FTSE 100 steady as Bank of England spooks pound
After weeks of US-China trade talks dominating the limelight in the eyes of the market, the Bank of England finally caught investors’ attention and sent Sterling to a two-week low.
Markets had expected the Bank’s Monetary Policy Committee to vote to keep interest rates at 0.75%, and it did.
But investors were more surprised by the vote tally, which revealed a split in opinions, with two dissenting voices against the committee’s decision.
Two members voted to slash rates to 0.5%, while seven voted for them to stay at current levels.
The pound crashed on the news, losing as much as 0.46% of its value against the dollar, at 1.2794.
It later recovered slightly just before markets closed to 1.2821, a 0.25% fall on the day.
“Just as it was looking like the pound was impervious to anything but election news, the Bank of England sprung a surprise,” said Connor Campbell, an analyst at Spreadex.
“The fact that two members of the Monetary Policy Committee actually voted to reduce interest rates this month, the first split decision since June 2018, freaked the pound out.”
However, a rate cut could still be some way off, Mr Campbell said, depending on what happens in the December general election.
The exporter-heavy FTSE 100, which is often buoyed by a cheap pound, advanced, albeit cautiously, 0.13% over the day to 7,406.41.
However, the thawing US-China trade war was not completely absent from the headlines driving markets.
“Trade optimism surrounding the US-China situation has lifted stock market sentiment.
“It was reported that China and the US will remove their respective tariffs when the first phase of the trade deal is signed. Nothing is a done deal but the talks are heading in the right direction,” said David Madden, an analyst at CMC Markets.
It was a busy day for company news.
Sainsbury’s attempts to slash costs by £500 million started in earnest as the supermarket revealed it took a £203 million hit to its balance sheet from a series of store closures.
As a result, pre-tax profits fell to £9 million in the six months to September 21 from £107 million a year ago, although the company insists its plans are on track, with improvements to pricing and product ranges.
Rolls-Royce has cut its profit guidance for the year as it continued to be plagued by problems with its troubled Trent 1000 engines.
Another famous British engineering name, Aston Martin, tumbled to a £92.3 million pre-tax loss for the past three quarters as sales volumes slid on “tough trading conditions” in the UK and Europe.
Paddy Power owner Flutter Entertainment saw revenues jump in the third quarter on the back of improving sales in the US and Australia.
Among these big names from British industry and high streets, a smaller retailer, The Works, managed to grab headlines as it issued a profit warning, partly as a result of falling sales of squishy children’s toys. Shares closed down 42%.
International oil standard Brent crude rose 1.17% to 62.47 dollars.
The biggest risers on the FTSE 100 were RSA Insurance, up 21.2p to 553.40p, Persimmon, up 86p to 2,362.00p, NMC Healthcare, up 63p to 2,408.00p, Evraz, up 9.7p to 385.50p, and Smurfit Kappa, up 66p to 2,760.00p.
The biggest fallers on the FTSE 100 were Hiscox, down 135p to 1,254.00p, Hikma Pharmaceuticals, down 83p to 1,942.00p, Ocado, down 49.5p to 1,281.00p, Fresnillo, down 22p to 683.60p, and Polymetal, down 36.5p to 1,214.50p.