FTSE 100 slips amid Bank of England rate hold and fresh US falls

The FTSE 100 fell on Thursday as the Bank of England left interest rates unchanged in a tight vote and investors weighed a deluge of earnings from leading blue-chip names.

The FTSE 100 Index closed down 41.30 points, 0.4%, at 9,735.78.

The FTSE 250 ended 189.35 points lower, 0.9%, at 21,905.03, and the AIM All-Share fell 3.09 points, 0.4%, at 753.13.

The Bank of England kept rates on hold in a knife-edge vote, with the decision of governor Andrew Bailey proving decisive.

Five members of the nine-strong Monetary Policy Committee (MPC), including Mr Bailey, voted for the status quo.

Mr Bailey was joined by Clare Lombardelli, Catherine Mann, Megan Greene and Huw Pill.

Four MPC members, Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor, put the case for a quarter-point cut.

Ms Dhingra and Mr Taylor argued policy was already “significantly over-restrictive, which could unduly damage activity and possibly lead to an undershoot in inflation in the medium term”.

But others on the MPC placed greater weight on risks of persistence in inflation, requiring more prolonged monetary policy restriction.

Mr Bailey judged that the overall risks to medium-term inflation had moved down to become more balanced recently but felt there was value in waiting for further evidence.

It represents a second successive hold and the first time this year that Threadneedle Street has gone two meetings in a row without cutting.

So far this year, it has reduced Bank Rate in February, May and August, so every other meeting.

The decision was as forecast by market consensus, although softer-than-expected inflation and a weakening labour market prompted some analysts to predict a quarter-point cut.

In the accompanying statement, the MPC said the risk from greater inflation persistence has become “less pronounced” recently, and the risk to medium-term inflation from weaker demand “more apparent”, such that overall the risks are now more balanced.

But more evidence is needed on both, it added, and future rate reductions will therefore depend on the evolution of the outlook for inflation.

“If progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path,” the MPC said.

ING said while the Bank may have left rates on hold, its latest decision “leaves us more convinced” that a rate cut is coming in December.

“Everything hinges on governor Andrew Bailey’s vote – and his comments make it abundantly clear that he is siding with the doves,” ING added.

Sandra Rhouma, European economist at AllianceBernstein, agreed.

“The door is wide open for a rate cut in December and only a reacceleration in inflation or an inflationary Budget can close it,” she said.

Despite the perceived “dovish” hold, the pound traded higher against the dollar as the greenback gave up recent gains across the board.

Sterling was quoted at 1.3106 dollars at the time of the London equities close on Thursday, higher compared with 1.3037 dollars on Wednesday.

The euro stood at 1.1536 dollars, up against 1.1476 dollars. Against the yen, the dollar was trading lower at 153.12 yen, compared with 154.23 yen.

Despite the falls, the FTSE 100 outperformed European and US peers.

In European equities on Thursday, the CAC 40 in Paris closed down 1.4%, while the DAX 40 in Frankfurt ended 1.3% lower.

Stocks in New York were also lower at around the time of the London close.

The Dow Jones Industrial Average was down 0.9% as was the S&P 500 index, while the Nasdaq Composite declined 1.6%.

The renewed falls on Wall Street came as a report said job cuts jumped in October as companies adjusted staffing levels during the artificial intelligence boom.

According to outplacement firm Challenger, Gray & Christmas, job cuts for the month totalled 153,074, a 183% surge from September and 175% higher than the same month a year ago. It was the highest level for any October since 2003.

The yield on the US 10-year Treasury was at 4.09%, narrowed from 4.15% on Wednesday. The yield on the US 30-year Treasury was quoted at 4.68%, down from 4.72%.

In London, investors weighed a deluge of earnings and trading updates.

In the winners’ enclosure: grocer J Sainsbury, up 5.5%, which raised profit guidance amid strong sales, and IMI, up 3.8%, which reiterated full-year guidance and said it was on track to deliver a fourth consecutive year of mid-single digit organic revenue growth.

Also climbing was AstraZeneca, up 3.1%, after third-quarter sales beat expectations, which it said sets it up well to sustain growth through 2026.

Banks were in demand after a report in the Financial Times said the sector would be spared from tax rises in the Budget – NatWest rose 2.1%, Lloyds Banking Group 1.8% and Barclays 0.6%.

But faring less well, Hikma Pharmaceuticals was down 14% as it reduced medium-term guidance and cut the top end of its 2025 core operating profit view amid a delayed start to production at a US site.

Also firmly in the red, Smith & Nephew was down 11% as third-quarter revenue fell short of consensus.

The medical device manufacturer said revenue in the third quarter to September 27 improved 6.3% on-year to 1.50 billion dollars from 1.41 billion dollars. Revenue fell short of company-compiled consensus of 1.51 billion dollars.

Elsewhere, Diageo fell 6.5% as it lowered guidance despite third-quarter sales coming in ahead of expectations.

London-based Diageo, which owns Smirnoff vodka, Johnnie Walker whisky and Guinness, said sales growth in Europe, Latin America & Caribbean and Africa was offset by weakness in Chinese white spirits impacting Asia Pacific results and softer performance in North America reflecting weak consumer confidence.

Brent oil was quoted lower at 63.25 dollars a barrel at the time of the London equities close on Thursday, from 64.35 dollars late on Wednesday.

Gold traded little changed at 3,977.52 dollars an ounce against 3,978.61 dollars.

The biggest risers on the FTSE 100 were J Sainsbury, up 18.6 pence at 355.8p, IMI, up 90p at 2,492p, Antofagasta, up 93p at 2,746p, Fresnillo, up 74p at 2,220p and Auto Trader, up 24.6p at 798.6p.

The biggest fallers on the FTSE 100 were Hikma Pharmaceuticals, down 249p at 1,522p, Smith & Nephew, down 151.5p at 1,242p, Diageo, down 117.5p at 1,680p, Howden Joinery, down 51p at 820p and Pearson, down 50.5p at 1,002.5p.

Friday’s global economic calendar has unemployment figures in Canada, trade data in Germany, Halifax price index in the UK and the Michigan consumer sentiment index in the US.

Friday’s UK corporate calendar has half-year results from specialist currency and asset manager Record.

Contributed by Alliance News