Stocks in London close higher on Thursday, close to a new record, boosted by a rate cut at the Bank of England and strong results from AstraZeneca.
BoE Governor Andrew Bailey believes the central bank will be able to cut rates further, but policymakers will need to decide meeting-by-meeting ‘how far and how fast’ bank rate can be trimmed.
Speaking following the BoE’s decision to cut bank rate by 25 basis points to 4.50%, Bailey said the road ahead will have ‘bumps’ but the disinflation process is on track.
The FTSE 100 index closed up 103.99 points, 1.2%, at 8,727.28, below a new intra-day high of 8,767.50.
The FTSE 250 ended up 210.25 points, 1.0%, at 20,973.13, and the AIM All-Share closed up 5.26 points, 0.7%, at 720.84.
The Cboe UK 100 ended up 1.5% at 875.51, the Cboe UK 250 closed up 1.0% at 18,313.57, and the Cboe Small Companies ended up 0.9% at 15,689.31.
The BoE’s Monetary Policy Committee voted 7 to 2 for the expected quarter-point cut. All members of the MPC backed a cut in interest rates. Two members Swati Dhingra, and previous ’hawk’ Catherine Mann, preferred a larger 50 basis points cut, which would have taken base rate to 4.25%.
The MPC judged there had been sufficient progress on disinflation in domestic prices and wages to support the rate cut and said a ‘gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate.’
The BoE thinks GDP fell by 0.1% in the fourth quarter and will rise by 0.1% in the first quarter. It halved its growth forecast for 2025 to 0.75% from 1.5% previously.
Consumer price inflation is now expected to pick-up quite sharply in the near term, to 3.7% in the third quarter, before easing again.
In its policy statement, the BoE said ‘a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate’. The insertion of the world ‘careful’ was in focus.
That word was added deliberately to reflect uncertainty, Governor Bailey said in the press conference. There are domestic and global uncertainties, Bailey said.
ING said: ‘The Bank of England’s latest decision, which saw two members vote for a more aggressive rate cut, has caught markets slightly off-guard. But the overall message is a gradual one and we’re sticking to our call of four rate cuts in total this year.’
‘Expectations ahead of the meeting today were that eight committee members would vote for the cut and that we‘d see Catherine Mann, until now the arch-hawk, vote to keep policy unchanged.’
‘That is until now. Not only has Mann ended her fight against rate cuts, but she has doubled down with a vote to slash rates by 50bp. Though not directly attributed to Mann, the meeting minutes suggest that she saw a need to give a ’clear signal‘ on where interest rates need to get to.’
Rob Wood at Pantheon Macroeconomics felt attention should be on the ‘hawkish inflation forecasts, rather than the dovish vote’.
‘The market reacted strongly to that dovish surprise in the vote - we had expected eight to vote for a 25bp cut and one member to vote for no change - pricing in four cuts in total this year, but we still think three is a better bet.’
The rate cut initially put sterling under pressure although it rallied from lows. The pound was quoted lower at $1.2444 at the London equities close on Thursday, compared to $1.2513 at the close on Wednesday. It had fallen as low as $1.2362 in the wake of the BoE’s move.
The euro stood at $1.0375 at the European equities close Thursday, lower against $1.0414 at the same time on Wednesday.
Against the yen, the dollar was trading lower at JP¥151.82 compared to JP¥152.33 late Wednesday.
In European equities on Thursday, the CAC 40 in Paris ended up 1.7%, while the DAX 40 in Frankfurt ended 1.5% higher.
Stocks in New York were mixed at the London equities close, with the DJIA down 0.3%, the S&P 500 index up 0.2% and the Nasdaq Composite up 0.1%.
Back in London, AstraZeneca climbed 6.4% after well received earnings, driven by its cancer drug portfolio.
The Cambridge-based pharmaceuticals firm said revenue in 2024 rose 18% to $54.07 billion from $45.81 billion in 2023. It helped pretax profit surge 26% to $8.69 billion from $6.90 billion. At constant exchange rates, total revenue rose 21%. Reported earnings per share rose 18% to $4.54 from $3.84 and core EPS by 13% to $8.21 from $7.26.
‘Our company delivered a very strong performance in 2024 with total revenue and core EPS up 21% and 19% respectively. We also delivered nine positive high value phase III studies in the year, which coupled with increasing demand for our medicines in all key regions, will help sustain our growth momentum into 2025,’ Chief Executive Officer Pascal Soriot commented.
In the fourth quarter, revenue rose 24% to $14.89 billion from $12.02 billion and pretax profit near doubled to $1.67 billion from £897 million. EPS increased 56% to $0.97 from $0.62, with core EPS up 44% to $2.09 from $1.45.
Shore Capital analyst Sean Conroy said fourth-quarter revenue was 5% ahead of consensus and core EPS 1% above forecast.
For 2025, AstraZeneca expects revenue growth to ease to a high single-digit percentage at constant currency. Core EPS is expected to increase by a low double-digit percentage.
But IMI fell 1.2% after it disclosed it had suffered a cyber security incident.
The Birmingham, England-based engineering firm said the incident involved ‘unauthorised access to the company’s systems’.
‘As soon as IMI became aware of the unauthorised access, the company engaged external cyber security experts to investigate and contain the incident. In parallel, the company is taking the necessary steps to comply with our regulatory obligations,’ the firm added.
On the FTSE 250, Babcock International rose 6.5% after it upped its guidance for the financial year due to end on March 31.
The London-based provider of technical and engineering support services to the defence and civil sectors now expects £4.9 billion in revenue for the year, which would be a 12% rise from £4.39 billion in financial 2024. It also sits ahead of the Vuma-compiled average analyst forecast of £4.67 billion for the company.
This was due to double-digit organic growth in its Nuclear division, driven by new build and de-commissioning work in the civil nuclear sector and increased submarine support activity, as well as ‘strong’ growth within its Marine arm. where it saw larger LGE volumes and a ramp-up of its Skynet programme.
Babcock also cited a Vuma market consensus of £333.5 million in underlying operating profit for the year, which would be up 34% from the £237.8 million reported last year.
Brent oil was quoted at $74.71 a barrel at the London equities close Thursday, up from $76.64 late Wednesday.
Gold was quoted at $2,851.18 an ounce at the London equities close Thursday against $2,870.03 at the close on Wednesday.
In Friday’s UK corporate calendar has half-year results from Ashmore.
The economic calendar for Friday has US nonfarm payrolls.
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