• FTSE 100 gains 35 points
  • US stocks advance early on
  • Deliveroo up after court verdict

The FTSE 100 index posted good gains on Thursday supported by a benign statement on monetary policy from the Bank of England, while US markets bounced back after the sell-off caused by the Federal Reserve comments on interest rate hikes last week.

At the close, the UK blue-chip index was 35.91 points, or 0.5% firmer at 7,109.97, not far below the day’s peak of 7,119.41 and well above the session low of 7,070.90.

On Wall Street by London’s close, the Dow Jones Industrials Average was 242 points, or 0.7% higher at 34,116, while the broader S&P 500 index gained 0.5% and the tech-laden Nasdaq Composite rose 0.9%.

Joshua Mahony, senior market analyst at IG, a global leader in online trading commented: “The Bank of England has been one of the main determinants of that positive outlook, with the MPC allaying fears that the recent hawkish shift from the Fed is the first in a wave of many such moves.

“Instead, the Bank of England managed to hold their dovish stance in a more convincing manner, with the outgoing Haldane once again representing the only member to vote for a reduction in the asset purchase programme.”

He continued: “While today’s meeting saw upgrades to growth and inflation projections, there is a feeling that this recent surge in CPI will be temporary in nature. Despite UK inflation rising above the 2% target, it seems the Bank of England members remain steadfast in their position that policy should remain accommodative for now. That dovish stance helped to boost the FTSE 100 in two ways, with the prospect of loose monetary policy lifting stocks and driving the pound lower.”

However, Mahoney noted that economic data out of the US has highlighted the lumpy nature of this recovery, with both jobless claims and durable goods orders falling short of expectations.

He said: “While we had hoped to see proof that last week’s unemployment claims rise was a one-off, we instead saw the rate flat-line with an upward revision to the prior week’s figure. One positive came in the form of the continuing jobless claims figure, with the larger-than-expected decline signalling that there is room for optimism over the jobs market trajectory despite the recent rise in new claims. Despite disappointing initial jobless claims and core durable goods figures, markets are clearly treating bad news as good news given the impact it could have in delaying any monetary tightening.“

4.00pm: Markets happy as rate rise concerns fade

Leading shares continue to be buoyed by the dovish tone from the Bank of England and receding fears of a change in policy from the US Federal Reserve.

The FTSE 100 is currently up 39.42 points or 0.6% at 7113.48, with Wall Street also making good gains.

The Dow Jones Industrial Average is up 0.66% or 222 points while the S&P 500 has added 0.57% and the Nasdaq Composite 0.84%.

Edward Moya at Oanda said: “Wall Street is eyeing record territory after another round of US data suggests the economy is headed in the right direction, but not triggering any fears that policymakers should be rushing to tighten monetary policy.

“There is no rush to remove the punchbowl of stimulus as jobless claims are still elevated and durable goods data suggests manufacturing is still working its way through bottlenecks and supply shortages. It is hard not to be bullish stocks given that the Fed will still remain accommodative a while longer and as infrastructure spending seems inevitable.” 

Back in the UK and the main risers are a mixed bag.

Leading the way is gaming group Flutter Entertainment PLC (LON:FLTR), up 2.74% to 14,235p.

Close behind is miner Anglo American PLC (LON:AAL), benefiting from the continuing strength in commodity prices and adding 2.66% to 2897p.

Royal Mail PLC (LON:RMG) is also one of the leading risers, up 2.63% to 594p. The company plans to recruit 1,000 new apprentice posties as the online shopping boom leads to greater demand for parcel delivery

Elsewhere Deliveroo PLC (LON:ROO) has jumped 8.78% to 273.7p after the Court of Appeal threw out an attempt to have its delivery riders classified as workers.

Concern over the status of its workforce was one of the reasons behind the company’s disastrous flotation in April. If the riders were classified as workers and not self-employed, they would be eligible for standard workplace benefits such as paid holidays, sick leave and a pension. Investors worried the costs of this would cause problems for the company’s business model.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “In its prospectus at IPO, Deliveroo said ongoing success in defending its contractor model could not be guaranteed. The boss of Deliveroo’s rival Just Eat Takeaway, which plans to increase its reach in the UK, has already adopted an employment model for its workers.

“Although the gig economy stronghold is for now staying largely firm, over time there may be fresh capitulations as companies tweak their models to satisfy ongoing concerns under the spotlight being increasingly trained on firms by institutional investors.

“There is now much more attention being placed on environmental, social and governance issues, with workers’ rights increasingly under scrutiny. So while Deliveroo might have still won for now on legal grounds, the jury is still out in the court of public opinion.’’

Just Eat Takeaway.com NV (LON:JET) is also higher, adding 2.22% to 6544p.

