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Boost for London market after Bank of England holds fire on rates

Published 15/09/2016

The Bank of England kept interest rates on hold
The Bank of England kept interest rates on hold

The London market closed higher on Thursday, cheering the Bank of England's decision to stand pat on rates after delivering a bumper stimulus package last month.

The FTSE 100 closed near highs of the day, up by 0.9% or 57 points to 6730.3 points, while the pound was hit by US dollar strength as attention turned to the US Federal Reserve's own interest rate decision set to be delivered next week.

Sterling was down by 0.2% at 1.321 against the US dollar, and fell 0.2% against the euro at 1.175.

Stocks were buoyant after the Bank of England kept interest rates on hold following last month's emergency cut to 0.25%, but said a further reduction was still on the cards despite signs of a bounce-back in the economy.

Policymakers said the immediate impact of the Brexit vote was not quite as bad as first feared and now expect ''less of a slowing in UK gross domestic product (GDP) growth'' in the second half of 2016.

Across Europe, the German Dax closed 0.5% higher while the French Cac eked out gains of 0.07%.

In oil markets, Brent crude prices were volatile, but traded near 1.7% higher at 46.70 US dollars per barrel later in the day. Gains were limited by speculation over new oil supply set to come online from Nigeria and Libya.

Strong financial results by Morrisons pulled supermarkets higher on the FTSE 100.

Morrisons bagged a third consecutive quarter of like-for-like sales growth amid a turnaround under chief executive David Potts, and said it has seen "no negative impact" on customer sentiment or behaviour as a result of the EU referendum.

The supermarket said like-for-like sales grew 2% in the second quarter, while pre-tax profit for the six months to July 31 rose 13.5% to £143 million.

Morrisons was the best performing stock on the top tier index, closing up by 7.5% or 14.5p to 208.1p.

Tesco finished close behind, up 5% or 8p to 169.7p. Sainsbury shares were higher by 4.9p at 240p.

Shares in UK database and exhibitions firm Informa rose 34p to 727.5p following news that the firm snapped up US rival Penton Information Services from MidOcean Partners and Wasserstein & Co. in a £1.2 billion deal designed to accelerate its American expansion.

It said the tie-up would create one of the world's largest exhibitions and events companies, with 47% of its annual pro-forma revenues coming from the US.

Shares in clothing retailer Next were dealt a blow, dropping 253p to 4957p after posting a 1.5% drop in pre-tax profits to £342.1 million for the six months to the end of July.

Next says profits were dragged lower by a 16.8% tumble in earnings across its retail shops, warning that trading has remained "challenging and volatile".

The biggest gainers on the FTSE 100 were Morrison Supermarkets up 14.5p to 208.1p , Tesco up 8p to 169.7p , Informa up 34p to 727.5p, and RSA Insurance Group up 21.5p to 530.5p.

The biggest losers on the FTSE 100 were Hargreaves Lansdown down 71p to 1273p, Next down 253p to 4957p, Marks and Spencer Group down 8.4p to 313.4p, and Royal Bank of Scotland (RBS) down 3.2p to 194.2p.

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