• FTSE 100 closes down 101 points
  • Bank of England leaves bank rate unchanged, sending sterling soaring
  • US GDP roughly in line with expectations

5.15pm: FTSE closes firmly in the drink

FTSE 100 index closed firmly in the red Thursday as the strong pound did for the dollar earning blue-chip index.

Sterling was boosted by the decision by the Bank of England earlier to keep rates on hold – part of a 7-2 vote by the policy committee in favour of a patient approach. 

The pound added 0.64% against the US dollar, while FTSE 100 tanked over 101 points to 7,381.

The mid-cap FTSE 250 plunged 177 points to 21,291.

“Mark Carney resisted the opportunity to go out with a bang today….,”noted Joshua Mahony, senior market analyst at IG.

“Despite recent dovish statements, impressive PMI gains do highlight an economic resurgence taking place in the UK economy this month after Brexit and election fears subsided. Despite Brexit technically taking place at the end of this week, there will be little change for the time being.”

Mahony added: “From a monetary standpoint, things remain on a knife edge given the volatility of both inflation and growth likely in the months ahead.”

4pm: FTSE stabilised

London’s leading index has stabilised in the afternoon session, albeit well below 7,400, after a busy day for corporate and macroeconomic updates.

The FTSE 100 was down 99 points (1.3%) at 7,385. In the US, the main benchmarks are faring better than the Footsie, with the Dow and S&P 500 down by around 0.6% after the release of fourth-quarter US gross domestic product (GDP) numbers.

“4Q19 US GDP growth came in at 2.1%, the same as in 3Q, but the growth mix shows weakening consumer spending while business investment continues to languish. Trade stability may provide a better platform for 2020 growth, but coronavirus worries could undermine it,” said ING Economics.

The unchanged fourth-quarter GDP annualised growth number was slightly above the 2.0% increase economists had been expecting.

“The details show slower consumer spending growth and weak business investment being offset by another strong residential investment figure, robust government spending and a plunge in imports resulting in a major contribution from net exports to the headline growth rate,” said James Knightley, ING’s chief international economist.

Meanwhile, the Bank of England proved it is possible to make a big splash by doing nothing – in this case, leaving its base rate unchanged – although the downward revision of its UK growth forecasts also had economists pondering.

“No MPC [Monetary Policy Committee] member felt compelled to join Michael Saunders and Jonathan Haskel for an immediate interest rate cut. Despite some recent dovish comments earlier in January by MPC members (Silvana Tenreyro, Gertjan Vlieghe and Mark Carney) indicating that they could favour a near-term interest rate cut if the economy failed to quickly show improvement after the election, they clearly decided that there had been enough evidence of this to sit tight for now at least,” speculated Howard Archer, the chief economic advisor to the EY ITEM Club.

“The MPC also noted that global growth had appeared to stabilise and that there had been a reduction in trade tensions. The Bank considered it was too early to judge the impact of the Coronavirus. The Bank of England also noted possible support to UK growth from the budget,” he added.
 

2.35pm: US indices open lower

US indices opened lower but quickly set about reducing their losses.

The Dow Jones, which eked out a small gain yesterday, was down 43 points (0.2%) at 28,648 while the S&P 500 was 20 points lighter at 3,254.

In London, the FTSE 100 was down 104 points (1.4%) at 7,379 as sterling hardened by more than half a cent to US$1.3079 after the Bank of England opted to keep its key lending rate unchanged.

12.50am: Sterling’s gain is the Footsie’s pain

Sterling has perked up following the Bank of England‘s decision to leave its key lending rate unchanged and that’s weighing on the Footsie.

London’s index of heavyweight shares is now nursing a triple-digit fall, down 102 points (1.4%) at 7,381.

“Sterling set off higher on basis that no additional members called for a cut this time round (7-2 in favour of hold) despite comments from the likes of Vlieghe, Tenreyro and Carney himself suggesting that further accommodation in the short term may be warranted; however, the fact that very little has actually changed, I feel it’s the correct decision for the committee to sit on their hands for now, outlooks remain subdued but with ‘early signs that growth is picking up’ it makes sense to await further data,” suggested John Goldie, the foreign exchange strategist at Argentex Group PLC (LON:AGFX).

