Thomas Cook Share News (TCG)

LONDON (Alliance News) - The terrorist attack in Nice and the inaction of the Bank of England depressed market sentiment in London as the week drew to a close Friday, with equities trading lower at midday.

At least 84 people were killed when a truck ploughed into a crowd in the southern French city of Nice during Bastille Day celebrations in the evening, officials and reports said Friday. Several of the casualties suffered gunshot wounds as the driver fired a handgun from the cab late Thursday, news agency AFP reported.

The reaction in the London equity market produced a sell-off of travel stocks.

"Recent experience suggests the initial sell-off will be short-lived, but the potential damage to traveller confidence is a clear negative for affected firms. This is especially true in France where there is already concern that the drop in sterling will impact tourism from the UK," said Jasper Lawler, market analyst at CMC Markets.

Budget airline easyJet was the biggest large-cap faller, down 3.2%, International Consolidated Airlines Group was down 1.9% and Thomas Cook Group was down 3.5%.

The FTSE 100 index was down 0.2%, or 11.13 points at 6,643.34. The FTSE 250 was down 0.9% at 16,633.58, while the AIM All-Share index was up 0.2% at 724.20.

UK stocks added to their declines from Thursday, when the Bank of England surprised the market by keeping UK interest rates at 0.5% and its stock of purchased assets unchanged at GBP375 billion.

The market had priced in a high chance of an interest rate cut by the UK central bank given the dovish comments by Governor Mark Carney following the UK's vote to leave the European Union.

Gertjan Vlieghe was the only Monetary Policy Committee member to vote for a cut to 0.25%, in a 8-1 decision to keep rates on hold. The size of purchased assets was unanimously retained at its current level.

The minutes of the meeting suggested that the expected easing is likely to materialize in the Bank of England's next policy decision on August 4.

The pound rose on Thursday following the decision, but fell on Friday after BoE's chief economist and monetary policy committee member Andy Haldane said in a speech that "material easing of monetary policy" will be required next month to maintain confidence in the UK economy.

"I would rather run the risk of taking a sledgehammer to crack a nut than taking a miniature rock hammer to tunnel my way out of prison – like another Andy, the one in the Shawshank Redemption," he said. "And yes I know Andy did eventually escape. But it did take him 20 years. The MPC does not have that same 'luxury'."

Haldane added that easier monetary policy should be just one part of a collective policy response aimed at protecting the UK economy and jobs from a downturn.

Governor Carney is scheduled to make a speech in Toronto at 1300 BST.

At midday, the pound traded at USD1.3349, slightly higher than the USD1.3343 seen at the London stock market close on Thursday, but lower than its USD1.3480 high on Friday.

In mainland Europe, the French CAC 40 index was down 0.6% and the German DAX 30 was down 0.4%.

Ahead of the open on Wall Street, the Dow Jones Industrial Average was indicated to open flat, as was the Nasdaq 100 index and the S&P 500.

Chinese economic growth held steady in the second quarter, as stimulus measures and increased lending prevented any further slowdown in the economy.

Gross domestic product expanded 6.7% year-on-year in the second quarter, the same rate as seen in the prior period, the National Bureau of Statistics reported.

The growth was slightly better than the 6.6% growth forecast by economists and within the government's full year target of 6.5% to 7.0%. In 2015, the Chinese economy grew at its slowest pace in 25 years.

On a quarterly basis, GDP advanced 1.8% in the second quarter, which was faster than the consensus estimate for 1.6% growth.

"The reading, along with other activity data for June, surprised us and the market, and would suggest that stimulus efforts have successfully supported growth," said Craig Botham, emerging markets economist at Schroders.

However, the economist highlighted that while government spending has risen, private sector investment growth is flat compared to 10% in late 2015.

"This points to risks and challenges for the third quarter. The economy looks to be increasingly reliant on fiscal stimulus to keep growth going," Botham added.

In company news, shares in DCC were up 0.6% after the Irish distribution and outsourcing group reiterated its outlook for its current financial year to end-March 2017, saying it expects "another year of profit growth and development".

DCC said the UK's vote to leave the EU is not expected to have any "material direct impact" on its business as it has "relatively little cross-border trade".

The company said its operating profit for the first quarter to end-June was "significantly ahead" of the previous year, and "modestly ahead" of expectations, driven by the performance of its DCC Energy business, which in turn was boosted by acquisitions it completed in the previous year.

Davy analysts Allan Smylie and Ross Harvey added that, even in the event of a UK recession, the group has a "very defensive earnings stream" with the Energy and Healthcare businesses accounting for 83% of group profits.

Sepura shares jumped 30% after it said it has been formally contracted to supply a TETRA network for New York City Transit, a USD34 million deal it first announced in April.

The critical communications services company said the radio systems contract covers system design, project management, and the supply of 40 base stations and approximately 7,500 terminals for the operator the New York subway system.

"This contract endorses both our acquisition of Teltronic and our strategy to focus on both the global transport sector and developing our business in North America - the two fastest growing segments for TETRA," said Sepura Chief Executive Gordon Watling.

Metals Exploration said it requires immediate additional funding for general working capital, as a result of debt restructuring discussions taking longer than expected and its milling activities being suspended.

The company needs the funding because its lenders for the Runruno project in the Philippines require a bi-annual interest payment against the current Runruno facility.

Metals Exploration said it is currently in talks with major shareholders to raise USD5 million of additional working capital, but said no agreement has been reached at this time. The stock traded down 25%.

Still ahead in the economic calendar, US retail sales and inflation data are at 1300 BST. US industrial production is at 1415 BST, while the Reuters/Michigan consumer sentiment index is at 1500 BST.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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