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London close: FTSE flops to sub-7,000 finish for first time in 15 months
London stocks fell their lowest close since late 2016 as the pound held its gains after the Bank of England left the door open for a May rate rise, while miners and retailers leading the falls.
The FTSE 100 finished Thursday's session down 86.38 points or 1.23% at 6,952.59, the first close below 7,000 in 15 months, but coming off a new intra-day low of 6,914.45 in the last half hour.
The pound had earlier spiked higher after the BoE voted to keep interest rates on hold at 0.5%, as widely expected. But sterling later fell flat against the euro at 1.1462 and was down 0.3% on the dollar at 1.4094, having topped 1.42 earlier.
Yields were sent reeling immediately following the MPC's announcement, with the benchmark 10-year Gilt trading down by nine basis points at 1.44% as of the London close, having hit an intra-day low of 1.40%.
The Bank's monetary policy committee voted 7-2 in favour of steady rates, versus consensus expectations of a unanimous outcome, with dissenters Ian McCafferty and Michael Saunders favouring a 25 basis points increase.
While the bank's asset-purchase programme and corporate bond-buying programme was were left untouched, the MPC also left the way open for interest rates to rise at its next meeting in May.
"The firming of shorter-term measures of wage growth in recent quarters and a range of survey indicators suggest pay growth will rise further in response to the tightening labour market. This provides increasing confidence that growth in wages and unit labour costs will pick up to target-consistent rates," the bank said in a statement.
The question, said Howard Archer, chief economic adviser to the EY ITEM Club, is whether three of McCafferty and Saunders' colleagues will jump ship and join the "tightening two" to form a majority for pushing through a rate rise when the Committee meets next. "The wording of the minutes suggest that's a strong possibility."
However, Archer noted that the signalling towards a near-term rate rise "was somewhat weaker than we saw in MPC meetings running up to last November's rise in Bank Rate".
Either way, said Ben Brettell, Hargreaves Lansdown's chief economist, the MPC faces a delicate balancing act, with inflation falling back, a pick-up in wage growth pointing to an erosion of slack in the labour market and the ongoing Brexit-related uncertainty. "It's easy to see why the committee is divided at present."
The BoE's decision came a day after the Federal Reserve lifted rates by 25 basis points on Wednesday, as widely expected, to a target range of 1.5% to 1.75% and signalled that rates would rise twice more this year and three times in 2019.
Earlier, data from the Office for National Statistics showed UK retail sales bounced back more strongly than expected last month after two months of declines, though non-food store sales continued to wane.
Retail sales volumes in February increased 0.8% on the month before, more than the 0.4% rise in volume that economists had forecast and up from January's figure, which was revised to a fall of 0.2%. Increases in volumes were seen across all main sectors except non-food stores in February, while sales values also rose 0.8% on the month.
Excluding fuel, retail sales were up 0.6% month-on-month in February, again beating a 0.4% average forecast and rebounding from a 0.2% fall the month before.
Compared to February last year, retail sales rose 1.5%, which was unchanged from the month after that figure was revised up. Excluding fuel, retail sales were up 1.1%, down from a revised 1.3% for the month before.
With both the Fed and BoE rate announcements out of the way, trade fears were in focus again as the White House was set to announce a package of punitive measures against China later in the day that include tariffs on imports worth at least $30bn.
Market analyst Neil Wilson at ETX Capital said the FTSE 100 was "on the ropes" and flirting with key technical support at 6919, the intraday low from 6 February.
"The move lower was rejected but the market is very much on the back foot as broader risk sentiment turns off," he said, pointing to Wall Street pessimism around tech stocks post-Facebook's data row and UK alarm bells in the retail and tech sectors that were also knocking sentiment.
"We also have the prospect of rates rising faster both in the US and UK, which all else equal is a downer for stocks. Fears of a big escalation in the nascent trade war are the biggest weight, but the Facebook saga and rising rates is not helpful. All in all this looks like a broad risk-off move with the US 10-year yield dipping to 2.8% signalling a bit of safe haven seeking."
In company news, it was 'no deal' Thursday, as consumer goods giant Reckitt Benckiser said it had ended discussions with Pfizer about buying part of the US company's consumer healthcare business. The consumer goods company said it did not want to buy the whole business and that it was not possible to buy part of the division, leaving the door open for a possible bid from GSK.
Meanwhile, infrastructure and support services business Stobart said it no longer plans to make a bid for regional airline Flybe after the companies failed to agree on "satisfactory" terms. Shares in Flybe tanked on the news.
Health and safety technology group Halma fell after saying that profits for the year to 31 March would be in line with current market forecasts as growth continued in the second half.
