroders saw the largest decline, down 3.88%, followed by Close Brothers, down 3.25%.

Prudential and Pearson also lost ground, falling 0.74% and 0.58%, respectively.

Automotive distributor Inchcape saw its shares plummet 12.57% despite reporting a rise in annual earnings, driven by growth in new and used vehicle sales and higher prices.

Kingfisher, the owner of B&Q and Castorama, fell by 2.77% following negative read-across from DIY retailer Wickes.

Wickes, which was spun off from Travis Perkins, was itself down 1.59% after posting a decline in full-year profits due to normalised DIY demand after the pandemic boom.

Elsewhere, Informa was knocked lower by a downgrade to “equalweight” at Morgan Stanley, causing shares to decline by 2.71%.

On the upside, PureTech Health surged 10.84% after US-listed Royalty Pharma bought an interest in the company’s royalty in Karuna Therapeutics’ KarXT drug for up to $500m.

Gas producer Energean rallied by 9.13% after almost doubling annual 2022 profits and expecting output this year to reach 131,000 to 158,000 barrels of oil equivalent per day following the launch of its main Karish field off Israel.

Finally, Bulmers and Magners owner C&C Group rose by 3.6% after announcing expectations of a jump in full-year revenues and operating profit despite a challenging backdrop.

The company also plans to resume dividend payments later in the year.

Darktrace was also boosted by an initiation at “buy” at HSBC, causing shares to rise by 1.04%.

Reporting by Josh White for

Market Movers

FTSE 100 (UKX) 7,499.60 -0.89%
FTSE 250 (MCX) 18,729.96 -0.15%
techMARK (TASX) 4,545.46 0.22%

FTSE 100 – Risers

Melrose Industries (MRO) 159.85p 3.70%
Endeavour Mining (EDV) 1,843.00p 2.90%
Ocado Group (OCDO) 445.20p 2.83%
Scottish Mortgage Inv Trust (SMT) 670.00p 2.17%
BAE Systems (BA.) 975.00p 1.77%
SEGRO (SGRO) 737.40p 1.63%
Centrica (CNA) 104.75p 1.50%
Beazley (BEZ) 557.00p 1.36%
Unite Group (UTG) 898.00p 1.35%
Auto Trader Group (AUTO) 607.60p 1.33%

FTSE 100 – Fallers

British American Tobacco (BATS) 2,823.50p -5.54%
Schroders (SDR) 445.40p -3.88%
Standard Chartered (STAN) 632.40p -3.01%
HSBC Holdings (HSBA) 548.20p -2.90%
Legal & General Group (LGEN) 228.90p -2.80%
Kingfisher (KGF) 263.70p -2.77%
Informa (INF) 674.00p -2.71%
Imperial Brands (IMB) 1,875.50p -2.29%
M&G (MNG) 181.95p -2.28%
Smith & Nephew (SN.) 1,152.00p -2.17%

FTSE 250 – Risers

PureTech Health (PRTC) 225.00p 10.84%
Energean (ENOG) 1,219.00p 9.13%
TP Icap Group (TCAP) 185.70p 4.74%
Centamin (DI) (CEY) 104.00p 4.10%
C&C Group (CDI) (CCR) 155.20p 3.60%
Vanquis Banking Group 20 (VANQ) 225.40p 3.21%
Baltic Classifieds Group (BCG) 153.40p 2.95%
Vistry Group (VTY) 753.50p 2.80%
Games Workshop Group (GAW) 9,010.00p 2.73%
Petershill Partners (PHLL) 150.00p 2.59%

FTSE 250 – Fallers

Inchcape (INCH) 758.00p -12.57%
OSB Group (OSB) 467.40p -6.71%
IWG (IWG) 150.80p -5.31%
NB Private Equity Partners Ltd. (NBPE) 1,470.00p -4.89%
Molten Ventures (GROW) 287.20p -4.20%
Currys (CURY) 56.25p -3.93%
Chemring Group (CHG) 273.00p -3.36%
Close Brothers Group (CBG) 893.00p -3.25%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,000.00p -2.44%
Direct Line Insurance Group (DLG) 144.00p -2.37%

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