FTSE rallies on rate outlook and strong company updates / Image Source: Adobe

Stocks in London extended gains at midday as the Bank of England left interest rates unchanged, with no officials now deeming a rate rise necessary.

Sterling was quoted at $1.2744 shortly after midday on Thursday, higher than $1.2717 at the London equities close on Wednesday. Before the decision, the pound was trading at $1.2753.

The FTSE 100 index was up 113.17 points, 1.5%, at 7,850.55. The FTSE 250 was up 186.65 points, 1.0%, at 19,671.05, and the AIM All-Share was up 4.66 points, 0.6%, at 740.25.

The Cboe UK 100 was up 1.3% at 785.16, the Cboe UK 250 was up 0.8% at 17,075.86, and the Cboe Small Companies was down 0.5% at 14,709.26.

In European equities on Thursday, the CAC 40 in Paris was down marginally, while the DAX 40 in Frankfurt was up 0.5%.

The Bank of England left interest rates unchanged at a 15-year high on Thursday but there was ’dovish’ twist to the voting make-up, as two members of the Monetary Policy Committee dropped their call for rates to rise.

At its March meeting, the BoE kept the benchmark bank rate at 5.25%. It is the fifth successive hold, following one in September, which ended a streak of 14 consecutive hikes since December 2021, and three more in November, December and February. The BoE had rapidly increased bank rate from a Covid-19-induced low of 0.10%.

But there was a marked shift in the voting pattern with eight members of the MPC voting to leave interest rates unchanged with hawks Jonathan Haskel and Catherine Mann no longer recommending rates be increased.

Andrew Bailey, Sarah Breeden, Ben Broadbent, Megan Greene, Jonathan Haskel, Catherine Mann, Huw Pill and Dave Ramsden voted to leave interest rates unchanged. Swati Dhingra dissented, sticking to her view that rates should be cut by 25 basis points to 5%.

At the February meeting, six members of the MPC voted to keep interest rates unchanged.

Jonathan Haskel and Catherine Mann pressed the case for rates to be increased by 25 basis points, while Swati Dhingra suggested a 25bps cut, meaning a two-six-one division.

The BoE’s interest rate decision follows the US Federal Reserve’s on Wednesday.

The Fed left interest rates unmoved, as expected, while its latest set of projections still suggest three cuts will be in the offing this year. The central bank’s federal funds rate range was unmoved at 5.25%-5.50%.

Fed Chair Jerome Powell refrained from giving a steer on when interest rates would be cut after projections showed three reductions are still on the cards in 2024.

‘It didn’t matter that yesterday’s decision was to leave rates untouched, the market is focused on what might happen next and any fears that the Fed might become even more stubborn over changing monetary policy appear to have been blown out of the water,’ said AJ Bell’s Russ Mould.

On the back of the decision, gold rallied to a fresh record above $2,200 on Thursday. Gold was quoted at $2,207.56 an ounce, higher against $2,157.96.

Stocks in New York were called higher, after Wednesday’s rally. The Dow Jones Industrial Average was called up 0.2%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 0.7%.

The euro stood at $1.0915, against $1.0856. Against the yen, the dollar was trading at JP¥150.98, compared to JP¥151.61.

In the FTSE 100, Next surged 5.2%.

Statutory pretax profit in the 52 weeks to January 27 rose 17% to £1.02 billion from £869.3 million the year prior. The retailer said this included a £109 million exceptional gain from the Reiss acquisition, bought last September.

Excluding this, and brand amortisation, pretax profit climbed 5% to £918 million from £875 million last year, £3 million ahead of previous guidance.

Next said total group sales climbed 5.9% to £5.84 billion from £5.52 billion with Next full price sales up 4.0%.

3i jumped 5.0%.

The private equity and venture capital investor said its largest investee Action is off to a ‘strong start’ this year, and said its other portfolio companies are showing ‘overall resilience’.

In the FTSE 250, Dowlais lost 5.2%.

The automotive engineering spin-off of Melrose Industries, which listed in London back in April, said pretax loss widened in 2023 to £522 million from £63 million the year before. This resulted from a goodwill impairment of £449 million in 2023 compared to no such cost in 2022.

Revenue, however, rose by 5.7% to £4.86 billion from £4.60 billion a year prior, due to volume growth in its Automotive division, as well as inflation recoveries across the firm.

Looking ahead, Dowlais said it expects its 2024 revenue to be similar to that of 2023, noting expected industry-wide declines in global light vehicle production. It also said it expects its operating profit to be ‘modestly second half weighted’.

On AIM, Cap-XX surged 56%.

The manufacturer of supercapacitors for portable electronic devices SAID that it has been signed a settlement agreement with Tesla.

‘Whilst the terms of the settlement agreement are confidential, they do not involve payments to Tesla that the board of CAP-XX considers to be material to the company,’ Cap-XX says.

Back in September 2019, Cap-XX alleged that Maxwell Technologies had directly and indirectly infringed on CAP-XX’s patents for several capacitor products. Maxwell, a California-based manufacturer of energy storage and power delivery products, was acquired by Tesla in 2019 for $218 million.

However, last year, Tesla filed a counter complaint against Cap-XX in a US District Court, alleging infringement of two patents by Cap-XX.

Brent oil was quoted at $85.77 a barrel at midday in London on Thursday, down from $85.93 late Wednesday.

Still to come on Thursday’s economic calendar, there is the weekly US initial jobless claims report. There is also a flash composite PMI reading from the US.

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Issue Date: 21 Mar 2024