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London midday: Stocks tick higher but M&S, Halfords, Inmarsat in the red
London stocks maintained their upward momentum as midday passed on Tuesday in spite of the pound popping up as Bank of England policymaker Gertjan Vlieghe predicted up to six interest rates in the next three years, with a raft of corporate news also keeping things interesting.
The FTSE 100 was up 0.1% to 7,869.76, making fresh highs after a record close on Monday, while the pound was up 0.1% against the euro at 1.1394 and 0.2% firmer versus the dollar at 1.3458.
Chris Beauchamp, chief market analyst at IG, said: "Record highs on the FTSE 100 are becoming a daily occurrence it seems, as the index edges on further towards the 8,000 mark. At the rate it's going, we should hit this round number by Thursday, if not earlier. Little has disturbed this trend over the past two months, proving that even this long-established bull market can deliver remarkable surprises. What makes it more fascinating is of course that it comes despite political ennui, Brexit turmoil and a deteriorating consumer backdrop."
Sterling got a lift after Vlieghe said in written evidence to the Treasury Select Committee that his own central projection required "one or two quarter point rate increases per year over the three-year forecast period". He said his expectations were stronger than the path of rates derived from market yields at the BoE's May inflation report, which suggested there would be just under three quarter-point increases in the next three years.
"Provided the headwinds from Brexit uncertainty do not intensify in the near term, and ultimately fade over the coming years, I think policy rates are likely to rise, in my central view, by 25bp to 50bp per year over the forecast period," Vlieghe said.
Following the softening of market expectations earlier this month that have weighed on the pound, strategist David Cheetham at XTB said: "Should this forecast prove accurate then it would represent a fairly quick pace of tightening compared to current market expectations and therefore provide upside for sterling."
Adding to the hawkish mood, Bank of England governor Mark Carney told the Treasury committee he expected the economy to regain momentum after severe winter weather growth to almost grind to a half in the first quarter.
"There is a lot of residual softness in that first quarter which is why, for me, it makes sense to see if momentum is re-established which I do expect it to be," Carney said. But he added that the output lost in the first quarter was unlikely to be made up.
Elsewhere, figures from the Office for National Statistics showed that public sector net borrowing excluding banks fell to its lowest level in a decade in April. Borrowing was down £1.6bn year-on-year to £7.8bn versus expectations of £8.6bn.
"The latest reading will be well received by fiscal hawks who want to see the budget deficit reduced and following on from last year's figures which also beat forecasts in terms of lower net borrowing it appears that this is occurring at a faster pace than expected," said XTB's Cheetham.
The latest survey from the Confederation of British Industry was also in focus, showing that factory orders weakened in May and output growth slowed to its weakest for more than two years. The volume of factory orders slowed to its lowest since November 2016 and output was broadly flat - the weakest showing since April 2016, the CBI's monthly manufacturing survey showed. Output rose in only eight of 17 sub-sectors with contraction sharpest in chemicals, food, drink and tobacco.
On the corporate front, banks were helping lift the FTSE on the back of improving interest rate expectations, but the headlines were grabbed by Marks & Spencer as it confirmed the closure of 100 stores by 2022, 21 of which have already been closed.
Fellow high street retailer Halfords skidded lower after the bike and car parts retailer said profits were likely to remain flat this year as selling prices remain flat, while Pets at Home was down after reporting full-year profit down 12%.
Shares in Inmarsat tumbled as the satellite group lost exclusivity on maritime safety after the UN certified US rival Iridium Communications to provide global maritime distress safety system (GMDSS) services.
National Grid was weaker after regulator Ofgem said it was launching an investigation into its UK transmission business, while DG Healthcare also retreated on the back of a big drop in first-half profit.
Financial technology company NEX Group edged down despite reporting a 9% increase in full-year trading profit, while HomeServe declined even as it posted a 25% rise in full-year statutory pre-tax profit.
On the upside, Rank Group racked up strong gains after announcing the acquisition of QSB, the owner of Spanish digital bingo business YoBingo.es, for up to 52m in cash, while Intermediate Capital rallied after its final results.
