London midday: Stocks cut losses after BoE holds rates steady

(Sharecast News) - London stocks completed erased early losses by Thursday lunchtime after the Bank of England chose to keep interest rates unchanged at its latest policy meeting after data showed a surprise slowdown in inflation. The Monetary Policy Committee decided to maintain the Bank Rate at 5.25% following 14 consecutive meetings to tighten monetary policy since November 2021. Five of the nine members of the committee voted in favour of keeping rates unchanged.

The FTSE 100, which fell to a low of 7,474.7 earlier on in the day, cut losses to trade broadly flat after the announcement. The index hit a fresh four-month high of 7,731.65 the previous session.

Before the MPC decision on Thursday, markets had been pricing in an 20% chance of a pause in the hiking cycle, but a surprise slowdown in inflation reported on Wednesday shifted the balance of probabilities to a 50-50 split.

Gordon Milnes at Investec Real Estate said this was "absolutely the right decision in the face of recent economic data".

"Hopefully the Bank of England can hold their nerve and this is the peak, which will be a welcome boon for investors, developers and lenders. Now we need some further visibility on potential interest rate cuts, which should act as a catalyst for a rapid bounceback in real estate activity levels," he said.

In the US, stock futures were pointing to further losses on Wall Street after the Federal Reserve spooked investors the previous session. Despite leaving interest rates unchanged at the 5.25-5.5% range on Wednesday - as widely expected - the majority of Federal Open Market Committee members indicated that there would likely be a need to tighten monetary policy again this year at one of its remaining two meetings.

Retailers higher, miners fall

UK sportswear retailer JD Sports Fashion saw shares surge after reporting it was still on track to deliver a 5% rise in annual profit. First-half earnings rose by more than a quarter driven by strong sales despite the cost-of-living crisis.

High street peer Next also impressed as it lifted full-year guidance for the third time in four months after better-than-expected summer sales. Pre-tax profits are now forecast to come at £875m from previous guidance of £845m.

Dunelm was rebounding after disappointing the market on Wednesday with its full-year results, in which pre-tax profits fell 8%.

Mining stocks were largely out of favour as investors scaled back their appetite for risk, with dollar strength weighing on the price of metals. Antofgasta, Glencore and Fresnillo were among the worst performers on the FTSE 100.

Ocado was under intense selling pressure as investors took profits following share-price gains earlier in the week after a solid third-quarter trading update from the online grocery group. Exane Paribas analysts cut the stock from 'neutral' to 'underperform' on Thursday, saying the risk-reward is now more balanced after a decent run in the shares since June.

Safety equipment group Halma was lower despite saying it expects deliver good underlying growth in the first half, as it maintained full-year guidance.

Outsourcing group Capita rose after signing two new contracts with the UK and Northern Ireland governments worth a combined £565m.

Hospitality conglomerate SSP Group dropped despite revealing that it would deliver annual revenues and profits at the "upper end of the ranges previously indicated".