Rupert Thompson, the chief investment officer at Kingswood, reckons the so-called “Boris bounce” staved off a base rate cut that was looking increasingly more likely.

“If as is likely, the bounce in the soft sentiment data is sustained and over coming months feeds through to some improvement in the hard economic data, rates will very likely remain on hold. Indeed, further out, the MPC is still talking of the need for some modest tightening of policy if the economy recovers as it expects,” Thompson noted.

12.05pm: Bank leaves its key lending rate unchanged

The FTSE 100 dipped further into the red after the Bank of England left its base rate unchanged.

London’s index of blue-chip shares fell below 7,400 to 7,395, down 88 points; it was loitering around 7,405 before the Bank announced its rate decision.

The Bank also cut its growth forecasts for the UK economy. It now expects gross domestic product (GDP) will rise by 0.8% this year, having previously looked for growth of 1.2%.

GDP is tipped to rise 1.4% in 2021, compared to the central bank’s previous forecast of 1.8%, while the 2022 forecast has been trimmed to 1.7% from 2.0%.

11.50am: Not long now until the Bank of England coin toss

The decision on whether the Bank of England will cut its key interest rate today is too close to call, according to Daiwa Capital Markets.

Ahead of the meeting of the Bank’s Monetary Policy Committee (MPC), the FTSE 100 was down 69 points (0.9%) at 7,415, less than a dozen points above its low mark for the day.

“The prior two MPC meetings saw two external members – Haskel and Saunders – vote for a 25bp [quarter point] rate cut and since the start of the year, three further members – Vlieghe, Tenreyro and Carney himself – suggested that they would be ready to vote for a rate cut if the economic recovery anticipated in the BoE’s November base case forecast was unlikely to materialise. So, certainly, there is a potential majority in favour of a rate cut today and the economic case for a rate cut looks strong too,” Daiwa said.

“On balance, we expect the majority of members to keep Bank Rate at 0.75% for a little longer yet, while also raising further the possibility of a near-term rate cut if and when the economic data fail to improve sufficiently over the near term; however, we would certainly not be surprised if the MPC voted for a 25bp rate cut today for risk management reasons and we maintain our forecast that Bank Rate will be cut to 0.5% by May at the latest,” Daiwa added, giving a masterclass in hedging its bets.

“I’m still in the cut camp,” admitted Neil Wilson of markets.com.

“Harder data has turned notably softer and the BoE doesn’t want to risk allowing weakness to become entrenched. Whilst PMI and CBI survey data did evince something of a Boris Bounce there should be sufficient doubts about whether this will be maintained to warrant a pre-emotive cut,” Wilson said.

11.35am: Investor confidence subsided in January – and that was before the coronavirus outbreak hit big

Although we probably did not need telling, State Street Global Markets has revealed that investor confidence declined in January.

The financial services provider’s Global Investor Confidence Index (ICI) fell to 76.5 from December’s revised reading of 79.7.

The North American ICI fell 3.4 points to 68.2 and the European ICI dropped 3.9 points to 105.5.

“It is telling that the confidence of European investors has continued to fall. This is similar to the first round of asset purchases from the European Central Bank (ECB) that the promise of buying has as big – if not bigger – signalling effect for investors than the action of buying itself,” said Michael Metcalfe, the head of Global Macro Strategy at State Street Global Markets.

“Meanwhile, the cut-off date for this reading (1/22/2020) means that the potential impact of the escalated contagion from the Novel Coronavirus on sentiment will not be captured this month,” he noted.

The FTSE 100 was down 61 points (0.8%) at 7,423.

Shares in British Airways owner International Consolidated Airlines Group (LON:IAG) fell 2.1% after the British flag-carrier said it would suspend flights to and from China for a month.

10.55am: UK economic sentiment improves

The European Commission’s Economic Sentiment Indicator (ESI) for the UK rose to 91.5 in January, from 88.2 in December.

“The Economic Sentiment Indicator is moving in the right direction, albeit a bit more slowly than other survey indicators,” opined Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.

“The headline number is a tad disappointing; the ESI merely rose to a five-month high in January and remains well below its long-run average but the manufacturing component of the ESI has a ludicrously high 40% weight, even though the sector accounts for just 10% of UK GDP,” grumbled Tombs.

