Stocks in London ended lower on Thursday as concerns about conflict in the Middle East continued to dominate sentiment and the Bank of England left interest rates unchanged.
The FTSE 100 index closed down 51.67 points, 0.6%, at 8,791.80. The FTSE 250 ended 216.27 points lower, 1.0%, at 21,073.99, and the AIM All-Share fell 5.17 points, 0.7%, at 758.19.
The London Stock Exchange celebrated the 30th anniversary of AIM on Thursday, calling it a ‘cornerstone’ of the UK’s capital markets.
Since its launch in 1995, AIM has become one of the world‘s most successful growth markets, helping over 4,000 companies raise more than £136 billion.
The Cboe UK 100 closed down 0.7% at 875.37, the Cboe UK 250 ended 1.0% lower at 18,616.57, but the Cboe Small Companies rose 0.5% at 17,008.95.
The decision to hold rates by the BoE’s Monetary Policy Committee was widely expected, although the vote split was slightly more dovish than forecast.
The MPC voted 6-3 for the status quo, with Swati Dhingra, BoE Deputy Governor Dave Ramsden and Alan Taylor preferring a 25 basis point rate cut to 4.00%.
The BoE said there remain ‘two-sided’ risks to inflation meaning ‘a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate.’
The BoE noted loftier food prices could raise ‘inflation expectations, impacting wage and price setting behaviours’.
Bank of England Governor Andrew Bailey said interest rates remain on a ‘gradual downward path.’
Ebury analyst Matthew Ryan noted the vote split on was ‘slightly more dovish than markets had anticipated’.
‘Yet, the BoE still appears to be in no hurry to speed up the pace of policy loosening. Importantly for markets, the phrase that cuts will be both ’gradual and careful’ was retained in the statement - there was some speculation that this could be either tweaked or jettisoned,’ Ryan said.
ING noted past experience has shown that the vote split contains few useful signals.
‘December’s meeting saw a similar 6-3 vote, yet heralded little change in the bank’s overall stance,’ ING explained.
ING said ’rate hawks’ will have a beady eye on oil prices.
A ‘serious spike in oil prices is the most obvious hawkish risk for the UK rate outlook,’ ING said.
Nonetheless, ING expects the BoE to cut interest rates in August.
The oil price rose again amid concerns the situation in the Middle East could worsen.
Brent oil traded higher at $78.59 a barrel late on Thursday from $75.06 on Wednesday as the Israel-Iran conflict continued.
The oil price rise boosted oil majors and FTSE 100 heavyweights BP and Shell which rose 1.4% and 1.1% respectively but weighed on British Airways owner, IAG, down 3.2% and low-cost airline easyJet, down 3.0%, on concerns of rising fuel costs and travel disruption.
Israel’s defence minister Israel Katz said that Iran’s Supreme Leader Ayatollah Ali Khamenei cannot ‘continue to exist’, just days after reports that Washington vetoed Israeli plans to assassinate him, AFP reported.
‘Khamenei openly declares that he wants Israel destroyed he personally gives the order to fire on hospitals,’ Katz told journalists in the city of Holon near Tel Aviv.
‘Such a man can no longer be allowed to exist.’
US President Donald Trump wrote on Tuesday that the US knew Khamenei’s location but would not kill him ‘for now’.
Uncertainty surrounds Trump’s next move amid reports that the US stands ready to intervene in the conflict.
Bloomberg on Thursday reported senior US officials are preparing for the possibility of a strike on Iran in coming days.
In European equities on Thursday, the CAC 40 in Paris closed down 1.1%, as did the DAX 40 in Frankfurt.
Financial markets in the US were closed to mark Juneteenth National Independence Day.
On Wednesday, the Federal Reserve left interest rates unchanged.
In a unanimous vote, the Federal Open Market Committee voted to maintain the target range for the federal funds rate at 4.25-4.50%, the fourth consecutive hold.
In a statement, the FOMC said: ‘Uncertainty about the economic outlook has diminished but remains elevated.’
