Blue chips in favour ahead of likely Bank of England interest rates cut

Independent

3 days ago

The FTSE 100 closed higher on Wednesday ahead of an expected interest rate reduction by the Bank of England on Thursday.
The FTSE 100 index closed up 21.58 points, 0.2%, at 9,164.31.
The FTSE 250 ended 24.19 points higher, 0.1%, at 21,925.88 and the AIM All-Share finished up 0.87 of a point, 0.1%, at 764.35.
The Bank of England is expected to maintain its quarterly pace of interest rate cuts so far in 2025 with a further quarter-point reduction on Thursday, as it maintains a balance between the trade-off of elevated inflation and softening growth and a cooling labour market.
The UK's central bank held interest rates in June at 4.25%, after a 25 basis points cut in May.
This followed interest rates cuts in February this year, and November and August 2024, when the base rate was first cut from 5.25%.
Analysts at Citi said: 'We expect the MPC to cut the bank rate by 25bps to 4.0%. This outcome is largely consensual by now and priced accordingly. This, however, is where the clarity ends.
'There is little consensus regarding the expectations for content and tone of the MPC communication; the vote split in the committee; the forecast updates; and of course, the subsequent rate path.
'Unless the MPC actively attempts to narrow the range of expectations by displaying a stronger degree of agreement, this situation might not change much after Thursday.'
At its June meeting, the nine-member monetary policy committee voted 6-3 in favour of a hold.
This time around, analysts expect Catherine Mann to vote for the status quo, with Swati Dhingra likely to put the case for a larger 50 basis points cut.
Morgan Stanley said BoE chief economist Huw Pill could vote for a cut 'but our level of confidence is not high'.
In addition, Morgan Stanley said Alan Taylor could join Dhingra in voting for a 50bp reduction.
In Europe, the CAC 40 in Paris edged up 0.2%, while the DAX 40 in Frankfurt rose 0.3%.
In New York, the Dow Jones Industrial Average was up 0.3%, the S&P 500 was 0.6% higher, and the Nasdaq Composite advanced 0.8%.
Stocks received some support as US President Donald Trump claimed that Washington was 'very close to a deal' to extend a China tariffs truce provided some optimism.
Dozens of economies around the world including the EU and India are set to face higher US tariffs on Thursday, as Mr Trump's long-threatened 'reciprocal' duties over trade practices he deems unfair take effect.
AJ Bell analyst Danni Hewson said an agreement between Washington and Beijing would 'remove the last remaining big uncertainty around tariffs as a 12 August deadline approaches'.
Mr Trump on Wednesday imposed an additional 25% tariff on Indian goods over New Delhi's continued purchase of Russian oil, a key revenue source for Moscow's war in Ukraine.
The tariff is set to take effect in three weeks and would be added on top of a separate 25% tariff entering into force on Thursday.
Weak economic data on Tuesday raised concerns of an economic slowdown in the US.
But Kathleen Brooks, research director at trading group XTB, said 'decent' corporate results in the US and Europe were overshadowing these concerns and the impact of Mr 'Trump's continuing obsession with tariffs'.
In a Tuesday interview with CNBC, Mr Trump said he was looking at hitting pharmaceuticals with tolls that eventually reach 250%, while semiconductors were also in the firing line.
The pound rose to 1.3343 dollars late on Wednesday afternoon in London, compared to 1.3301 dollars at the equities close on Tuesday.
The euro traded at 1.1639 dollars, higher against 1.1579 dollars. Against the yen, the dollar was trading lower at 147.34 yen compared to 147.42 yen.
The yield on the US 10-year treasury was at 4.22%, widened from 4.20%. The yield on the US 30-year treasury was 4.81%, stretched from 4.77%.
On the FTSE 100, Hiscox rose 9.4% as it announced better-than-expected first-half profit and increased its share buyback by 100 million dollars.
The Bermuda-based specialist insurer posted pretax profit of 276.6 million dollars for the six months that ended June 30, down 2.4% from 283.5 million dollars a year before, but 30% ahead of 212 million dollars Visible Alpha consensus.
'We have delivered a strong performance in the first half with profitable growth in each of our businesses,' said chief executive Aki Hussain.
In addition, Hiscox increased the size of its share buyback to 275 million dollars from 175 million dollars.
Meanwhile, Guinness owner Diageo, up 3.9%, and oil major BP, up 3.2%, extended gains after Tuesday's well received earnings.
But Coca-Cola Europacific Partners slumped 9.2% as it cut annual revenue guidance despite a 'solid' first half for the soft drink bottler.
The company, which operates in over 30 markets including Australia, Germany, Great Britain and Spain, now expects revenue growth between 3% and 4%, a downgrade from its prior expectation of 4% growth for 2025.
Elsewhere, British Airways owner IAG fell 2.0% after UBS downgraded to 'sell' from 'neutral'.
IAG has flown high in the last 12 months with shares more than doubling.
But UBS suggested this could be as good as it gets, citing concerns over likely slowing momentum in profit growth, North Atlantic yield progression, the UK economic backdrop and changes in the Avios loyalty programme.
On the FTSE 250, Telecom Plus climbed 2.9% as it reported the integration of TalkTalk customers was going well but TP ICAP fell 8.1% as profit fell short of City hopes.
The interdealer broker said pre-tax profit in the first half of 2025 edged up 2.5% to £123 million from £120 million a year prior.
Adjusted earnings before interest and tax advanced 8.2% to £184 million from £170 million, though Shore Capital Markets said the outcome fell short of consensus of £189 million.
Brent oil was quoted higher at 68.31 dollars a barrel in London on Wednesday, up from 68.04 dollars late on Tuesday.
Gold eased to 3,375.48 dollars an ounce against 3,385.82 dollars.
The biggest risers on the FTSE 100 were Hiscox, up 119.0 pence at 1,379.0p, Fresnillo, up 135.0p at 1,655.0p, Diageo, up 79.5p at 1,983.5p, BP, up 12.90p at 430.35p and London Stock Exchange, up 296.0p at 10,100.0p.
The biggest fallers on the FTSE 100 were Coca-Cola Europacific Partners, down 680.0p at 6,710.0p, Coca-Cola HBC, down 270.0p at 3,652.0p, Glencore, down 16.3p at 284.75p, Relx, down 168.00p at 3,646.0p and Pearson, down 43.5p at 1,083.5p.
Thursday's local corporate calendar sees half year results from bookmaker Flutter Entertainment, hotel operator InterContinental Hotels Group and advertising group WPP.
The global economic calendar on Thursday has the UK interest rate decision and weekly jobless claims data in the US.