“Meanwhile, the consumer sentiment indicator—a seasonally adjusted version of GfK’s survey, released tomorrow—rose to -6.5—its highest level since August 2018—from -7.1 in December. The election result clearly has not boosted consumer sentiment as much as business confidence, though the former had less scope to rebound,” Tombs suggested.

“Indeed, consumer sentiment in January slightly exceeded both its post-referendum average and its average since the survey began in 1985. As a result, momentum in real disposable income growth, facilitated by low inflation, supportive fiscal policy, falling mortgage rates and reviving employment growth, should feed through to solid growth in households’ spending in the first half of this year,” he added.

The FTSE 100 was down 55 points (0.7%) at 7,428.

10.05am: Warm response to Evraz and Unilever’s updates limits the damage

If nothing else, today’s jam-packed results schedule has distracted the market from fretting about the coronavirus.

In the circumstances, a 34 point (0.5%) fall to 7,450 for the FTSE 100 is not a bad result, thanks to positive responses to trading updates from Evraz PLC (LON:EVR) and Unilever PLC (LON:ULVR) offsetting loud raspberries for the updates from BT and Shell.

The fourth-quarter trading update from Evraz PLC (LON:EVR) sent the shares to the top of the Footsie leaderboard, with a 3.0% rise. The Russian steel maker reported a 2.1% quarter-on-quarter increase in output in the final three months of 2019.

Unilever PLC’s (LON:ULVR) decision to review its continued ownership of its tea brands had a revivifying effect on the share price, which rose 1.4%.

“Unilever is looking to offload its tea business amid declining demand in developed markets for traditional black tea,” reported markets.com’s Neil Wilson.

“The company is carrying out a strategic review of the business. Surely the move to ever-greater coffee consumption in the West has been a drag on tea sales as we swap out our cup of Assam for giant mugs of Arabica. It comes not long after the disposal of the spreads business which similarly fell prey to changing consumer trends in developed markets,” Wilson ventured.

9.20am: Footsie falls early on

The FTSE 100 index dropped back in early trade on Thursday reflecting weakness in global markets amid worsening fears over the impact of the coronavirus.

Meanwhile, earnings disappointments from oil giant Royal Dutch Shell PLC (LON:RDSA) (LON:RDSB) and BT Group PLC (LON:BT.A) added to the grim mood.    

After over an hour of trading, the UK blue-chip index was down 35 points at 7,448, albeit bouncing off an early session low of 7,402.98.

Connor Campbell, financial analyst at Spreadex commented: “With the coronavirus death toll leaping 29% overnight, the European markets reverted back to panic mode, quickly unravelling the rebound managed in the last couple of sessions.

“The market’s fears weren’t helped by the Fed on Wednesday evening. As the central bank kept rates unchanged, while re-upping its commitment to 2% inflation, Jerome Powell refused to speculate on the full impact of the coronavirus, though he did acknowledge the potential for any economic disruption in China to spill over to the US.”

On currency markets, sterling was around 0.3% lower versus both the euro and the dollar ahead of news due at midday from latest Bank of England Monetary Policy Committee meeting.

Spreadex‘s Campbell said: “It is clearly anxious about this afternoon’s knife edge Bank of England meeting. The big question is, will Mark Carney oversee a nasty goodbye, the MPC cutting interest rates in his last appearance as governor, or will that decision be punted to the Andrew Bailey era? There’s evidence for both, be it the UK’s contracting economy in November or the suggestion of a return to growth by January’s flash PMIs.”

Proactive news headlines:

Belvoir Group PLC (LON:BLV) said its profits in 2019 will be ‘comfortably ahead’ of expectations after revenues surged ahead in spite of the impact of Brexit and the tenant fee ban. Revenue at the letting agency jumped 43% to £19.5m with the property division achieving 6% growth.

Caledonia Mining Corporation PLC (LON:CMCL) (CVE:CAL) saw its shares jump on Thursday after the gold producer said its earnings for 2019 will be substantially higher than market expectations. In a statement, the AIM-listed group said the outperformance was due to the combined effects of the continued strength of the gold price, higher than expected production for 2019 and lower than expected operating costs.

