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London's blue chip index recorded a strong session on Thursday, after sterling started to slide following rate hikes from two major central banks.
As a result of the pound's weakness, the FTSE 100 outperformed European peers - which saw gains kept to a minimum as peace talks between Russia and Ukraine have yielded little progress so far.
The FTSE 100 index closed up 93.66 points, or 1.3%, at 7,385.34 on Thursday. The mid-cap FTSE 250 index ended up 70.15 points, 0.3%, at 20,975.69. The AIM All-Share index rose 10.02 points, or 1.0%, at 1,025.33.
The Cboe UK 100 index rose 1.1% at 733.83. The Cboe 250 added 0.4% at 18,536.52, and the Cboe Small Companies closed up 1.1% at 14,668.45.
In mainland Europe, the CAC 40 stock index in Paris closed up 0.4%, but the DAX 40 in Frankfurt ended down 0.4%.
The BoE raised the Bank Rate by 0.25 percentage point, to 0.75% in a bid to tame rampant inflation. Bank Rate is now at its pre-Covid level, having been cut as low as 0.10% after the onset of the pandemic.
The BoE said some further modest tightening may be appropriate in coming months, but acknowledged there were ‘risks on both sides of that judgement’ depending on how medium-term prospects for inflation evolve.
It was a ‘dovish’ rate hike, analysts at Lloyds Bank commented.
‘While the outturn was in line with both market and economists' expectations, it was notable that both the Statement and Minutes of the meeting seemed to take a more cautious line on further policy changes compared to that seen previously,’ Lloyds analysts added.
The pound was quoted at $1.3155 late Thursday, down from $1.3207 prior to the Bank of England decision, but still up from $1.3098 at the London equities close Wednesday.
London-listed financial stocks closed lower amid the slightly dovish messaging from the central bank. NatWest fell 3.9% and Lloyds Banking lost 1.2%.
On Wednesday, the Federal Reserve enacted its first interest rate hike since 2018 and projections indicate there could be six more increases to come before the end of 2022. The US central bank raised the federal funds rate range to 0.25% to 0.50%, as widely forecast by the market.
The euro was priced at $1.1113, higher against $1.1005 late Wednesday. Against the Japanese yen, the dollar was trading at JP¥118.44, down from JP¥118.50 late Wednesday.
Gold prices rose, as the dollar struggled to make headway post-Fed. The precious metal rose to $1,942.97 an ounce late Thursday in London, from $1,908.85 at the same time on Wednesday.
Oil prices increased as geopolitical tensions continue to mount. North Sea benchmark Brent fetched $106.62 a barrel late Thursday, up from $99.33 late Wednesday.
Russia is pretending to negotiate with Ukraine, while pursuing the invasion of its neighbour in line with a brutal strategy it has used elsewhere, French Foreign Minister Jean-Yves Le Drian said Thursday.
Ukraine, by contrast, ‘is engaging in the talks responsibly and with an open mind’, he added.
The office of Ukrainian President Volodymyr Zelensky on Wednesday rubbished the Kremlin's proposal for its neighbour to become a neutral country like Sweden or Austria, saying Kiev would need ironclad guarantees of its security.
The fallout from the war in Ukraine could reduce global economic growth by ‘over one percentage point’ in the first year after the invasion, the OECD warned in a report on Thursday.
The impact ‘if sustained’ would produce ‘a deep recession in Russia, and push up global consumer price inflation by approximately 2.5 percentage points’, the group of developed economies said in its report.
Equities in New York were higher at the time of the London close. The Dow Jones Industrial Average was up 0.4%, the S&P 500 was 0.5x% higher and the Nasdaq Composite added 0.3%.
In London, OSB Group jumped 14%, the best mid-cap performer.
The specialist lender's robust annual results and share buyback announcement meant it bucked a trend of financial stocks closing lower on Thursday post-BoE.
OSB's net interest income for 2021 grew 24% to £587.6 million from £472.2 million in 2020, with total income rising 24% to £629.0 million from £508.6 million. Pretax profit surged 78% to £464.6 million from £260.4 million.
OSB declared a total dividend of 26.0 pence per share, up from 14.5p paid out in 2020.
In addition, OSB said it intends to commence a share repurchase programme to return up to £100 million to shareholders, starting on Friday.
Among large caps, Ocado tumbled 9.1%. Ocado Retail, the online grocery joint venture between Ocado Group and Marks & Spencer, warned of slowing revenue growth and rising inflation.
M&S shares closed down 2.9%.
Ocado Retail said revenue declined by 5.7% in the 13 weeks that ended February 27 from a year before but was up 32% from 2020.
Retail revenue fell to £564.7 million from £599.1 million a year before. Average orders per week rose by 12% to 367,500 from 329,500, but average basket size shrank by 15% to £124, ‘as customer behaviours return towards pre-Covid levels’.
Looking ahead, Ocado Retail expects revenue growth of 10% for the full-year, though this should in the high-teens toward the end of the year, it said. Meanwhile, profit margins will be hurt by food and energy price inflation.
Deliveroo rose 6.4%. The food delivery company laid out a ‘path to profitability’, targetting breakeven in roughly two years.
For 2021, revenue was £1.82 billion, up 57% from £1.16 billion in 2020, but Deliveroo's pretax loss widened to £298.2 million from £212.6 million.
Deliveroo expects to reach adjusted earnings before interest, tax, depreciation and amortisation breakeven at some point in the second half of 2023 or first half of 2024.
Edison Group analyst Neil Shah commented: ‘Deliveroo will likely face an uncertain year ahead, with the impending cost of living crisis and inflationary prices potentially weakening the appetite for takeaway meals.’
Friday's economic calendar as EU trade data at 1000 GMT. In the UK political front, the Conservative Party spring conference begins, with Chancellor Rishi Sunak delivering a speech.
The local corporate calendar has annual results from advertising company S4 Capital, half-year numbers from pub operator JD Wetherspoon and a trading statement from financial services firm Investec.
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