Long-dated income provider, Dukemount Capital (LON:DKE) was up 19% at 0.47p after attracting the attention of two investors who have between them spent almost £200,000 on the company’s shares this week after it announced organising a £6.5mln loan facility last week for two gas peaking facilities.

3.15pm: Scottish Mortgage Trust gains from Nasdaq’s gains

One of the beneficiaries of the tech heavy Nasdaq Composite breaking records almost every day is Scottish Mortgage Investment Trust PLC (LON:SMT).

The FTSE 100 company’s shares are up 1.81% or 23p at 1291.5p, helped by its investments in the likes of Amazon and Tesla.

Meanwhile the FTSE 100 itself is still well into positive territory, up 38.13 points or 0.54% at 7112.19.

2.42pm: Wall Street opens in the green despite jobs data miss

The main indices on Wall Street have started Thursday’s session on the front foot despite jobs data falling short of expectations.

Shortly after the opening bell, the Dow Jones Industrial Average was up 0.51% at 34,047 while the S&P 500 climbed 0.56% to 4,265 and the Nasdaq rose 0.64% to 14,363.

Back in London, the FTSE 100 was continuing to push higher in late afternoon, rising 41 points to 7,115 at around 2.40pm.

2.12pm: Sterling slips back further

Back with the Bank of England‘s decision to keep rates and QE steady, a key phrase from its report points to the overall dovish view.

It said: “Policy should… ensure that the recovery was not undermined by a premature tightening in monetary conditions.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Given this overt dovishness, the economic recovery will have to be flawlessly strong for markets’ expectation that Bank Rate will rise to 0.25% in just 12 months’ time to be realised. We continue to expect the MPC to wait until the second half of 2023.”

Laith Khalaf, financial analyst at AJ Bell, said: “Inflation is already above target and the UK economy is racing along, but the Bank of England isn’t taking its foot off the accelerator just yet. That’s because the inflation numbers are comparing activity now with this time last year, when the shock and scale of the pandemic was just sinking into the UK economy. We will only really be able to get an idea whether inflation is a flash in the pan or not at the back end of this year, at which point talk of transitory factors will be starting to wear thin…

“But it’s worth recognising that the data points on which monetary policy is being formulated are pretty shaky right now and subject to considerable change. Indeed, it’s notable the Bank now expects inflation to tick up over 3% in the short term, partly a result of the discounts provided by the Eat Out to Help Out scheme last summer.”

So with interest rate rises not on the agenda, the pound has dipped further against the dollar, down 0.32% at 41.3921.

1.51pm: US markets unmoved by latest data

A host of US data has come in and is generally below expectations, albeit still pretty strong.

Weekly jobless claims fell by 7,000 to 411,000 but this was higher than the forecast figure of 380,000, The previous week’s number was revised up from 412,000 to 418,000.

The four week moving average rose by 1,500 to 397,750.

Meanwhile orders for durable goods – long lasting items such as cars – rose by 2.3% in May to US$253.3bn after a dip in April. But again this was below the estimated 2.8% rise.

 

 

Revised economic growth figures however were bang in line with forecasts:

 

There has been little reaction so far from Wall Street. The Dow Jones Industrial Average is expected to open 0.47% higher, the S&P 500 add 0.49% and the Nasdaq Composite 0.63%.

In the UK the FTSE 100 is up 29.71 points or 0.42% at 7103.77.

12.31pm: US markets await jobless claims

Wall Street is expected to open higher ahead of more key economic figures.

The Dow Jones Industrial Average is set to climb 0.5% or 180 points, while the S&P 500 is showing a 0.47% gain. The Nasdaq Composite, which hit another new peak on Wednesday, is indicated 0.56% higher.

Among the data due, weekly jobless claims are forecast to drop to 380,000 after a surprise jump the previous week to 412,000.

Sophie Griffiths at Oanda said: ” Initial jobless claims are expected to resume the downtrend after an unexpected jump last week. Any sign of further weakness in the labour market recovery could drag the US dollar lower.”

Durable goods orders for May are likely to show a pick-up following a fall in April, when the global semiconductor shortage caused backlogs in the automotive sector.

Meanwhile the FTSE 100 has come off its best levels and is now up 34.98 points or 0.49% at 7109.04

12.13pm: Pound slips after Bank news

The Bank of England has kept interest rates on hold at 0.1% and its bond purchases at £895bn.

Departing member Andy Haldane, the Bank’s chief economist, again voted to reduce the QE programme to £825bn, the only dissenter among the nine members of the Monetary Policy Committee.

 

 

The Bank said that since May, global growth had been stronger than expected.

Pricing pressures had picked up “reflecting strong demand for goods, rising commodity prices, supply side constraints and transportation bottlenecks.”

