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(Alliance News) - Stock prices in London largely opened higher on Thursday, in somewhat confident trade ahead of a Bank of England interest rate decision, which comes in the wake of the UK inflation rate returning to target.
The FTSE 100 index traded 22.16 points higher, 0.3%, at 8,227.27. The FTSE 250 was up 65.85 points, 0.3%, at 20,446.90, though the AIM All-Share was down 3.11 points, 0.4%, at 774.39.
The Cboe UK 100 rose 0.3% to 818.78, the Cboe UK 250 added 0.4% at 17,786.84, and the Cboe Small Companies was 0.1% higher at 16,751.73.
In European equities on Thursday, both the CAC 40 in Paris and the DAX 40 in Frankfurt were up 0.5%.
The pound was quoted at USD1.2710 early Thursday, down from USD1.2723 at the London equities close Wednesday. The euro slipped to USD1.0733 from USD1.0745. Against the yen, the dollar rose to JPY158.23 from JPY157.92.
Threadneedle Street is expected to maintain UK bank rate at the 16-year high of 5.25% for the seventh-successive meeting on Thursday. It announces the rate decision at midday. Unlike the upcoming meeting in August, Thursday's decision will not be accompanied by a monetary policy report with economic projections, nor a press conference with Governor Andrew Bailey.
For those hoping for a summer rate cut, August, and not the June meeting, is likely to be the best bet.
For the first time since July 2021, inflation returned to target, numbers on Wednesday showed.
According to the Office for National Statistics, the rate of yearly consumer price growth faded to 2.0% in May, from 2.3% in April. The reading was in-line with the FXStreet cited consensus.
Analysts at Lloyds Bank commented: "Although headline CPI inflation is back at target for the first time in nearly three years, the services side of the equation continues to run well ahead of that, slowing to only 5.7% year-on-year in May. That compares to 5.3% the BoE staff expected to be the case at this point. That overlays with high wage growth, which continues to defy generally softer labour market data (declining vacancies, rising unemployment/ shrinking employment).
"You can make a good argument those elevated measures are lagging components, but from the MPC's perspective that persistence still presents risks to the medium-term outlook. Consequently, the minutes of the June meeting will have very limited scope for any incrementally dovish developments. The market is pricing a 35% probability of a reduction in bank rate in August."
Also in the economic calendar, there is eurozone consumer confidence data at 1500 BST. At 1330 BST, there is the US initial jobless claims data.
In London, Sainsbury's shares rose 1.6%, as it struck a deal to sell its core banking business to NatWest. Shareholders in the grocer stand to receive some cash as part of the deal.
Sainsbury's said it expects its bank arm to return excess capital of at least GBP250 million to the grocer once its phased withdrawal from it has been completed and a future model for Argos Financial Services is in place. Sainsbury's intends to return this capital to shareholders.
NatWest, meanwhile, explained Sainsbury's Bank will pay it GBP125 million consideration as part of the transfer.
The deal includes the grocer's personal loan, credit card and retail deposit portfolios but not its commission income pact, including insurance, ATMs and travel money. Argos Financial Services is also not included in the deal and Sainsbury's said it will update on plans for that division "at a future date".
NatWest added: "As part of the transaction, NatWest Group also expects to add around one million customer accounts."
The deal is expected to have a 20 basis point impact on its common equity tier 1 ratio on completion. It will be earnings per share and return on tangible equity accretive from completion.
Sainsbury's in January had announced a phased withdrawal from its core banking business. Peer Tesco in February struck a deal to sell the retail banking business of Tesco Bank to Barclays.
NatWest shares traded 0.8% higher.
Elsewhere, Energean rose 6.9%. It said it will sell its portfolio in Egypt, Italy and Croatia to a Carlyle International Energy Partners-controlled entity in a deal worth up to USD945 million.
The exploration and production firm said deal proceeds will be enough to repay a USD450 million corporate bond and allow for USD200 million for a special dividend.
