20th Aug 2014 09:55
LONDON (Alliance News) - UK stock prices remain depressed after a disappointing start to the day, but the pound jumped after the Bank of England minutes revealed that two out of the seven members of its Monetary Policy Committee voted to raise interest rates.
At mid-morning Wednesday, the FTSE 100 was down 0.3% at 6,758.57, the FTSE 250 down 0.7% to 15,782.2, and the AIM-All Share flat at 763.54.
European stocks are performing similarly, with the CAC 40 and the DAX down 0.4%.
The Bank of England minutes surprised investors, revealing that members of the MPC voted seven to two in favour of keeping base interest rates at the record low of 0.25%. The MPC had voted unanimously since July 2011.
Ian McCafferty and Martin Weale were named as the members who voted in favour of increasing the Bank Rate by 25 basis points. Mcafferty and Weale argued that the rapid fall in unemployment and the tightening of labour markets likely will cause wage growth to pick up. They said that there is a possibility that wages are lagging behind developments in the labour market, and since the impact of monetary policy can also be considered to have a lag, an immediate rise in interest rates will anticipate the changes in wage growth.
"We had expected one dissenting vote at last meeting. Two dissenters mean that chances for a rate hike still this year may have increased a bit," says Christian Schulz, senior economist at Berenberg. However, Schulz warns that dissenters are not always an indication of an imminent majority shift.
The news caused the pound to appreciate sharply, as it tried to regain the ground it lost on Tuesday when UK inflation came in lower than expected. Sterling jumped to a high of USD1.66790 immediately after the news and at mid-morning Wednesday it trades the dollar at USD1.6640.
Mining giant Glencore released interim results. The company reported a higher profit for the first half of the year as it continued to benefit from the synergies it is eking out of its its Xstrata and Viterra acquisitions, and as higher production offset commodity price falls and a hit from currency movements. Furthermore, the metals and mining giant raised its interim dividend and announced a buyback of up to USD1 billion over the next seven months. The company's shares are up 0.1%.
Balfour Beatty closed the door on a proposed merger with Carillion PLC, stating that Carillion's revised proposal late Tuesday failed to address two key concerns that it raised last week. Carillion had said it was prepared to offer Balfour Beatty shareholders an even bigger majority stake in the merged business, but it continued to insist that Balfour Beatty's sale of its US project management business Parsons Brinckerhoff not be completed if the merger were to go ahead.
Balfour Beatty on Wednesday said the new proposal did not address the considerable risks associated with the proposed business plan, including the strategy to reduce the scale of the UK construction business, when it is "poised to benefit from a recovery in the market", and Carillion's continued intention to terminate the sale of Parsons Brinckerhoff, when talks are well advanced.
As a result, Balfour Beatty's board has decided to not seek an extension to the "Put Up or Shut Up" deadline of 1700 BST on Thursday.
Balfour Beatty's shares are trading down 7%, while Carillion is down 3%, both leading fallers in the FTSE 250.
By Neil Thakrar; [email protected]
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Related Shares:
Balfour BeattyCarillion PlcGlencore