London open: FTSE rallies ahead of expected BoE rate cut
London stocks rallied in early trade on Thursday following a positive session on Wall Street, as investors eyed an expected rate cut by the Bank of England.
At 0835 GMT, the FTSE 100 was up 0.8% at 8,691.63, having hit a new intraday high 8,695.
Kathleen Brooks, research director at XTB, said: "The Bank of England is due to cut interest rates for the first time since November on Thursday. Interest rates are expected to be cut by 25 basis points to 4.5% from 4.75%. This move is widely expected, and we do not expect a shock decision from the BOE. This meeting will also include the BOE's latest forecasts for growth and inflation, and the BOE Governor's press conference.
"The market is fully priced for a rate cut from the BOE, with a 98% chance of a cut currently priced in by the GBP overnight index swaps market. What the BOE's updated forecasts tell us will determine if the OIS market is right to expect a further two cuts later this year, or if the market is underpricing the prospect of further cuts from the BOE."
The BoE announcement is due at midday.
Brooks added: "UK growth has weakened in recent months and the outlook looks poor. The OBR is expected to slash its growth forecasts next month, which will be included in the Chancellor's spring statement.
"The Bank of England is likely to do the same this Thursday. The BOE had expected GDP to expand by 1.5% this year, that looks lofty after a spate of weak economic data, and it could be revised down to 1%. The risk is that growth could undershoot downwardly revised forecasts, as the Citi economic surprise index is close to its lowest level for a year, as you can see below. This suggests that UK economic data has surprised to the downside by a wide margin."
In equity markets, Anglo American gained after a fourth-quarter production report, while AstraZeneca was up as the pharma giant posted a jump in full-year profits.
BBGI Global Infrastructure surged after agreeing to be bought by Canadian pension fund manager British Columbia Investment Management in a £1.06bn deal.
Defence contractor Babcock rose as it upgraded full-year expectations on the back of double-digit organic growth in its nuclear operations and strong growth in the marine division.
The company said it now expects revenue in the year to 31 March to come in at £4.9bn compared with forecasts of £4.51bn - £4.78bn and underlying operating profit to beat the top end of a £327.1m - £339.7m range.
On the downside, engineering firm IMI fell after saying it had been hit by a cyber attack on its computer systems.
Catering giant Compass lost ground as it reported a 9.2% increase in organic revenues in the first quarter but warned that, if current foreign exchange rates persist for the remainder of the year, they would have a $558m negative impact on revenues, compared with a hit of just $69m last year.
Market Movers
FTSE 100 (UKX) 8,691.63 0.79%
FTSE 250 (MCX) 20,854.41 0.44%
techMARK (TASX) 4,753.30 0.86%
FTSE 100 - Risers
Anglo American (AAL) 2,420.00p 3.77%
AstraZeneca (AZN) 11,538.00p 3.70%
Antofagasta (ANTO) 1,743.00p 2.83%
Glencore (GLEN) 354.75p 1.88%
Rio Tinto (RIO) 4,991.00p 1.86%
CRH (CDI) (CRH) 8,052.00p 1.33%
Beazley (BEZ) 847.00p 1.26%
BAE Systems (BA.) 1,222.50p 1.20%
Prudential (PRU) 662.80p 1.19%
F&C Investment Trust (FCIT) 1,180.00p 1.03%
FTSE 100 - Fallers
IMI (IMI) 1,918.00p -2.29%
Weir Group (WEIR) 2,324.00p -1.44%
Compass Group (CPG) 2,757.00p -1.18%
Halma (HLMA) 2,919.00p -0.71%
Associated British Foods (ABF) 1,851.00p -0.62%
JD Sports Fashion (JD.) 83.90p -0.50%
SEGRO (SGRO) 718.20p -0.36%
Marks & Spencer Group (MKS) 356.60p -0.28%
Airtel Africa (AAF) 145.70p -0.21%
Smiths Group (SMIN) 2,030.00p -0.20%
FTSE 250 - Risers
BBGI Global Infrastructure S.A. NPV (DI) (BBGI) 145.20p 19.21%
Babcock International Group (BAB) 595.00p 9.68%
Ferrexpo (FXPO) 76.40p 3.80%
Oxford Instruments (OXIG) 2,100.00p 3.70%
International Public Partnerships Ltd. (INPP) 118.60p 3.67%
Wizz Air Holdings (WIZZ) 1,315.00p 3.46%
AO World (AO.) 102.40p 3.23%
Bridgepoint Group (Reg S) (BPT) 387.40p 2.65%
HICL Infrastructure (HICL) 115.20p 2.49%
Just Group (JUST) 164.60p 2.36%
FTSE 250 - Fallers
Paragon Banking Group (PAG) 755.00p -3.33%
Genuit Group (GEN) 374.50p -2.35%
W.A.G Payment Solutions (WPS) 71.60p -1.38%
Watches of Switzerland Group (WOSG) 548.00p -1.26%
Ninety One (N91) 148.80p -1.26%
Helios Towers (HTWS) 94.40p -1.15%
Grainger (GRI) 218.00p -1.13%
Dr. Martens (DOCS) 72.90p -1.02%
GCP Infrastructure Investments Ltd (GCP) 71.60p -0.97%
Big Yellow Group (BYG) 957.00p -0.93%
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