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London open: Stocks show confidence ahead of Bank rate cut
London stocks started in confident fashion on Thursday ahead of an expected interest rate cut from the Bank of England later and following a positive Asia session.
The BoE rate announcement is at midday, with traders also eyeing US initial jobless claims at 1330 BST.
Markets are pricing in a 25 basis points cut to take the headline Bank Rate down to 0.25% from 0.50%.
There is also some hope for further quantitative easing or other stimulus measures to cushion what is expected to be a negative shock to the economy from the Brexit vote.
If the Bank leaves rates unchanged it would lead to a strong recovery in sterling, said FXTM strategist Hussein Sayed, pushing the pound up towards 1.34 dollars.
“However, a rally could be seen as a good opportunity for traders who missed shorting the currency when it dropped by more than 2000 pips post the Brexit vote, as more turmoil is expected to come,” Sayed said.
“Although unlikely at this meeting, restarting the quantitative easing program, which currently stands at £375bn, could be on the table and a combination of a rate cut along with new QE program has the potential to pull back GBPUSD below 1.3.”
In other macroeconomic news on Thursday, the Royal Institution of Chartered Surveyors indicated that the UK housing market was sent somewhat reeling by the Brexit vote, with expectations of falling prices and a sharp drop in enquiries about house purchases and a fall in sales agreed.
In its latest survey of estate agents and surveyors, conducted after the June 23 vote to leave the EU, the found a “marked drop in activity in the housing market”.
In corporate news, information services firm Experian issued a first quarter trading update on Thursday, with total revenue growth of 5% at constant exchange rates in the three months to 30 June and 1% at actual exchange rates. Of that, North America contributed 5% of the total revenue growth at constant exchange rates, Latin America 8%, UK and Ireland 1% and EMEA Asia Pacific 9%. Latin America and UK and Ireland both declined at actual exchange rates, however, by 6% and 5% respectively.
Like-for-like sales skidded lower at Halfords in the first quarter as the timing of Easter and dreary weather exacerbated the recent cycling decline. Group revenue in the 13-week period to 1 July increased 2.1%, as retail rose 1.5% and Autocentres climbed 5.9%. But group like-for-like sales dipped 0.6%, with a 1.2% fall from retail outweiging a 3.1% gain from Autocentres.
Opening 12 new UK stores and five in Germany, B&M European Value Retail drove strong first-quarter revenue and said it was “on course” to hit market forecasts.
Moneysupermarket.com said it expects solid half-year results, with revenues seen growing by 10% to £158 million. The company said it is making some additional marketing investment and so adjusted operating profit is expected to grow by 6% to around £54m.