Shares in Micro Focus fell the most on the Footsie after credit agency Moody's cut its outlook on the software company's ratings to negative, following Monday's profit warning.
Crest Nicholson initially moved higher as the housebuilder said trading conditions continue to be generally robust with good sales across its areas of operation and strong demand for homes, but its share later subsided.
Ted Baker was in the red after it reported a 12% jump in full-year pre-tax profit as revenue grew but the retailer warned that "external" trading conditions will remain challenging, while Sanne retreated despite posting a 49% jump in full-year pre-tax profit.
The GKN/Melrose drama rumbled on as the engineer told its shareholders in a letter that it continues to view the turnaround specialist's offer as "entirely opportunistic". Chairman Mike Turner said Melrose's offer is "wholly inadequate in comparison to the value creation potential inherent" in the group's planned strategy.
Interserve surged after announcing late the previous day that it had agreed almost £300m of further financing from its lenders, while online broker IG Group rallied as it reported record third-quarter revenue.
Ultra Electronics slipped as the defence company appointed Simon Pryce formerly group CEO at BBA Aviation, as its new chief executive.
In broker note action, Esure was lifted to 'neutral' from 'underweight' by JPMorgan, while GlaxoSmithKline was upgraded to 'equalweight' from 'underweight' at Morgan Stanley.
Hastings got a boost to 'overweight' from 'neutral' at JPM, while Reckitt Benckiser was upgraded to 'buy' from 'hold' at SocGen.
Meanwhile, ex-dividend stocks were taking six points off the FTSE 100 and 21.5 points off the 250. Sky, British American Tobacco, Randgold Resources, Segro, Schroders, Meggitt, Centamin, GVC Holdings, Close Bros, Kier Group, OneSavings Bank, Stobart and Dunelm went ex-dividend.
Market Movers
FTSE 100 (UKX) 6,952.59 -1.23%
FTSE 250 (MCX) 19,393.89 -1.39%
techMARK (TASX) 3,170.69 -1.48%
FTSE 100 - Risers
Reckitt Benckiser Group (RB.) 5,900.00p 4.87%
Coca-Cola HBC AG (CDI) (CCH) 2,522.00p 2.98%
Just Eat (JE.) 717.60p 1.59%
Imperial Brands (IMB) 2,360.00p 1.35%
ITV (ITV) 144.75p 1.29%
Evraz (EVR) 436.60p 0.99%
Old Mutual (OML) 246.90p 0.94%
Smurfit Kappa Group (SKG) 3,020.00p 0.87%
London Stock Exchange Group (LSE) 4,178.00p 0.67%
Unilever (ULVR) 3,748.50p 0.39%
FTSE 100 - Fallers
Micro Focus International (MCRO) 911.80p -6.25%
Schroders (SDR) 3,259.00p -3.75%
Rio Tinto (RIO) 3,584.50p -3.51%
Glencore (GLEN) 358.45p -3.42%
Scottish Mortgage Inv Trust (SMT) 443.40p -3.06%
Barratt Developments (BDEV) 519.80p -3.02%
Kingfisher (KGF) 292.70p -2.95%
Hargreaves Lansdown (HL.) 1,688.00p -2.88%
Persimmon (PSN) 2,488.00p -2.85%
NMC Health (NMC) 3,340.00p -2.79%
FTSE 250 - Risers
888 Holdings (888) 281.40p 4.22%
Softcat (SCT) 611.00p 3.74%
IG Group Holdings (IGG) 841.00p 2.87%
Provident Financial (PFG) 671.20p 2.77%
Sanne Group (SNN) 688.00p 2.23%
Petrofac Ltd. (PFC) 515.60p 1.86%
Merlin Entertainments (MERL) 352.40p 1.41%
Charter Court Financial Services Group (CCFS) 302.00p 1.34%
Domino's Pizza Group (DOM) 330.50p 1.16%
Euromoney Institutional Investor (ERM) 1,254.00p 1.13%
FTSE 250 - Fallers
Ted Baker (TED) 2,568.00p -12.53%
Ferrexpo (FXPO) 279.90p -8.11%
Kaz Minerals (KAZ) 863.00p -6.42%
Vedanta Resources (VED) 707.60p -4.89%
TI Fluid Systems (TIFS) 238.00p -4.80%
Hochschild Mining (HOC) 189.50p -4.80%
Bellway (BWY) 2,991.00p -4.78%
Metro Bank (MTRO) 3,726.00p -4.66%
Centamin (DI) (CEY) 148.85p -4.58%
Close Brothers Group (CBG) 1,405.00p -4.49%