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London close: Stocks bounce on foreign interest, dip in Sterling
London stocks managed to stage a small bounce on Tuesday, with sentiment boosted by the second bid for a British firm in as many days from across the Channel.
Also helping to put a bid into equities was a softer-than-expected UK inflation print for February that left analysts a tad more divided on the outlook for a hike in Bank Rate come May.
Against that backdrop, the FTSE 100 ended up by 0.26% to 7,061.27, while the pound was down 0.19% versus the dollar at 1.3998.
Meanwhile, Sterling was up 0.44% against the euro at 1.1419 as it still enjoyed some support from the agreement on terms for a Brexit transition period agreed the day before.
Data released on Tuesday morning showed UK inflation cooled off more than expected last month, with February's consumer price index rising 2.7% compared to the same month last year, down from 3.0% a month earlier and lower than the market's expectation of 2.8%.
The fall was due to a decline in core CPI, which excludes more volatile prices such as fuel as food. The Office for National Statistics revealed core CPI eased to 2.4% in February from 2.7% in January, again lower than the market consensus, which had pointed to 2.5%.
CPIH, the measure preferred by the ONS as it takes account of owner-occupiers' housing costs, came in at 2.5% versus the 2.6% expected. The much maligned retail price index was up 3.6% year on year, down from 4.0% and below the 3.7% forecast.
Ahead of the BoE's monetary policy committee meeting this week, inflation came in well below the MPC's 2.9% forecast for the month, which opened the doors to speculation around policymaker's plans for interest rates and the market's expectations of a May hike.
Samuel Tombs at Pantheon Macroeconomics said the MPC probably wouldn't change course if February's CPI figures had been the only data to surprise to the downside.
"But since the MPC last met in February, GDP, labour market and retail sales data all have been weaker than the consensus anticipated, while the latest PMIs and the recent heavy snow suggest that Q1 GDP growth will undershoot the MPC's forecast. Accordingly, we think that the MPC will refrain from ratcheting up its guidance and won't clearly signal an imminent rate rise in the minutes of Thursday's meeting, prompting markets to reassess their view that the chances of a May rate hike are as high as 80%."
However, Capital Economics economist Paul Hollingsworth said the CPI outcome does not significantly reduce the chance of an interest rate hike in May.
In corporate news, housebuilder Bellway rose after saying it was on track to build more than 10,000 homes in a year for the first time as half year pre-tax profits rose 16.6% to £288.7m. Peer Crest Nicholson also rallied on the news.
British Land, the retail and office property developer, was top of the FTSE leaderboard with M&A interest in the sector still piqued by the offer for retail developer Hammerson from France's Klepierre during the previous session.
In other M&A news, engineering group Fenner surged after agreeing to be bought by French tyre manufacturer Michelin in a deal worth around £1.3bn.
Glencore shares on the other hand slipped after it agreed to buy Rio Tinto's 82% interest in the Hail Creek coal mine and adjacent coal resources, as well as its 71.2% interest in the Valeria coal resource in central Queensland for $1.7bn.
TUI was higher as the tour operator said it continued to see strong growth in cruises and unveiled plans to boost capacity.
On the downside, Wood Group sank after saying it expects to see modest earnings growth in 2018, while Imperial Brands edged down after announcing the disposal of its other tobacco products business in the US.
Industrial property investor Hansteen Holdings also lost ground as it said it would return £145m in cash to shareholders and posted an 87% jump in full-year IFRS profit to £204.3m.
Engineer GKN - which is currently fending off a hostile bid from Melrose Industries - recovered following an early dip as it said the turnaround specialist's claims about its pension schemes were "misleading".
Ocado was on the back foot as it said first-quarter revenues fell from the preceding quarter but improved compared to the start of last year as heavy snow across Britain disrupted the final week.
Online gaming specialist 888 Holdings retreated despite reporting full-year earnings ahead of expectations, while plastic pipe-maker Polypipe was down after it said that a strong UK performance against a challenging backdrop helped it to record a 3.9% rise in full year pre-tax profits to £55.6m.
In broker note action, Gem Diamonds and Petra Diamonds were lifted to 'buy' at Citi, while Micro Focus was upgraded to 'neutral' at Credit Suisse and IMI was boosted to 'neutral' at UBS.
National Grid was initiated at 'buy' at Societe Generale, while Fenner was lifted to 'hold' at Investec.
Barclays meanwhile was downgraded to 'hold' over at Investec.
Market Movers
FTSE 100 (UKX) 7,061.27 0.26%
FTSE 250 (MCX) 19,723.56 0.15%
techMARK (TASX) 3,227.81 -0.45%
FTSE 100 - Risers
Royal Bank of Scotland Group (RBS) 263.90p 2.29%
TUI AG Reg Shs (DI) (TUI) 1,568.00p 2.28%
London Stock Exchange Group (LSE) 4,036.00p 1.94%
Old Mutual (OML) 247.50p 1.94%
Evraz (EVR) 418.30p 1.70%
Rentokil Initial (RTO) 269.40p 1.70%
Johnson Matthey (JMAT) 3,177.00p 1.70%
Taylor Wimpey (TW.) 188.10p 1.54%
St James's Place (STJ) 1,137.00p 1.52%
Berkeley Group Holdings (The) (BKG) 3,825.00p 1.43%
FTSE 100 - Fallers
Paddy Power Betfair (PPB) 7,425.00p -2.88%
Just Eat (JE.) 715.00p -2.80%
Centrica (CNA) 132.75p -2.17%
WPP (WPP) 1,151.00p -2.13%
Micro Focus International (MCRO) 991.40p -1.94%
United Utilities Group (UU.) 677.40p -1.85%
Fresnillo (FRES) 1,166.00p -1.81%
Imperial Brands (IMB) 2,372.50p -1.72%
Mediclinic International (MDC) 570.80p -1.42%
Smurfit Kappa Group (SKG) 3,042.00p -1.17%
FTSE 250 - Risers
Fenner (FENR) 612.50p 24.85%
IP Group (IPO) 108.00p 5.88%
Softcat (SCT) 679.00p 5.11%
Hastings Group Holdings (HSTG) 271.60p 3.59%
Bellway (BWY) 3,162.00p 3.48%
TBC Bank Group (TBCG) 1,876.00p 3.19%
Nex Group (NXG) 899.00p 3.10%
SSP Group (SSPG) 631.00p 3.02%
ZPG Plc (ZPG) 331.80p 2.98%
Virgin Money Holdings (UK) (VM.) 272.20p 2.87%
FTSE 250 - Fallers
Sophos Group (SOPH) 416.60p -9.24%
Wood Group (John) (WG.) 597.60p -6.80%
888 Holdings (888) 277.80p -6.63%
Polypipe Group (PLP) 379.00p -4.63%
Capita (CPI) 153.30p -3.65%
Clarkson (CKN) 3,225.00p -3.60%
Dixons Carphone (DC.) 182.00p -3.27%
Renewi (RWI) 82.40p -2.94%
Inmarsat (ISAT) 382.00p -2.68%
CLS Holdings (CLI) 226.50p -2.58%