London midday: Stocks up but gains muted ahead of rate announcements

The FTSE 100 was up 0.2% at 7,059.77.

Richard Hunter, head of markets at Interactive Investor, said: “In economic terms, the Bank of England interest rate decision on Thursday is likely to take centre stage.

“Muddied by some emergency measures which were brought on by the ill-conceived government announcements of the ‘fiscal event’, the Bank needs to return to its knitting with measures designed to contain inflationary pressures. This could even result in an aggressive hike of 0.75%, despite a clearly lagging economy which could already be in recessionary territory.”

Figures released earlier by the BoE showed that mortgage approvals fell sharply in September as interest rates continued to climb.

According to the Bank’s latest money and credit report, mortgage approvals for house purchases – a key indicator of future borrowing – decreased “significantly” to 66,800 from 74,400 a month earlier.

It was, however, not as sharp a decline as some had feared. Most analysts had expected approvals to fall to around 63,700.

The effective interest rate, meanwhile, on newly-drawn mortgages jumped 29 basis points to 2.84%, the largest monthly increase since December 2021, when the current rate-increasing cycle began.

Net borrowing of mortgage debt remained steady at £6.1bn in September, above the six-month average of £5.7bn. Gross lending rose to £27bn from £25.9bn in August, while gross repayments were little changed at £20.6bn.

Net consumer credit borrowing also increased, but by less than in August, when it rose by £1.2bn. Consumers borrowed an additional £0.7bn last month, the lowest since December 2021 and below consensus for around £1.0bn.

The slowdown was entirely attributed to credit card borrowing, which fell to £0.1bn from £0.7bn month-on-month.

In contrast, households added £8.9bn to their savings, well above the 2018-2019 average of £4.9bn.

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: “Households are acting with caution when deciding whether to save less or borrow more to maintain their real level of consumption amid the surge in inflation.

“Looking ahead, we think households will remain wary given that consumer confidence is on the floor. Note too that households likely will become even more cautious when unemployment starts to rise in the coming months as businesses seek savings in response to the surge in their borrowing costs.”

In equity markets, banks were on the rise following a report that the government had denied suggestions it is considering a windfall tax on the sector as one means of closing the budget hole.

According to The Times, Prime Minister Rishi Sunak and Chancellor Jeremey Hunt played down the notion that they were looking at new taxes on banks. It was understood that Hunt is likely to cut the current 8% surcharge for financial institutions to 3%, which would mean that if the corporate tax rate goes up to 25%, banks will face a 28% tax rate.

NatWest (LON:NWG), Lloyds and Barclays (LON:BARC) all advanced. NatWest was also recovering from heavy losses last week on the back of results.

British Gas owner Centrica (LON:CNA) surged after an upgrade to ‘buy’ at Jefferies, while Drax powered ahead after the same upgrade. Centrica was also boosted after Citi reiterated its ‘buy’ rating on the shares.

International Distribution Services shot higher after strikes planned by Royal Mail (LON:IDSI) workers over the next two weeks were called off.

EasyJet flew higher following a report that BA and Iberia owner IAG is renewing plans to consolidate the sector. According to The Times, speculation is mounting that IAG could look to buy smaller rivals such as easyJet (LON:EZJ) or Portugal’s TAP. IAG and Wizz Air (LON:WIZZ) also gained.

Russ Mould, investment director at AJ Bell, said easyJet as a takeover target for IAG makes “perfect sense”.

“Owning EasyJet would significantly boost International Consolidated Airlines’ position in the leisure market and give it access to many prized airport landing slots,” he said.

“The key challenge is funding such a deal. International Consolidated Airlines is already ladened with large debts and shareholders may prefer it to pay down these borrowings rather than spend billions on buying another airline such as EasyJet.”

On the downside, Harbour Energy lost ground following a report that the windfall tax on energy companies could be raised to 30% and extended by three years. According to The Times, under options being considered by Jeremy Hunt, the energy profit levy would increase by up to five percentage points.

Bodycote slumped after saying it had appointed Ben Fidler as chief financial officer, succeeding Dominique Yates who announced his intention to retire earlier this year. Fidler is currently the deputy CFO of Rolls-Royce (LON:RR), a position he has held since January 2021.

Market Movers

FTSE 100 (UKX) 7,059.77 0.17%

FTSE 250 (MCX) 17,903.70 -0.07%

techMARK (TASX) 4,227.30 -0.18%

FTSE 100 – Risers

Centrica (CNA) 76.08p 3.99%

International Consolidated Airlines Group (LON:ICAG) SA (CDI) (IAG) 119.88p 3.99%

NATWEST GROUP (NWG) 232.30p 3.29%

Coca-Cola (NYSE:KO) HBC AG (CDI) (CCH) 1,895.50p 2.35%

Prudential (LON:PRU) 814.80p 2.16%

M&G (MNG) 177.00p 2.08%

Lloyds Banking Group (LON:LLOY) 42.12p 2.07%

BT Group (LON:BT.A) 129.20p 2.01%

Aviva (LON:AV.) 420.40p 1.72%

Flutter Entertainment (CDI) (FLTR) 11,435.00p 1.69%

FTSE 100 – Fallers

Intertek Group (LON:ITRK) 3,653.00p -2.79%

Spirax-Sarco Engineering (SPX) 10,740.00p -1.47%

Berkeley Group Holdings (The) (BKG) 3,468.00p -1.45%

Croda International (CRDA) 6,774.00p -1.34%

Harbour Energy (HBR) 369.20p -1.28%

SEGRO (SGRO) 782.00p -1.21%

Shell (LON:RDSa) (SHEL) 2,392.00p -1.10%

Rentokil Initial (LON:RTO) 539.60p -0.88%

BAE Systems (LON:BAES) (BA.) 807.40p -0.86%

Sage Group (LON:SGE) 725.40p -0.85%

FTSE 250 – Risers

International Distributions Services (IDS) 208.60p 7.64%

easyJet (EZJ) 350.90p 6.82%

Carnival (NYSE:CCL) 697.80p 5.41%

Helios Towers (HTWS) 120.00p 5.08%

Wizz Air Holdings (WIZZ) 1,692.00p 5.03%

Mitchells & Butlers (MAB) 116.80p 3.91%

Abrdn (ABDN) 159.15p 2.84%

C&C Group (CDI) (CCR) 165.20p 2.80%

OSB Group (OSB) 411.40p 2.75%

Moonpig Group (MOON) 138.50p 2.44%

FTSE 250 – Fallers

Coats Group (LON:COA) 60.30p -4.59%

Petrofac Ltd. (LON:PFC) 109.80p -4.44%

Genus (LON:GNS) 2,568.00p -3.17%

JTC (JTC) 692.00p -3.08%

Oxford Instruments (LON:OXIG) 1,950.00p -2.74%

Grainger (GRI) 225.40p -2.51%

Balanced Commercial Property Trust Limited (BCPT) 84.30p -2.43%

HGCapital Trust (HGT) 350.00p -2.37%

Bytes Technology Group (BYIT) 360.40p -2.17%

Tritax Eurobox (GBP) (EBOX) 59.50p -2.14%