MPC surprise buoys pound but hits FTSE

Market report Perry Gourley

Sterling rose after a higher than expected number of Bank of England monetary policy committee (MPC) members voted to raise interest rates.

The pound surged 0.7 per cent against the euro to 1.444, its highest level since the General Election.

The Bank’s vote was a boon for the pound, which had tumbled in morning trading after data from the Office for National Statistics showed retail sales fell by 1.2 per cent between April and May.

David Madden, a market analyst at CMC Markets UK, said: “The fall in UK retail sales in May only added to sterling’s woes, but the shock that three members of the Bank of England (BOE) voted to increase interest rates jolted the pound higher.

In stocks, British Airways owner IAG saw shares dropped 20.5p to 584p as the company revealed that the major IT failure that caused travel chaos for tens of thousands of passengers last month will cost the company £80 million.

Amec Foster Wheeler shares slumped 13.6p to 483p and Wood Group shares dropped 21.5p to 663.5p as both companies’ shareholders approved Wood Group’s £2.2 billion takeover of the engineering and project management firm.

Majestic Wine shares tumbled 35.5p to 349.25p despite insisting that it is “past the tipping point” with its recovery plan, as investors focused on its annual pre-tax loss of £1.5 million.

The biggest risers on the FTSE 100 were Ashtead, up 23p at 1,600p, HSBC Holdings ,up6p at 686.7p, and Royal Bank of Scotland Group, up 1.6p to 251.5p. The home safety products developer said it had seen a strong start to the year and expects to make a return to profitability in the first half. The drinks retailer reported a full-year loss blamed on factors including one-off costs but said it is confident its recovery plan is working.