The FTSE 100 closed up 0.03% Thursday as the Bank of England announced the largest increase in interest rates in 27 years and raised them by 0.50% to 1.75%. "Despite the dire outlook painted by the Bank of England... the FTSE 100 has managed to hold up reasonably well, although weakness in the oil price which is back below $100 a barrel is holding it back," Michael Hewson of CMC Markets said. Entain was the day's biggest riser, closing up 5%, followed by Flutter Entertainment and Anglo American, up 4% and 3.2% respectively. Rolls-Royce was the day's biggest faller after posting a swing to 1H pretax loss, down 8.1%, followed by Hikma Pharmaceuticals and Mondi, down 6.3% and 5% respectively.

 
Companies News: 

Petropavlovsk Gets High-Court Approval to Sell Main Assets for $600 Mln to UMMC-Invest

Petropavlovsk PLC said Thursday that the High Court of Justice in London has confirmed that the company's administrators can sell the principal assets of the group to metal producer UMMC-Invest.

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Property Franchise 1H Revenue Rose 18% on Acquisition Contributions

Property Franchise Group PLC said Thursday that its first-half revenue rose 18% on the contributions of previous acquisitions.

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Permanent TSB Appoints Nicola O'Brien as CFO

Permanent TSB Group Holdings PLC said Thursday that it has appointed Nicola O'Brien as Chief Financial Officer with immediate effect.

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Empiric Student Property Appoints Donald Grant as CFSO Designate, Executive Director

Empiric Student Property PLC said Thursday that it has appointed Donald Grant as its new chief financial and sustainability officer designate and executive director of the group.

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Mears Group 1H Profit Significantly Rose; Hikes Full-Year Expectations

Mears Group PLC said Thursday that its first-half pretax profit significantly rose, and it raised its expectations for the full year.

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Duke Royalty 1Q Normalized Cash Revenue Rose to Record High

Duke Royalty Ltd. said Thursday that it expects to close the first quarter of fiscal 2023 with significantly higher normalized cash revenue, which is expected to increase further in the second quarter.

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City of London Group Appoints Jean Murphy as Chief Executive of Recognise Bank

City of London Group PLC said Thursday that Jean Murphy has been appointed as chief executive of Recognise Bank Ltd., its principal operating subsidiary.

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Instem 1H Revenue Rose, Inflation to Pressure Operating Profit

Instem PLC said Thursday that it expects to report a 40% increase in revenue for the first half of 2022, but that operating profit growth is likely slow due to inflationary pressures.

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Facilities by ADF Sees 1H Revenue Marginally Up on Robust Demand

Facilities By ADF PLC said Thursday that it expects to report revenue for the first half of 2022 that is marginally ahead on year as demand was robust.

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Ironveld Shareholder Withdraws Meeting Request to Remove Chairman, CEO

Ironveld PLC said Thursday that shareholder Richard Jennings, director of Align Research Ltd., has withdrawn his request to call a general meeting of shareholders to remove Chairman Giles Clarke and Chief Executive Martin Eales.

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Sanderson Design Sees 1H Profit In line; Sales to Rise 1%

Sanderson Design Group PLC said Thursday that it expects to report first-half profit in line with management views, with sales rising 1% on year.

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Secure Trust Bank 1H Pretax Profit Fell on Higher Impairments, Cuts Dividend

Secure Trust Bank PLC said Thursday that pretax profit for the first half fell on higher impairment charges, and reduced its dividend payout.

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Mobile Streams FY 2022 Revenue More Than Doubled on Strong Growth

Mobile Streams PLC said Thursday that it expects to report that fiscal 2022 revenue more than doubled due to continued strong growth.

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Falanx Group Expects FY 2022 Revenue Increase on Improved Pipeline; Shares Rise

Falanx Group Ltd. shares rose on Thursday after the company said that it expects to report an increased revenue for fiscal 2022 driven by services revenue and improved pipeline.

