- Carney revamps forward guidance
- BoE focusing on 'spare capacity' in economy
- Bank Rate to rise only gradually when tightening is needed
- Morrisons in buyout talks with private-equity firms
techMARK 2,824.49 -0.42%
FTSE 100 6,683.78 +0.17%
FTSE 250 16,060.03 -0.11%
UK stocks held on to small gains on Wednesday as investors digested a revamped forward guidance strategy put forward by Bank of England Governor Mark Carney alongside the quarterly Inflation Report.
Though the reaction in equity markets was relatively calm, analysts said that the new plan, which focuses on a much broader range of economic variables, has made the outlook for monetary policy more complex.
"The market has put a premium on the uncertainty that this has created, despite the Bank's attempt to dampen expectations of higher rates. In short, the Bank is digging [a hole], but with an even bigger shovel," said Simon Smith, Head of Research at FxPro.
The FTSE 100, which rose to a high of 6,708.17 ahead of Carney's comments, had pared gains slightly but was still trading 0.2% higher at 6,684 by midday.
The index jumped 1.2% on Tuesday to 6,672.66 - its highest finish since January 23rd - after new Federal Reserve Chair Janet Yellen expressed her commitment to continuing to scale back stimulus in "measured steps" after a "broad improvement" in the labour market.
Asian markets rose overnight after a higher-than-expected trade surplus in China as exports rose by more than anticipated in January. The trade balance of $31.86bn, surprising analysts who had expected a slight decline from the $25.64bn surplus registered in December.
Meanwhile, the US House of Representatives has passed an increase in the government's borrowing limit. The House voted 221-201 to waive the $17.2trn debt limit for just over a year, after Republicans gave up on their attempt to win concessions from the Democrats in return.
Carney redesigns forward guidance
Carney revised his initial forward guidance plan, which attempted to link monetary policy to the unemployment rate, just six months after its creation given that joblessness has fallen much faster than many had predicted. In contrast, the new guidance is now focused on a range of indicators which are aimed at reducing the amount of excess slack in the economy.
He stressed that if and when the times comes that the economy can sustain higher interest rates, the Bank Rate will then rise only gradually and any increase in rates will be limited.
Chief European Economist Jonathan Loynes from Capital Economics said that the new guidance from the BoE shifts the focus back to the benign outlook for inflation and "should therefore ensure that monetary policy remains very loose for some considerable time yet".
However, he said that the revised guidance "lacks the simplicity" of the initial plan given that so-called 'spare capacity' is an "even more unpredictable, and much less observable, economic concept" than unemployment.
WM Morrison founders considering private-equity buyout
WM Morrison was in focus after Bloomberg said that its founding family is considering taking the supermarket group private. The Morrison family, who are thought to hold around 9-10% of the UK grocer, are said to have spoken to a number of private-equity firms to gauge their interest. The stock surged early on but had pared gains slightly by midday. Supermarket peers Sainsbury and Tesco were in demand today.
Mining stocks were also in demand today after the better-than-expected data from top metals consumer China. Glencore Xstrata, Anglo American, Rio Tinto and Antofagasta were all trading higher.
Precious metals producer Fresnillo was up, extending gains made yesterday afternoon on hopes that it is close to having a ban on an explosives permit in Mexico lifted. Sector peer African Barrick Gold also rose despite cutting its dividend and swinging to an annual loss for 2013.
Africa-focused explorer Tullow Oil was a heavy faller after saying that while revenues rose in 2013 profits fell in the face of a £200m increase in exploration write-offs. Oil peers Shells and BP were trading lower early on.
Consumer products giant Reckitt Benckiser said it exceeded its targets after "another strong year" in 2013, but warned that markets conditions have become more challenging. Shares edge higher early on.
Data centre services group Telecity saw its shares
dive as much as 12% in early trading after predicting 2014 revenue would be below that forecast by analysts following a good set of results for 2013.
FTSE 100 - Risers
Standard Chartered (STAN) 1,306.00p +2.83%
Babcock International Group (BAB) 1,425.00p +2.15%
Legal & General Group (LGEN) 232.00p +1.93%
Rio Tinto (RIO) 3,521.50p +1.78%
Mondi (MNDI) 994.50p +1.69%
Anglo American (AAL) 1,551.50p +1.67%
Glencore Xstrata (GLEN) 338.30p +1.64%
Antofagasta (ANTO) 917.50p +1.61%
Ashtead Group (AHT) 828.00p +1.53%
Sports Direct International (SPD) 718.00p +1.41%
FTSE 100 - Fallers
Tullow Oil (TLW) 818.00p -3.25%
Persimmon (PSN) 1,397.00p -2.58%
Sage Group (SGE) 421.80p -1.47%
Carnival (CCL) 2,513.00p -1.41%
Royal Dutch Shell 'A' (RDSA) 2,117.50p -1.21%
United Utilities Group (UU.) 744.50p -1.06%
Land Securities Group (LAND) 1,049.00p -1.04%
Royal Dutch Shell 'B' (RDSB) 2,255.00p -0.88%
RSA Insurance Group (RSA) 98.25p -0.86%
Unilever (ULVR) 2,376.00p -0.83%
FTSE 250 - Risers
African Barrick Gold (ABG) 247.90p +3.29%
Playtech (PTEC) 743.00p +2.55%
Kenmare Resources (KMR) 15.78p +2.47%
esure Group (ESUR) 279.20p +2.27%
Lonmin (LMI) 330.80p +2.26%
Vedanta Resources (VED) 918.00p +2.06%
Redrow (RDW) 326.20p +1.94%
BlackRock World Mining Trust (BRWM) 511.00p +1.89%
Domino's Pizza Group (DOM) 522.50p +1.55%
Moneysupermarket.com Group (MONY) 178.60p +1.48%
FTSE 250 - Fallers
Telecity Group (TCY) 658.50p -9.79%
Imagination Technologies Group (IMG) 179.40p -2.66%
Renishaw (RSW) 1,839.00p -1.97%
Cairn Energy (CNE) 202.70p -1.94%
IP Group (IPO) 176.50p -1.94%
UK Commercial Property Trust (UKCM) 78.30p -1.76%
Oxford Instruments (OXIG) 1,529.00p -1.74%
888 Holdings (888) 142.80p -1.72%
ICAP (IAP) 407.70p -1.64%
Greencore Group (GNC) 245.80p -1.64%