(Alliance News) - Stocks in London ended mixed on Thursday after the Bank of England downplayed the threat of a sustained rise in inflation, following a hawkish pivot from the US Federal Reserve last week.
The FTSE 100 index closed up 35.91 points, or 0.5%, at 7,109.97. The FTSE 250 index ended down 149.30 points, or 0.7%, at 22,510.12. The AIM All-Share index rose 7.39 points, or 0.6%, to close at 1,238.48.
The Cboe UK 100 index closed up 0.4% at 708.50. The Cboe 250 ended down 0.6% at 20,247.10, the Cboe Small Companies shed 0.5% at 15,330.40.
In Paris the CAC 40 ended up 1.2%, while the DAX 30 in Frankfurt ended up 0.9%.
IG Group's Josh Mahony said: "Markets throughout Europe and the US are enjoying one of the more memorable days in a week that has largely been dominated by indecision and uncertainty. 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.
"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."
In the FTSE 100, Bunzl closed up 0.7% after the distribution firm said it has seen "good overall growth" in its first half, with a recovery in its base markets helping to offset a decline in Covid-related orders.
Revenue for the period ending June 30 is tipped to rise 1% year-on-year, and by around 6% to 7% at constant exchange rates. The firm in 2020 got a boost from sales of Covid-19 personal protective equipment such as gloves, masks and sanitisers.
At the other end of the large-caps, Vodafone and United Utilities ended the worst performer, down 4.1% and 3.0% respectively after the stocks went ex-dividend, meaning new buyers no longer qualify for the latest payout.
In the FTSE 250, Chrysalis Investments ended the best performer, up 4.9%, after it invested a further GBP35 million in upstart lender Starling Bank, in a funding round valuing the challenger bank at GBP1.3 billion.
Crest Nicholson finished 1.1% higher after the housebuilder declared an interim dividend as it swung back to profit and lifted its full-year outlook.
For the six months to April 30, the housebuilder swung to pretax profit of GBP36.3 million, compared to a GBP51.2 million pretax loss in the same period the year before.
The Surrey, England-based firm said revenue in its first half increased to GBP324.5 million, up 35% from GBP240.0 million year-on-year.
The FTSE 250-listed company reinstated its dividend, declaring an interim payout of 4.1p, "reflecting confidence in outlook". The company declared no dividend for financial 2020, compared to 11.2p the year before.
At the other end of the mid-caps, John Wood ended the worst performer, down 9.8%. The energy industry support services company said revenue and profit is set to fall in the first half of 2021, but kept its forecast unchanged as it sees improving momentum for the rest of the year.
Like-for-like revenue will plunge 21% year-on-year to USD3.2 billion from USD4.01 billion, the energy industry support services company said in a trading update, citing the "impact of Covid-19".
Elsewhere, Deliveroo closed up 9.3% after the UK Court of Appeal ruled that the riders of Will Shu's food delivery are not workers and are therefore not entitled to collective bargaining rights.
The pound sank against the dollar after the Bank of England left interest rates unchanged and took a relaxed view on the UK inflationary outlook.
Sterling was quoted at USD1.3900 at the London equities close, down sharply from USD1.3965 at the close Wednesday.
The UK central bank kept the Bank Rate at its historic low of 0.1% and maintained its Monetary Policy Committee voted eight to one to maintain asset purchases at the current level of GBP895 billion. Outgoing Andy Haldane was, once again, the sole dissenter in his final meeting as a member of the MPC.
Most MPC members felt they should "lean strongly against downside risks to the outlook and ensure that the recovery was not undermined by a premature tightening in monetary conditions", the BoE said.
In addition, the BoE insisted that soaring inflation should be only temporary despite a bigger than expected leap in the cost of living as the UK's economic recovery gathers speed.
The central bank said it now expects UK growth to surge by 5.5% in the second quarter as it recovers from a lockdown-hit start to the year.
In addition, the BoE warned near-term pressure on prices could "prove somewhat larger than expected", forecasting that inflation will rise above 3.0% for a temporary period.
However, the BoE was unconcerned that consumer price inflation breached its 2.0% target, insisting the spike is set to be only "transitory". UK consumer prices jumped in May to 2.1%, official figures last Wednesday showed, with inflation exceeding the BoE's target for the first time in nearly two years.
Analysts at ING commented: "The Bank of England's latest message is a cautiously upbeat one, though it's clear that policymakers are essentially in a holding pattern for the time being. The central bank is caught between higher-than-expected inflation and encouraging activity data, and mounting uncertainty surrounding Covid-19.
"The lack of stronger hints about a rate hike timing is arguable because there's no real need to guide markets at this stage. The Bank's May projections, which were based on roughly 20 basis points of tightening over two years, showed inflation roughly at target over the medium-term. That's an implicit way of saying that market pricing was broadly right, and since then, markets have brought forward their expectations and are now pricing two rate hikes by the middle of 2023."
The euro stood at USD1.1930 at the European equities close, down from USD1.1947 late Wednesday. Against the yen, the dollar was trading at JPY110.86, flat from JPY110.85 late Wednesday.
Stocks in New York were higher at the London equities close as investor digested a batch of mostly upbeat economic data.
The DJIA was up 0.6%, the S&P 500 index up 0.7% and the Nasdaq Composite up 0.8%.
The latest US initial jobless claims figure fell but came in higher than expected in the week just gone, figures from the Department of Labor showed, while separate numbers confirmed the country's economy grew on an annual basis in the first quarter.
Numbers showed that in the week ended June 19, the number of first-time claims for unemployment benefits totalled 411,000, down from the previous week's revised level of 418,000, but topping market expectations of 380,000.
In addition, the third gross domestic product estimate for the first quarter affirmed earlier forecasts. Numbers from the Bureau of Economic Analysis confirmed the US economy grew 6.4% at an annual rate in the first quarter. This compares to 4.3% growth in the fourth quarter of 2020.
Brent oil was quoted at USD75.50 a barrel at the equities close, down from USD75.65 at the close Wednesday.
Gold was quoted at USD1,779.00 an ounce at the London equities close, lower against USD1,788.30 late Wednesday.
The economic events calendar on Friday has Germany consumer climate survey at 0700 BST and US personal consumption expenditure index figures for May at 1330 BST - the core PCE reading is the Federal Reserve's preferred gauge of inflation.
There are no events scheduled in the UK corporate calendar on Friday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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