"This sale enables Energean to rationalise the portfolio and focus on its gas-weighted, gas-development strategy, underpinned by the Karish Field in Israel and recent farm-in to the Anchois field in Morocco. This strategy aims to maximise asset monetisation (through a develop and operate model), free cash flow generation and returns to shareholders," Energean explained. "The transaction also optimises the portfolio by divesting later life assets, removing over 60% of the group's decommissioning liabilities, and improving free cashflow generation in the short to medium-term."
Alpha Financial Markets Consulting rose 3.6% as it agreed to a GBP626.0 million takeover by funds managed by Bridgepoint Advisers.
Tate & Lyle lost 1.7% after it announced a deal to acquire nature-based ingredients company CP Kelco for USD1.8 billion, in a move which will create a "leading global speciality food and beverage solutions business".
The deal will see JM Huber, a consumer and industrial products firm and current owner of CP Kelco, "become a long-term shareholder" of Tate & Lyle, with a 16% stake on completion.
The deal with JM Huber consists of a USD1.15 billion cash portion funded from new and existing debt facilities and cash resources and USD645 million from the issue of 75 million new Tate & Lyle shares. There is a deferred consideration of up to 10 million extra Tate & Lyle shares, subject to performance criteria.
Away from the deal-making bonanza, CMC Markets shares jumped 9.3%. The online trading platform provider hailed strong annual results, which represented a "record-high outside the Covid-19 pandemic period".
Net operating income rose 15% to GBP332.8 million in the year to March 31, from GBP288.4 million. Pretax profit surged 21% to GBP63.3 million from GBP52.2 million.
CMC Markets lifted its final dividend by 87% to 7.3 pence per share from 3.9p. It gives a total dividend for the year of 8.3p, up 12% from 7.4p.
"Institutional, B2B and multi-asset, multi-currency platforms, across all brands is the future, and ours. We have built the infrastructure which will allow us to significantly increase our growth potential whilst improving profit margins through scale," Chief Executive Peter Cruddas said.
"It is going to be an exciting couple of years."
YouGov plunged 37% as the research and data analytics group warned on annual profit.
"Following the half-year results, YouGov has seen lower sales bookings than anticipated," it cautioned.
"In line with our stated strategy, the company had invested in the business to set up for an acceleration in growth in H2. While we have seen an improvement in the second half, the growth was below expectations."
It now expects revenue between GBP324 million and GBP327 million for the year ending July and adjusted operating profit between GBP41 and GBP44 million. At best, the new outlook suggests a full-year revenue rise of 27%, but a profit fall of 8.9%.
In Asia on Thursday, shares were largely lower. The Shanghai Composite ended down 0.4%, while the Hang Seng in Hong Kong traded 0.6% lower. Tokyo's Nikkei 225 rose 0.2%, though over in Sydney, the S&P/ASX 200 ended slightly lower.
China's benchmark lending rates were left unchanged on Thursday, as expected.
The People's Bank of China left the one-year loan prime rate - which serves as the benchmark for corporate loans - unchanged at 3.45%. The five-year LPR - which is used to price mortgages - was left at 3.95%. It had been cut from 4.20% in February, in an effort to stimulate the country's flagging housing market.
The loan prime rate is a lending reference rate set monthly by 18 banks. Back in August 2019, the PBoC revamped the mechanism to price loan prime rate, loosely pegging it to the medium-term lending facility.
Earlier this week, the PBoC left the one-year medium-term lending facility rate unchanged at 2.50%.
Pantheon Macroeconomics analyst Kelvin Lam said: "In all, we still see a reasonable chance of a symbolic cut in both the MLF rate and the LPR in the coming months."
A barrel of Brent oil fetched USD85.07 early Thursday, down from USD85.77 late Wednesday afternoon. Gold rose to USD2,342.89 an ounce, from USD2,325.80.
By Eric Cunha, Alliance News news editor
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