Greatland Gold PLC (LON:GGP) has hailed what it said are “further outstanding drill results” at its Havieron project in Western Australia. The drilling, carried out by Australian operator Newcrest Mining Limited (ASX:NCM), has continued to expand the extent of mineralisation at the project, Greatland said, with the best results including 136 metres at 2.9 grams per tonne of gold and 0.6% copper.

Alien Metals Limited (LON:UFO), the minerals exploration and development company said an induced polarisation survey is to commence soon at its Donovan 2 copper-gold project following a recently carried out a site visit to Mexico. The group said its technical team has decided that the next stage of work will be the ground-based survey designed to aid in defining coherent drilling targets.

ANGLE PLC (LON:AGL) (OTCMKTS:ANPCY) chief executive Andrew Newland said he was “delighted” following “positive discussions” with the US health watchdog that have paved the way for a formal submission for regulatory clearance of its cancer diagnostic. The face-to-face meeting with the US Food & Drug Administration (FDA) took place last week to garner feedback from the FDA, which also answered a number of queries from the AIM-listed med-tech firm.

Keywords Studios PLC (LON:KWS) has reported higher revenues and profits for 2019 despite what it said was a “relatively light year” for the video game industry. The provider of technical and creative services said in a trading update that it expects to report a full-year adjusted pre-tax profit of €41mln, 8% higher than 2018, while revenues are forecast to climb around 30% to €326mln.

Inspired Energy plc (LON:INSE) reported an acceleration in sales growth in the second half of 2019, with the energy consultancy deciding to step up investment to grab opportunities in optimisation services. Total revenue for the calendar year is expected to be up 50%, compared to 33% in the first half of the year and 24% in 2018, with the core corporate division growing 58%.

Falcon Oil & Gas Ltd (LON:FOG, CVE:FO) told investors that drilling operations have now started for the new, replacement, horizontal section in the Kyalla well. The sidetrack well, referred to as ‘Kyalla 117 N2-1H ST2’, will now be drilled horizontally within the Lower Kyalla shale over a lateral length between 1,000 and 2,000 metres. This new section is positioned at a depth of around 1,800 metres.

Seeing Machines Limited (LON:SEE) is expecting that revenues for its second half will “significantly” exceed those from the first six months of its current year. In a trading update for the six months ended 31 December, Paul McGlone, chief executive of the driver monitoring specialist, said the revenue boost will originate from the pipeline developed across its fleet division in the first half, with installations of its systems “accelerating month by month to support the connected unit target for the full year”.

discoverIE Group PLC (LON:DSCV) is on track to deliver full-year earnings in line with the customised electronics maker’s board’s expectations. In a trading update covering the final three months of 2019 – the third quarter of the group’s financial year – the group said sales were up by 6% year-on-year on a constant exchange rates (CER) basis and 3% on a reported basis. Growth in orders was ahead of sales growth.

Echo Energy PLC (LON:ECHO) told investors that the CLix-1001 well, its first in the Palermo Aike area, is now confirmed as successfully encountering its primary exploration target in the Springhill formation. Following further analysis of well data, the company said that the primary target was found some 28 metres higher in the well than anticipated, and, some 58 metres above the interpreted regional water contact zone.

Bahamas Petroleum Company PLC (LON:BPC) has told investors that its hotly anticipated first exploration well is expected to get underway in April. It said that the well, to be called Perseverance-1, will be drilled in the northern segment of the ‘B Structure’ to target some 770mln barrels of recoverable prospective resources, with the ‘upside case’ estimates potentially pitched twice as high.

IronRidge Resources Limited’s (LON:IRR) search for a significant gold deposit in “elephant country” in Côte d’Ivoire has yielded further early success. Following on from some impressive aircore drill results, geologists working on the Zaranou project have uncovered some major gold-in-soil anomalies, the longest of which was 4km.

Benchmark Holdings PLC LON:BMK) has conditionally raised £36.4mln via a share placing and the aquaculture health, nutrition and genetics business intends to raise up to a further £6.6mln by way of an open offer to qualifying shareholders to fund the commercial development of its CleanTreat system. The AIM-listed company said the placing will be at an issue price of 40p per ordinary share, with the open offer to be priced at the same level. Benchmark shares closed trade on Wednesday at 44.50p.