Fed Chair Jerome Powell said the US central bank is well placed to adjust policy as it continues to assess the impact of US trade policy on the economy.
Powell said the Fed expects a ‘meaningful’ amount of inflation in the coming months and stressed it is important to make sure a ‘one-time increase in inflation doesn’t turn into an inflation problem’.
In the accompanying summary of economic projections, Fed officials predicted two more 25 basis points rate cut in 2025, unchanged from March.
In 2026 and 2027, FOMC officials expect one further cut, toning down its projections in March for two reductions in each year.
The FOMC cut its forecast for economic growth in 2025 to 1.4% from 1.7% in March. Core PCE inflation, the Fed’s preferred inflation measure, is now seen at 3.1% in 2025, up from the 2.8% predicted in March.
The pound was quoted down at $1.3429 at the time of the London equities close on Thursday, compared to $1.3472 on Wednesday. The euro stood lower at $1.1468 against $1.1526. Against the yen, the dollar was trading at JP¥145.65, up compared to JP¥144.65.
On the FTSE 100, fears the Middle East conflict will lead to higher inflation and slower economic growth weighed on mining stocks.
Anglo American fell 3.3%, Antofagasta declined 3.4% and Rio Tinto dipped 2.5%.
Whitbread fell 1.6% after reporting total group sales fell by 3.8% to £710.9 million in the 13 weeks that ended May 29, the first quarter of its financial year, from £739.2 million a year prior, or by 1% on a like-for-like basis.
Total UK sales were down 5.4% to £648.2 million from £685.2 million. Accommodation sales fell 1.8% to £485.0 million from £494.1 million, while food and beverage revenue sales dropped 15% to £163.2 million from £191.0 million.
UK revenue per available room fell 2.4% to £62 in the quarter from £63.54 a year ago.
On the FTSE 250, Hays plunged 10% after saying it expects annual profit to be below market consensus, as the staffing firm grapples with challenging market conditions.
AJ Bell’s Russ Mould said the share price slump implies the jobs market is going from bad to worse.
‘Companies are clearly worried about the economic outlook and they‘re reluctant to take on full-time staff, potentially not replacing anyone lost to natural turnover. At the same time, individuals are worried that if they move job they’ll be in the last in, first out‘ firing line if companies look for new cost savings,’ he added.
Hays said permanent recruitment markets have been particularly hurt, amid ‘low levels of client and candidate confidence’.
Simon Lechipre, analyst at Jefferies, said the weaker than expected performance is particularly negative for Page Group where permanent recruitment makes up 72% of group fees.
Shares in PageGroup fell 8.8% while Robert Walters dropped 4.8%.
Hays expects annual pre-exceptional operating profit of £45 million, below company-compiled consensus of £56.4 million.
The yield on the US 10-year Treasury was quoted at 4.39%, stretched from 4.36%. The yield on the US 30-year Treasury was quoted at 4.89%, widened from 4.86%.
Gold was quoted lower at $3,368.94 an ounce against $3,387.84.
The biggest risers on the FTSE 100 were Melrose Industries, up 13.70 pence at 499.90p, BP, up 5.50p at 392.00p, Bunzl, up 28.00p at 2,250.00p, Shell, up 28.50p at 2,695.50p, and Vodafone, up 0.68p at 75.92p.
The biggest fallers on the FTSE 100 were Persimmon, down 50.00p at 1,317.00p, Antofagasta, down 60.00p at 1,699.00p, Anglo American, down 68.50p at 2,021.50p, IAG, down 10.20p at 309.30p and Airtel Africa, down 5.40p, at 171.20p.
Housebuilder Persimmon’s fall came as it traded ex-dividend.
Friday’s global economic calendar has retail sales and PPI data in Canada, inflation figures in Japan, UK retail sales numbers and the Philadelphia Fed manufacturing index.
The domestic corporate calendar on Friday has full-year results from housebuilder Berkeley Group.
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