FTSE 100 ahead as Bank of England maintains bond buying, while Wall Street set for positive start
- FTSE 100 adds 34 points
- Housebuilders lifted by Crest Nicholson
- Glaxo flat after strategy plans
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.
BoE Votes 8-1 For An Unchanged QE Target
— LiveSquawk (@LiveSquawk) June 24, 2021
BoE’s Haldane Voted To Reduce Asset Purchase Target
BoE: Won’t Tighten Until Clear Evidence Of Progress Towards Goal
— LiveSquawk (@LiveSquawk) June 24, 2021
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
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.
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.
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.