It said the consumer price index was likely to continue above the Bank’s 2% target and was likely to exceed 3% for a temporary period.

It has revised up its expectations for second quarter GDP by around 1.5% since its May meeting as restrictions on economic activity eased, so that June output was expected to be around 2.5% below its pre-COVID-19 fourth quarter level.

But it said after a period of strong GDP growth and above target inflation, both these will fall back.

And it added that the committee did not intend to tighten monetary policy until there was “clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.”

The pound has dipped 0.2957% against the dollar to $1.3925 while the FTSE 100 has climbed 39.31 points or 0.56% to 7113.37, hitting the day’s high.

11.35am: NatWest among the risers

Financial shares are heading higher ahead of the Bank of England announcement.

Any hint of higher interest rates would benefit the banks, so NatWest Group PLC (LON:NWG) is up 1.37%, Barclays PLC (LON:BARC) is 1.02% better, Lloyds Banking Group PLC (LON:LLOY) has been lifted 0.79% and HSBC PLC (LON:HSBA) is 0.75% higher.

And the FTSE 100 continues to grind out the gains, up 22.76 points or 0.32% at 7096.82.

11.06am: Calm before the Bank

It still seems to be the calm before the, well we will soon see if the Bank of England produces a storm.

There is little expectation of a shock, but then the Federal Reserve managed to catch markets on the hop so the possiblity is still there.

In any event the FTSE 100 is now up 18.67 points or 0.26% at 7092.73.

Chris Beauchamp, chief market analyst at IG, said: “UK markets are calm ahead of the BoE meeting, and while expectations for any change are quite low, investors are on notice for some tweaks to the statement.

“Having been caught napping by the Fed there is a determination not to repeat this, but the circumstances appear rather different this time. For the UK, the end of the furlough scheme threatens to spark a wave of unemployment that will set the UK economic recovery back, and it must be this, rather than recent inflation strength, that will bother UK policymakers.

“Given such an overhang, it is likely that any tweaks to today’s statement will be cosmetic at best, designed to give the BoE as much leeway as possible. Still, this cautious outlook hasn’t affected sterling much, as [the pound] renews its march back to $1.40 and the pound makes some headway against the euro too.”

10.19am: Bunzl on the acquisition trail

Distribution and services group Bunzl PLC (LON:BNZL) is one of the risers in the leading index.

Its shares are up 23p or 0.97% at 2406p after a positive trading update.

It said first half revenues are expected to rise 1% at actual exchange rates and by 6% to 7% at constant rates.

Full year revenues are forecast to be moderately higher compared to 2019, but margins are likely to be slightly ahead of historic levels.

It also bought two companies at the end of May, UK distributor Comax and Harvey Distributors in Australia, and is on the lookout for more.

Chief executive Frank van Zanten said: “Inclusive of these acquisitions the group has now acquired six businesses since the start of the year with a total committed spend of £114mln.

“The pipeline for acquisitions remains active, with discussions ongoing.”

Analyst Robin Speakman at Shore Capital said: “Acquisition activity has continued through the pandemic period and we still anticipate the potential for acceleration as economies globally normalise. With Bunzl’s strong balance sheet and cash flows, this is clearly a positive to our minds.”

10.07am: Pound firm ahead of Bank news

The pound has nudged higher as investors wait to see if the Bank of England becomes more hawkish on interest rates.

Sterling is up 0.03% at $1.3971 ahead of the meeting.

The UK currency’s recent weakness has been more due to the strength of the US dollar in the wake of the Federal Reserve suggesting US interest rates could rise more rapidly than people had been expecting.

But Ipek Ozkardeskaya, senior analyst at Swissquote, believes this may change: “Cable’s recent plunge is mainly due to the US dollar strength following a surprise hawkish shift in the Fed’s tone last week. But the subdued US yields give no way for a further dollar strength right now. Therefore, even a neutral Bank of England should support a move back above the 1.40 mark.”

She also believes that rising interest rates could be good for the UK’s leading share index.

She said: “The FTSE is well positioned to benefit from globally higher interest rates, and the reflation trade, as the index is heavy in banking, energy and mining stocks. I believe price pullbacks in the FTSE are interesting dip buying opportunities to strengthen long positions, and that the second test of the 7200 mark will likely be successful. The FTSE 100 is in a position to return to its pre-pandemic levels, close to 7700 mark, which would be some 5-7% increase from the current levels. “

At the moment the index is heading that way, albeit at a slow pace. It is currently up14.58 points or 0.21% at 7088.64.

9.55am: Ex-divs limit FTSE gains

Leading shares are edging higher as we approach high noon for the Bank of England‘s latest outlook.

