Old Lady’s £100bn boost fails to excite investors
LONDON shares sagged after the Bank of England disappointed investors with its latest stimulus plan.
The Old Lady of Threadneedle Street pledged to pump an extra £100bn into the economy as it reels from the effect of the coronavirus pandemic.
This figure had been widely anticipated, but the pace at which it will be distributed was not.
Initially the period for injecting the cash via bond-buying was meant to last until the autumn.
But instead it will be stretched out until the end of the year – meaning the pace of the purchases will be slowed from £13.5bn a week to £7bn while Britain battles an historic recession.
The Bank argues that the economy has been holding up better than it originally feared and that green shoots of recovery are already coming through the ground.
Bank governor Andrew Bailey said people shouldn’t get too het up about the slowing pace of the bond-buying, which he described as going ‘from warp speed to something that by any historical standards still looks fast’.
But investors weren’t as convinced, with the FTSE 100 shedding 0.5pc, or 29.18 points, to close at 6224.07, while the FTSE 250 finished at 17518.26, after falling 0.4pc, or 64.1 points.
IG chief market analyst Chris Beauchamp said investors had a lot on their minds to grapple with, including another 1.5m Americans filing for unemployment benefits for the first time.
He said: ‘A combination of a sour outlook for the economy and the ongoing deterioration in Brexit negotiations has intensified the bearish outlook for the pound, while the elevated level of US jobless claims has helped to boost the dollar in a “flight to safety” trade.’
Insurer Prudential was a bright spot on the Footsie after it sold an 11pc stake in its US business, Jackson, for £400m to rival firm Athene, which is backed by buyout group Apollo.
The transaction values Jackson at a comfortable £3.6bn and was part of a much larger £22bn reinsurance deal.
The Pru has been under pressure from activist hedge fund Third Point for Jackson to be split off from the company – and Prudential chief executive Mike Wells yesterday said the deal was a ‘step forward in meeting our strategic objectives for Jackson’.
Prudential shares rose by as much as 9pc, but settled on a rise of 2.7pc higher, or 31.5p, at 1210p at last night’s close.
Investors were more blasé about news coming out of BP, which raised nearly £9.6bn in debt to take advantage of low interest rates. The oil and gas giant, which just days ago wrote down the value of its assets by £14bn following tumbling oil prices and a bid to go green, raised the money via hybrid bonds.
This means that it raised the money in multiple currencies.
Shares in the energy major fell 0.6pc, or 1.9p, to 314.9p. Elsewhere, logistics group Wincanton edged up 0.8pc, or 1.5p, to 195p after it secured an additional contract with Morrisons. The supermarket group climbed 0.4pc, or 0.7p, to 188.05p.
Wizz Air shares gained height after it announced it will expand its network by setting up new bases in Germany, Romania and Russia, and launching 44 new routes.
The Eastern Europe-focused airline has been much less affected than other budget airlines that depend more on Western Europe for their earnings. Wizz shares rose 1.3pc, or 42p, to 3358p.
And self-storage firm Safestore surged 6.2pc, or 44.5p, to 762.5p, after it locked in higher profits and revenues in the first half of the year. Profits jumped from £39m in the same period of last year to £100m – helping it to raise its interim dividend 7.3pc to 5.9p per share.