London open: Stocks rally after Wall St gains; BoE in focus

(Sharecast News) - London stocks rallied in early trade on Thursday, taking their cue from strong gains on Wall Street after the Federal Reserve stood pat on interest rates and chair Jerome Powell struck a dovish note. At 0830 GMT, the FTSE 100 was up 1.1% at 7,822.48, as investors eyed a policy announcement from the Bank of England, which is widely expected to keep rates on hold at 5.25%.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The Federal Reserve stayed steadfast to its repeated mantra that more data is needed before cuts can come but welcomed the march down in prices. The status quo has reassured investors that cuts will arrive in the summer, although more patience is needed. It's helped stocks surge on another wave of enthusiasm and the feel-good factor is set to keep reverberating through early trading today.

"Bank of England policymakers are highly unlikely to waver from their stance and are likely to continue to stress that vigilance is still needed while they spy the prospect for rate cuts on the horizon.

"With February's inflation snapshot coming in slightly lower than expected, it'll give the monetary policy committee a little more confidence that their action is doing the trick in bringing down demand in the economy, but a majority vote for rates to be held is still expected. However, there may well be more dissenters around the table, arguing for earlier cuts, given the super-stagnant nature of the economy and the worry that inflation may end up undershooting the target not just briefly but for a more sustained period."

Market participants were also mulling the latest data from the Office for National Statistics, which showed the government borrowed more than expected in February.

Public sector borrowing excluding banks came in at £8.4bn last month, above expectations for £6bn. However, it was still down by £3.4bn on February last year.

Senior ONS statistician Jessica Barnaby said: "This was the fourth consecutive month in which borrowing was lower than in the same month a year ago, with growth in tax receipts exceeding growth in spending.

"Across the financial year to date, borrowing was the lowest it has been for four years.

"Relative to the size of our economy, debt remains at levels last seen in the early 1960s."

In equity markets, savings and investments firm M&G gained as it beat analysts' forecasts with its 2023 results, with net client flows, adjusted profits and operating capital generation all up materially on the previous year.

Adjusted operating profit before tax totalled £797m, up from £625m in 2022, which the firm put down to a resilient performance in Asset Management, and improved contributions from Life, Wealth and Corporate Centre. This was well ahead of the consensus forecast of £750m, according to UBS.

UK fashion retailer Next was also in the black as it held guidance for 2024 after posting a better-than-expected 5% rise in annual profits to £918m.

Direct Line nudged up as it reported a widening of its full-year losses but announced a new £100m cost-savings plan and reinstated its dividend.

Virgin Money advanced as it formally agreed to be taken over by Nationwide in a £2.9bn deal. The news confirmed a preliminary agreement announced on 7 March.

BA and Iberia owner IAG flew higher after an upgrade to 'outperform' at RBC Capital Markets, which said it sees upside to consensus expectations in 2024.

On the downside, Schroders, British American Tobacco, Crest Nicholson, Hikma, Pearson and Beazley all fell as they traded without entitlement to the dividend.