The FTSE 100 is now up 13.69 points or 0.19% at 7087.75.

The usual raft of Thursday ex-dividends is helping to limit the gains.

Into this category come United Utilities PLC (LON:UU.), down 3.62% or 37p at 984p, Vodafone PLC, 3.29% or 4.3p lower at 126.36p, British Land PLC (LON:BLND) off 1.89% or 9.8p at 509p and Experian PLC (LON:EXPN), 18p or 0.64% worse at 2788p.

Housebuilders continue to provide support after recent weakness, following good results from Crest Nicholson PLC (LON:CRST), up 4.28% at 448.8p.

So Berkeley Group PLC (LON:BKG) is 2.84% or 131p better at 4750p, whiel Barratt Developments PLC (LON:BDEV) is up 1.35% or 9.4p at 706.2p.

 

8.54am: Investors await Bank of England

The FTSE 100 made a quiet start to proceedings ahead of the Bank of England’s monthly interest call.

While the Bank is likely to stand pat on the cost of borrowing, there appears to be a growing clamour to understand its stance on inflation.

Scrutiny of every comment from US Federal Reserve’s officials appears to have heightened expectations on this side of the Atlantic.

Michael Hewson of CMC Markets made this observation: “It is Andy Haldane’s last [BoE Monetary Policy Committee] meeting as chief economist and he could well go out with a bang given his recently articulated concerns that the UK economy probably needs a tap on the brakes in case it careers off the road.

“In May he was alone in voting to reduce the scale of the ongoing asset purchase program to £100bn, from £150bn, and he’s likely to do the same again, or even be more aggressive in his calls for others to go the same way.

“His comments that the recovery is going gangbusters’ has seen markets start to price in the prospect of a rate hike in 2023, a not unreasonable position given that rates are still well below the levels they were at the beginning of 2020.”

On the market, the builders were back in vogue with Berkeley Group (LON:BKG) leading the risers a day after its prelims, which caused a monetary pause for breath among investors. The shares were up 2.6% with Barratt (LON:BDEV) and Taylor Wimpey (LON:TW.) not far behind.

GlaxoSmithKline (LON:GSK), flat after news of its dividend cut on Wednesday, was upgraded from ‘sell’ by Deutsche Bank.

6.50 am: FTSE 100 called higher 

The FTSE 100 looks set to start Thursday slightly higher ahead of the Bank of England rates decision.

CFD firm IG Markets calls London’s blue-chip benchmark up 3 points, making the price 7,084 to 7,087 with just over an hour to go until the open.

It appears set to be the typical guarded start for a Bank of England day, even if actual decision and changes are quite rare.

Little may change at the central bank today except perhaps messaging.

“In light of recent events and the slight shift in the Federal Reserve’s stance on the timeline of a possible rate rise, today’s Bank of England meeting could have the potential to mark a similar shift in timing with respect to the withdrawal of its own monetary policy emergency measures,” said Michael Hewson, analyst at CMC Markets.

“When the MPC last met in May the mood was notably more upbeat than was the case at the start of the year, with the bank raising its annual GDP forecast for the UK economy from 5% to 7.5%.

“The data since then has improved even further with yesterday’s flash PMI numbers showing rising orders, as well rising input prices which look set to push inflation pressures up even more than they already are.”

Last night, in New York, the Dow Jones fell 71 points or 0.21% to close at 33,874.

The S&P 500 similarly dipped 0.11% to end the session at 4,241 whilst the Nasdaq managed a positive finish, rising 0.13% to 14,271.

The small-cap focussed Russel 2000 index added 0.33% to 2,404.

In Asia, Japan’s Nikkei was sliver lower at 28,862 whilst Hong Kong’s Hang Seng was 0.13% higher at 28,854. The Shanghai Composite was down 0.12% at 3,561.

Around the markets

The pound: US$1.3957, down 0.05%

Gold: US$1,775 per ounce, down 0.08%

Silver: US$25.87 per ounce, down 0.01%

Brent crude: US$75.30 per barrel, up 0.6%

WTI crude: US$73.18 per barrel, up 0.4%

Bitcoin: US$32,787, down 4.09%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mostly lower on Thursday after the S&P 500 on Wall Street snapped its two-day winning streak overnight.

The markets are witnessing the after-effects of a surprise projection for rate increases as soon as 2023 by the U.S. Federal Reserve which knocked stock and boosted the dollar.

In Japan, the Nikkei 225 slipped 0.06% while South Korea’s Kospi rose 0.22%.

The Shanghai Composite in China fell 0.08% and Hong Kong’s Hang Seng index gained 0.15%

Shares in Australia dipped, with the S&P/ASX 200 trading 0.39% lower.

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