 
Market Talk: 

Rolls-Royce's New CEO Facing Sizeable Task

1321 GMT - Rolls-Royce Holdings's 1H demonstrates the size of the task facing newly-appointed Chief Executive Tufan Erginbilgic, AJ Bell investment director Russ Mould says in a note. "The pandemic was clearly a once-in-a-generation shock to the aviation sector which Rolls serves, and it was always going to impact the lucrative spares and repairs revenue, derived from the company's base of installed engines. These are directly linked to how long aircraft are in the air, so the fewer planes in the sky, the greater the damage to revenue," Mould says, adding that the problems predate Covid-19. Inflationary pressures and the impact from the Ukraine conflict might force the company into a more dramatic fix, he adds. Shares trade down 9.1% 82.50 pence.(kyle.morris@dowjones.com)

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BOE Protects Credibility With 50Bp Interest Rate Rise

1329 GMT - The European Central Bank and the Bank of England are in the same place as the U.S. Federal Reserve, says Ben Lord, fund manager at M&G Investments. "If they want to hang on to their credibility in the face of the high inflation we have at the moment (which is a result of the policy errors made last year), then they have to be tightening aggressively, even as growth slows and unemployment rises," he says. In his view, the BOE needed to deliver another "hawkish" shot in order to once again tighten financial conditions and to reduce demand to less inflationary levels, he says. (emese.bartha@wsj.com)

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BOE's Reluctant Rate Rises to Address Supply Shocks May Not Help Pound

1319 GMT - The Bank of England is reluctantly raising interest rates to address supply side shocks and this isn't particularly positive for sterling, ING says. The BOE delivered no surprises by voting 8-1 for a larger 50 basis-point rate rise on Thursday but the central bank's narrative of further forceful policy tightening even as the economy faces a recession is a "tricky one" for the growth-sensitive pound, ING analysts say. "GBP/USD remains vulnerable to the strong dollar and a difficult risk environment, but aggressive BOE tightening and an equally dim view for European growth prospects suggests EUR/GBP may continue to trade in a 0.8350-0.8450 range over the coming weeks." GBP/USD falls 0.4% to 1.2103 and EUR/GBP rises 0.5% to 0.8418. (renae.dyer@wsj.com)

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Gilt Market to Remain Volatile

1318 GMT - The U.K. gilt market will remain very volatile amid uncertainty about the inflation and growth outlook, David Zahn, head of European fixed income at Franklin Templeton, says after the Bank of England raised interest rates by 50 basis points to 1.75%, as broadly expected. "We remain defensively positioned in the near term mainly due to influences on the gilt market from outside the U.K.," he says. More interesting reading than the expected 50bp interest rate rise was in the projections for a recession at the end of the year that will be over a year long, Zahn says. He expects the BOE Monetary Policy Committee's reaction function to be much more reactive to economic data. (emese.bartha@wsj.com)

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High Inflation May Prevent BOE Policy Pivot, But UK Equities Still Have Appeal

1308 GMT - The potential for sticky underlying inflation in the U.K. means that investors could be wrong in their expectations of a policy pivot by the Bank of England in early 2023, says Hussain Mehdi, macro and investment strategist at HSBC Asset Management. The BOE raised interest rates by 50 basis points on Thursday, which confirms the notion of a central bank determined to crush inflation in the face of ongoing supply-side challenges, including a very tight labour market and soaring energy bills, he says. This outlook, including downside risks to profit performance, is consistent with a defensive and selective investment strategy, he says. "This includes a constructive view on U.K. equities--despite domestic macro challenges--given index exposure to commodity, value, and defensive names," Mehdi says. (emese.bartha@wsj.com)

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BOE May Lift Rates Another 50bp Before Pausing Tightening

