London close: Stocks manage stronger finish as sterling slips

(Sharecast News) - London stocks had pared some of their earlier gains, but remained above the waterline by the close on Tuesday, as sterling fell and gilt yields rose on the Bank of England denying reports it wanted to delay selling billions of pounds of government bonds. The FTSE 100 ended the session up 0.24% at 6,936.74, and the FTSE 250 was ahead 0.15% at 17,529.31.

Sterling was down 0.49% on the dollar, meanwhile, at $1.1302, as it weakened 0.46% against the euro to €1.1489.

"The FTSE 100 has unsurprisingly lagged its European and US counterparts, highlighting how a resurgent pound will typically mute any recovery as internationally-focused stocks see their earnings devalued," said IG senior market analyst Joshua Mahony.

"While the UK is filled with concern over rising costs thanks to Jeremy Hunt's less generous stance as chancellor, the prospect of a tighter economic environment brings expectations that inflationary forces can be trimmed earlier than would be the case under Kwarteng's pro-growth budget.

"Markets are clearly more optimistic after the UK's missteps provided a stark warning that an expansionary government stance would simply prolong the crisis if pitched against a central bank seeking to drive down inflation."

The Bank of England appeared to deny reports earlier in the session that it wanted to delay selling billions of pounds of government bonds.

It acquired £838bn of gilts during its quantitative easing programme, and had intended to start selling them on 6 October, before the sale was delayed until the end of the month in the wake of the government's doomed mini-budget.

The Financial Times reported before markets opened that the central bank had since bowed to investor pressure, and agreed to extend the delay further until markets calmed.

It said officials had made the decision after judging gilt markets to be "very distressed".

But in a brief statement, the BoE said: "This morning's FT report, that the BoE has decided to delay MPC gilt sales, is inaccurate."

A spokesperson declined to comment further.

Gilt yields jumped and the pound slumped after the mini-budget, which included £45bn of unfunded tax cuts but no spending plans or economic forecasts.

Since then, chancellor Kwasi Kwarteng had been sacked and his replacement, Jeremy Hunt, on Monday scrapped most of the budget.

Along with the Bank's £65bn temporary support package for the bond market, which ended on Friday, the changes to fiscal policy had helped steady gilt markets, with 30-year yields - which reached a peak of more than 5% - falling back to 4.32% on Monday.

However, yields remained considerably higher than the 3.75% seen before the mini-budget, and commentators were concerned that the still-fragile market was vulnerable to shocks.

"The central bank's mandate to ensure the orderly functioning of financial markets remain, suggesting it would be wise for the BoE to hold off at least for not from selling bonds, which could unnecessarily add to selling pressures in an already-fragile market, given the financial contagion that a dysfunctional market sell-off would provoke," said Victoria Scholar, head of investment at Interactive Investor.

In economic news, sentiment in Germany worsened significantly in October, according to a closely-watched survey.

The ZEW economic research institute said its investor expectations index had increased slightly, by 2.7 points to -59.2.

Analysts were expecting it to fall to -65.7.

But the assessment of the current economic situation in Germany - the European Union's biggest economy - fell sharply again, by 11.7 points to -72.2.

Consensus had been for a smaller fall, to -68.0.

"The ZEW indicator of economic sentiment rose slightly in October," said ZEW president Achim Wambach.

"However, the current economic situation is once again assessed as significantly worse than in the previous month.

"The probability that real gross domestic product will decline in the course of the next six months has also increased considerably."

On London's equity markets, advertising giant WPP managed to close 0.93% higher after French peer Publicis lifted its 2022 guidance, following better-than-expected third-quarter performance.

Clay bricks manufacturer Ibstock jumped 4.88% after it said third-quarter trading was ahead of its expectations, with "robust" demand patterns and a strong operational performance.

Price comparison website Moneysupermarket pushed 5.34% higher after saying annual core earnings would be at the upper end of expectations as third-quarter trading came in ahead of expectations, driven by customers switching financial products.

888 Holdings reversed earlier losses to close up 1.33%, even after it said group revenues declined 7% year-on-year to £449.0m in the three months ended 30 September.

The gambling operator put the performance down to enhanced UK online player safety measures, and the shuttering of its Dutch operations.

In broker note action, Moonpig was boosted 4.5% by an initiation at 'buy' by Canaccord.

On the downside, housebuilder Bellway fell 2.19% after it reported a jump in full-year profit amid record revenue and completions, but warned that demand was moderating.

Sector peers also lost ground, with Barratt Developments down 2.03%, Persimmon flat, Taylor Wimpey off 0.88%, and Vistry Group 0.18% weaker.

Elsewhere, miner Rio Tinto was 1.49% lower after it trimmed its full-year production guidance as the weakening global economic outlook weighed on the third quarter.

Ninety One Group was also in the red, falling 4.77% after it reported a fall in assets under management for the second quarter.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Abigail Townsend.

Market Movers

FTSE 100 (UKX) 6,936.74 0.24% FTSE 250 (MCX) 17,529.31 0.15% techMARK (TASX) 4,157.73 0.58%

FTSE 100 - Risers

Smurfit Kappa Group (CDI) (SKG) 2,845.00p 6.36% Rolls-Royce Holdings (RR.) 74.28p 3.79% Smith (DS) (SMDS) 285.00p 3.75% United Utilities Group (UU.) 919.40p 3.16% CRH (CDI) (CRH) 2,979.00p 2.80% Spirax-Sarco Engineering (SPX) 10,835.00p 2.56% Rentokil Initial (RTO) 514.40p 2.39% Pershing Square Holdings Ltd NPV (PSH) 2,675.00p 2.30% Halma (HLMA) 2,074.00p 2.27% Ashtead Group (AHT) 4,365.00p 2.25%

FTSE 100 - Fallers

Harbour Energy (HBR) 383.60p -4.36% Centrica (CNA) 69.78p -4.07% SEGRO (SGRO) 750.60p -2.14% Barratt Developments (BDEV) 352.70p -2.03% Airtel Africa (AAF) 125.60p -1.64% Rio Tinto (RIO) 4,748.00p -1.49% Intermediate Capital Group (ICP) 1,010.00p -1.22% HSBC Holdings (HSBA) 465.75p -1.17% BP (BP.) 445.25p -0.93% Taylor Wimpey (TW.) 90.48p -0.88%

FTSE 250 - Risers

Carnival (CCL) 611.00p 8.10% Moneysupermarket.com Group (MONY) 209.20p 5.34% Ibstock (IBST) 159.10p 4.88% Marshalls (MSLH) 245.00p 4.70% Moonpig Group (MOON) 136.90p 4.50% Discoverie Group (DSCV) 724.00p 4.47% Rathbones Group (RAT) 1,792.00p 4.31% Bridgepoint Group (Reg S) (BPT) 188.60p 3.97% 4Imprint Group (FOUR) 3,520.00p 3.38% Abrdn Private Equity Opportunities Trust (APEO) 412.00p 3.26%

FTSE 250 - Fallers

Syncona Limited NPV (SYNC) 166.00p -7.68% ASOS (ASC) 490.00p -5.41% Ninety One (N91) 177.70p -4.77% Drax Group (DRX) 508.00p -3.97% Hipgnosis Songs Fund Limited NPV (SONG) 86.50p -3.50% GCP Infrastructure Investments Ltd (GCP) 96.00p -3.42% Target Healthcare Reit Ltd (THRL) 82.00p -3.42% BBGI Global Infrastructure S.A. NPV (DI) (BBGI) 153.80p -3.27% Lancashire Holdings Limited (LRE) 488.80p -3.11% Diversified Energy Company (DEC) 125.40p -2.87%