Quadrise Fuels International PLC (LON:QFI) announced that, following a comprehensive audit tender process, its board has approved the proposed appointment of BDO as auditors to the company for the financial year ended 30 June 2020. It said shareholder approval to confirm the appointment of BDO for the financial year ended 30 June 2021 will be sought at the company’s 2020 Annual General Meeting.

Pure Gold Mining Inc. (CVE:PGM) (LON:PUR) announced the appointment of Peel Hunt and Tamesis Partners as its joint corporate brokers with immediate effect.

Anglo African Oil & Gas PLC: (LON:AAOG) said it has issued 12,222,242 new ordinary shares at a price of 0.375p each in settlement of certain creditors.

Tharisa PLC (LON:THS) said shareholders are advised that all the resolutions tabled at the Annual General Meeting of shareholders held on Wednesday, 29 January 2020 were passed by the requisite majority.

Vast Resources PLC (LON:VAST)  says the conclusion of the Tranche 1 drawdown process of the US$13.5mln net Atlas facility under the Bond Issue Deed announced on 24 October 2019 is imminent. The miner anticipates making a further announcement shortly.

Red Rock Resources PLC (LON:RRR) said that at its Annual General Meeting held on Wednesday, all resolutions were passed.

6.40am: Weakness expected

The FTSE 100 is to start Thursday on the back foot as global markets continue to suffer amid escalating coronavirus fears.

CFD and spreadbetting firm IG Markets sees the London index about 49 points lower, with the price called at 7,440 to 7,443.

Wall Street saw a mixed close on Wednesday with the Dow Jones Industrials Average finishing at 28,734, up 0.04%, whilst the S&P 500  closed 0.08% lower at 3,273 and the Nasdaq ended 0.05% higher at 9,275.

In Asia, unsurprisingly, trading volatility was much higher. Stocks slumped following the latest medical update on the coronavirus which has demonstrably gotten worse, with over 7,700 cases now confirmed and death toll having so far reached 170.

Japan’s Nikkei shed 400 points or 1.72% to 22,977, whilst Hong Kong’s Hang Seng dropped 627 points or 2.3% to 26,533. The Shanghai Composite fell by 2.75% to 2,976.

London is set for a busy schedule of corporate announcements with the likes of BT Group PLC (LON:BT), Royal Dutch Shell Plc (LON:RDSB), Unilever PLC (LON:ULVR) and Diageo PLC (LON:DGE) all in the diary.

Let’s not forget today is also one day closer to Brexit and the Bank of England is slated to make its next interest rate decision.

David Madden, analyst at CMC Markets, noted rising recent chatter around an interest rate cut, but, himself suggested policy makers might keep their powder for now.

“There is an argument for the for the UK central bank to cut rates,” Madden said in a note.

“The retail sales report for December showed a 0.6% fall, so consumers are clearly nervous about spending money. The manufacturing sector has been sector has been in contraction for the past eight months. On the other hand, the flash reading of the UK manufacturing PMI and services PMI updates both showed improvements on the previous final readings.

“The unemployment rate is at its lowest rate since the 1970’s, and wages are comfortably above the CPI rate, so workers are getting a decent rise in real wages.

“The Conservative government will release the Budget in March, and it is likely to be pro-business, so the BoE might keep rates on hold for the time being.”

Around the markets:

  • Pound: US$1.3014, down 0.05%
  • Gold: US$1,577, up 0.5%
  • Brent crude: US$59.20, down 0.5%
  • Bitcoin: US$9,313, down 0.34%

Significant events expected on Thursday:

Finals: Unilever PLC (LON:ULVR)

Interims: Diageo PLC (LON:DGE)

Trading announcements: BT Group PLC (LON:BT.A) Royal Dutch Shell PLC (LON:RDSB), Fuller, Smith & Turner PLC (LON:FSTA), Evraz PLC (LON:EVR), St. James’s Place PLC (LON:STJ)

Interims: Rank Group PLC (LON:RNK), Renishaw plc (LON:RSW), Haynes Publishing Group Plc (LON:HYNS), Best of the Best PLC (LON:BOTB),

Economic announcements: Bank of England policy decision, US jobless claims, US GDP

City headlines: