17th Sep 2014 10:04
LONDON (Alliance News) - UK equities are trading higher Wednesday after Bank of England meeting minutes revealed a repeat of last month's monetary policy committee vote, with Ian McCafferty and Martin Weale voting for an increase in interest rate, versus seven votes against.
At mid-morning the FTSE 100 is trading up 0.2% at 6,807.92, the FTSE 250 is up 0.4% to 15,661.62, and the AIM All-Share is trading 0.1% lower at 764.64.
European stocks are performing better, with the CAC 40 trading up 0.7% and the DAX trading up 0.5%.
The Bank of England minutes on Wednesday showed a repeat of last month's voting split, in line with economists' expectations, as McCafferty and Weale both voted for an immediate interest rate rise by 25 basis points. The committee voted unanimously to keep monthly asset purchases at GBP375 billion.
In addition, the UK's ILO unemployment rate fell to 6.2% for the three months to July, down from 6.4% in the three months up to June, its lowest level since the onset of the recession. This reading also beat the consensus of 6.3%. Furthermore, average earnings, including bonuses, rose by 0.6% year-on-year in July, which is up from a 0.1% fall in June. The number also surpassed economists' expectations of a 0.5% rise.
"The BoE still has time to wait on interest rates given weak wage growth, but not too long as unemployment is falling like a stone. Put another way, weak wages signal there has been plenty of slack in the labour market, but the unemployment rate shows that slack is falling quickly," says Rob Wood, chief UK economist at Berenberg. "We expect the first 25 basis point rate hike from the BoE in February next year."
The pound initially rose following the Bank of England release but was unable to keep hold of its gains against the dollar, as traders remain reluctant to hold any long positions ahead of Thursday's Scottish referendum vote.
Eurozone consumer price inflation for August came in marginally ahead of expectations at a 0.4% rise, above the consensus of a 0.3% rise. The print was unchanged from July. In addition, the month-on-month figure for August showed a 0.1% rise, compared to a 0.7% decline in July.
?With Eurozone inflation ticking up very slightly in August, hopefully this is an early sign that the stimulus measures introduced by Mario Draghi will start showing results sooner than expected," says Dennis de Jong, managing director at UFX.com. ?The threat of deflation is going to linger over the Eurozone for some time to come, and it could still only take one more crisis to push it over the edge."
In corporate news, Smiths Group is the biggest faller in the FTSE 100 index with its shares declining 6.2%. The company said its full year results were hit by the strength of sterling as growth in its John Crane, Smiths Interconnect and Flex-Tek businesses was offset by declines in Smiths Medical and Smiths Detection.
Smiths posted a pretax profit of GBP302.0 million in the recent financial year, down from GBP395.7 million the year before, as revenue fell to GBP2.95 billion from GBP3.11 billion and it posted higher exceptional and amortisation charges of GBP126.8 million, compared to GBP73.2 million a year before. The company said that the strength of sterling had "significantly reduced" its results, estimating a GBP43 million hit to its operating profit.
Meanwhile, JD Sports Fashion leads the FTSE 250 gainers after it reported an impressive increase in its pretax profit for the first half of its financial year, as revenue growth was driven by another strong sales performance from its core UK sportswear business. The sportswear, outdoor clothing and fashion retailer reported a pretax profit of GBP16.5 million for the six months to August 3, up from only GBP6.1 million a year earlier.
Alongside raising its interim dividend to 1.1500 pence per share, up from 1.1125 pence last year, the retailer gave a confident outlook for the remainder of the year, despite tough comparatives, saying it expects to deliver a profit an the top end of market expectations. The stock is up 7.0%.
Still ahead on Wednesday are US CPI figures at 1330 BST, while the US Federal Reserve interest rate decision will be announced after European markets close at 1900 BST.
Futures indicate a narrowly mixed opening for US equities, with the DJIA expected to open marginally higher, the S&P 500 to open flat and the Nasdaq Composite to open fractionally lower.
By Neil Thakrar; [email protected]
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Smiths GroupJD Sports