Balfour Beatty edged up as it said in an update ahead of its annual general meeting later in the week that trading was in line with its full year expectations and that it continues to make "good progress" on the second phase of transformation programme, while Galliford Try erased early losses when the construction group said it was likely to face additional costs due to weather-related delays in the building of Aberdeen's new ring road this year.
Entertainment One ticked up after the TV group said revenues for the family division rose more than 50% to £139m driven by children's favourites 'Peppa Pig' and 'PJ Masks'.
Irish food company Greencore advanced as it posted an interim operating loss amid challenges in its US division, but said pre-tax profit and revenue rose, while food producer Cranswick gained as it reported a 22% jump in full-year pre-tax profit as revenue grew, with strong volumes across all of its divisions.
West End property developer Shaftesbury edged higher after posting a 21% increase in first-half profit, while merchant bank Close Bros nudged up after saying it performed well in the third quarter.
In broker note action, Next was lifted to 'reduce' at AlphaValue, while Ashmore was upgraded to 'hold' at HSBC. Royal Mail was cut to 'neutral' at JPMorgan and Hunting was downgraded to 'hold' at Kepler Cheuvreux.
Market Movers
FTSE 100 (UKX) 7,869.76 0.13%
FTSE 250 (MCX) 21,208.10 0.33%
techMARK (TASX) 3,550.33 0.47%
FTSE 100 - Risers
Mediclinic International (MDC) 688.00p 3.61%
Fresnillo (FRES) 1,307.00p 2.91%
Micro Focus International (MCRO) 1,372.00p 2.24%
Royal Bank of Scotland Group (RBS) 295.90p 1.20%
Hargreaves Lansdown (HL.) 1,977.00p 1.07%
Vodafone Group (VOD) 197.34p 1.05%
Melrose Industries (MRO) 244.40p 1.03%
Glencore (GLEN) 391.65p 1.02%
easyJet (EZJ) 1,781.00p 0.99%
Halma (HLMA) 1,344.00p 0.98%
FTSE 100 - Fallers
Marks & Spencer Group (MKS) 293.11p -2.43%
TUI AG Reg Shs (DI) (TUI) 1,772.00p -2.13%
Paddy Power Betfair (PPB) 8,670.00p -1.37%
Next (NXT) 5,814.00p -1.02%
Reckitt Benckiser Group (RB.) 5,896.00p -0.87%
BP (BP.) 587.90p -0.83%
National Grid (NG.) 880.70p -0.80%
British American Tobacco (BATS) 3,734.50p -0.80%
Imperial Brands (IMB) 2,774.50p -0.66%
Smith & Nephew (SN.) 1,322.50p -0.64%
FTSE 250 - Risers
Greencore Group (GNC) 170.25p 8.68%
Cranswick (CWK) 3,366.00p 6.38%
Ocado Group (OCDO) 921.60p 5.52%
Rank Group (RNK) 162.60p 4.90%
NewRiver REIT (NRR) 280.00p 4.87%
Intermediate Capital Group (ICP) 1,212.00p 4.12%
Ultra Electronics Holdings (ULE) 1,571.89p 3.89%
Synthomer (SYNT) 536.00p 3.88%
Serco Group (SRP) 100.80p 3.44%
Greene King (GNK) 575.00p 3.12%
FTSE 250 - Fallers
Inmarsat (ISAT) 346.26p -10.90%
Halfords Group (HFD) 346.00p -10.82%
Pets at Home Group (PETS) 146.60p -7.22%
UDG Healthcare Public Limited Company (UDG) 878.50p -5.69%
Capita (CPI) 130.50p -4.71%
Millennium & Copthorne Hotels (MLC) 552.00p -3.16%
Thomas Cook Group (TCG) 121.75p -2.68%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 332.00p -2.64%
Homeserve (HSV) 823.00p -2.26%
Vietnam Enterprise Investments (DI) (VEIL) 446.00p -1.55%