1300 GMT - The Bank of England could raise interest rates by another 50 basis points in September but that may be the last rate rise, ING says. Given only one policymaker voted against Thursday's 50bp rate rise and the BOE repeated its willingness to act forcefully to curb inflation, there's a strong chance of another similar move in September, ING analysts say in a note. However, the BOE gave hints it might soon pause rate rises with inflation expected to be well below target in coming years, they say. "The window for further hikes further appears to be closing, not least because outside of the jobs market, there are signs that some of the key inflation drivers may be starting to ease." (renae.dyer@wsj.com)

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Tackling Inflation Is BOE's Short-Term Priority

1256 GMT - The Bank of England has upped the pace of monetary policy tightening as it faces a continued trade-off between ever-higher inflation and a deteriorating growth outlook, confirming that the priority in the short term is tackling high prices, says Hetal Mehta, senior European economist at Legal & General Investment Management. After Thursday's 50 basis-point rate increase the economist considers that further rate rises are likely "as inflation remains uncomfortably high in the coming months." The BOE's new economic forecasts signal a significant decline in GDP stretching into 2024, although they will not have been able to take into account any fiscal easing a new Prime Minister could deliver in the autumn, she says. (emese.bartha@wsj.com)

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Gilts Extend Rally as BOE Warns of Recession Risks

1250 GMT - U.K. gilts extend their rally as the Bank of England expects the country's economy to enter into recession. The 10-year gilt yield is trading close to 10 basis points lower at 1.832%, according to Tradeweb. "The Bank [of England] knows further rate rises make a future recession potentially deeper and longer but may see it as a price worth paying to help bring prices under control," Ed Monk, associate director for personal investing at Fidelity International, says. He adds that the BOE has a narrow path to tread with inflation now forecast to hit 13% this year, while growth is slowing. (emese.bartha@wsj.com)

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Europe Stocks Gain After BOE Decision; US to Open Flat

1248 GMT - European markets gain after the Bank of England's interest-rate rise and ahead of an expected broadly flat U.S. open. The Stoxx Europe 600 and FTSE 100 advance 0.5%, the CAC 40 adds 0.8% and the DAX climbs 1.1%. Brent crude drops 0.2% to $96.55 a barrel. IG futures data show the Dow opening at 32827, versus Wednesday's close of 32812. The BoE predicted a U.K. recession starting in 4Q this year and lasting through 2023, Validus Risk Management says. "With [foreign minister] Liz Truss heavy favorite to take the Tory leadership, she may find the position a poisoned chalice as she takes the wheel just as the U.K. enters its worst recession in over a decade," Validus's Shane O'Neill writes. (philip.waller@wsj.com)

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UK Labor Supply Issues Are Key Factor in BOE's High Inflation Forecasts

1245 GMT - The Bank of England's expectations for inflation to peak at just over 13% in the fourth quarter is driven by higher energy prices but labor supply issues are also having an impact, JP Morgan Asset Management says. Tight labor markets are driving robust wage growth, and fears that these wage pressures may prove persistent is a clear motivation for the BOE's decision to raise interest rates by a larger 50 basis points to 1.75% on Thursday, JP Morgan market strategist Hugh Gimber says in a note. "All in all, with the Bank faced by an unenviable set of circumstances, a 50 basis point hike appears the appropriate course for the economy, despite the risks to the growth outlook." (renae.dyer@wsj.com)

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BOE's Pessimistic Forecasts Overshadow Big Rate Rise for Investors

1239 GMT - The Bank of England's significantly greater pessimism surrounding the outlook for the economy is a bigger focus for investors than its expected decision to raise interest rates by a chunky 50 basis points, causing sterling and long-dated gilt yields to fall, says Shane O'Neill, head of interest rates at Validus Risk Management. "The BoE has become significantly more pessimistic about the state of the economy, predicting a recession that starts in Q4 this year and lasts through 2023. Not just a technical recession but...the worst performance for the economy since the global financial crash should it come to pass," he says in a note. (jessica.fleetham@wsj.com)

 

Contact: London NewsPlus, Dow Jones Newswires;

 

(END) Dow Jones Newswires

August 04, 2022 12:44 ET (16:44 GMT)

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