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Bullish BOE Boosts Sterling, Gilt Yields; Stocks Slip

09/23/2021 | 09:18am EDT

Bullish BOE Boosts Sterling, Gilt Yields; Stocks Slip

The Bank of England's 7-2 split vote to keep the current GBP875 billion target of government bond purchases while "symbolic" it does signify the central bank's increasingly hawkish stance on monetary policy, says Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors. This provides an important sign as markets focus on the potential for an interest rate increase in the first half of 2022, he says. Gilt yields rose following the announcement causing the yield curve to flatten due to greater increases on shorter-dated yields, he notes. The FTSE 100 trades slightly weaker as a stronger pound weigh on U.K. multinationals that earn most of their profits overseas.

 
Companies News: 

Xeros Technology 1H Pretax Loss Narrowed Slightly

Xeros Technology Group PLC on Thursday reported a slightly narrowed pretax loss for the first half of the year, and said that it is confident that revenue will grow in 2022 and beyond despite suffering royalty income delays.

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Eve Sleep 1H Pretax Loss Widened; Full Year on Track to Meet Board's Views

Eve Sleep PLC said Thursday that its pretax loss widened for the first half after booking higher costs, but that it was on track to deliver the board's expectations for the full year.

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Home REIT Raises GBP350 Mln via Share Issue, More Than Planned

Home REIT PLC said Thursday that it has now raised 350 million pounds ($476.6 million) via the previously announced share issue, more than initially planned due to strong investor demand.

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Marley Group to Proceed With London IPO

Marley Group Ltd. said Thursday that it will proceed with its planned initial public offering on the London Stock Exchange, as first indicated last week.

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Distribution Finance Capital 1H Pretax Loss Narrowed Materially

Distribution Finance Capital Holdings PLC reported on Thursday a significantly narrowed pretax loss for the first half of 2021 and said that momentum has started to build in growing its loan book.

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Eve Sleep 1H Pretax Loss Widened; Full Year on Track to Meet Board's Views

Eve Sleep PLC said Thursday that its pretax loss widened for the first half after booking higher costs, but that it was on track to deliver the board's expectations for the full year.

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GreenRoc Mining Prices IPO at 10 Pence a Share; Trading to Start Sept. 28

GreenRoc Mining PLC on Thursday priced its initial public offering on London's junior AIM at 10 pence a share and said that trading is expected to start on Sept. 28.

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Civitas Social Housing Shareholders Reject Pre-emption Resolution at AGM

Civitas Social Housing PLC said Thursday that all resolutions proposed at its annual meeting passed except for resolution 13, which failed to receive enough shareholder support.

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3i Infrastructure to Sell Four European Liquid Storage Terminals to Evos

3i Infrastructure PLC said Thursday that it has agreed to the conditional sale of a 45% stake in four European liquid storage terminals to energy storage company Evos, and that this is expected to be completed in the fourth quarter.

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Lloyds Nonexecutive Directors Nick Prettejohn, Stuart Sinclair to Step Down

Lloyds Banking Group PLC said Thursday that Nick Prettejohn and Stuart Sinclair intend to step down as nonexecutive directors.

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Navigator Holdings Names Von Appen Chairman as Butters Retires >NVGS

Navigator Holdings Ltd. on Thursday said David Butters has retired as executive chairman.

 
Market Talk: 

UK Government Isn't Expected to Introduce Windfall Tax on Energy Companies

1252 GMT - While the introduction of a windfall tax on U.K. energy companies can't be ruled out, it would be very surprising if the conservative government goes down this route, Citi's Jenny Ping says. Such action would not only undermine investor confidence in the U.K., it would also derail the government's commitment to net zero emissions, she says. "Instead, we believe the U.K. government will leverage the current situation to push for more speedy diversification away from gas, more investment in different forms of low carbon generation, especially those with stable baseload production," Ping says.

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BOE Could Raise Rates Before Market Expects

1226 GMT - The Bank of England could raise interest rates before the market anticipates, says Jesus Cabra Guisasola, associate at Validus Risk Management, following the BOE's policy announcement earlier. The BOE signaled that the case for tighter monetary policy has strengthened, despite lowering growth forecasts, causing sterling to break above a key chart level against the dollar at $1.3700, he says. "Money markets are betting for a hike in interest rates of 15 basis points by March 2022. However, if the economy grows at a faster pace, with inflation above the 2% target and jobless rate falling, we could see the BOE acting sooner rather than later," he says. GBP/USD is last up 0.6% at 1.3707, up from 1.3683 before the BOE's announcement.

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BOE Likely to Be First Major Central Bank to Raise Interest Rates

1221 GMT - The Bank of England looks poised to become the first major central bank to raise interest rates, says Ambrose Crofton, global market strategist at JP Morgan Asset Management. "We expect the Bank of England to be the first major central bank to achieve interest rate lift-off in the first half of next year," he says. Whether inflationary pressures prove entirely temporary depends in part on the labour market, he says, adding that there is huge demand for labor and job vacancies are at a historical high, leading businesses to raise wages to attract and retain workers. "This could lead to more sustaining price pressures in the medium term" and prompt the BOE to raise interest rates, he says.

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UK Faces Post-Brexit Supply-Chain Crisis, Data Show

1218 GMT - U.K. retailers face widespread shortages and a fifth of road hauliers have collapsed or suspended trading following the U.K.'s exit from the EU, parcel-delivery website ParcelHero says. Some 30% of accommodation and food-service companies and 23% of retailers and wholesalers reported lower-than-expected stocks, according to Office for National Statistics data covering August 23-Sept. 5 and cited by ParcelHero. Transport and storage companies reported similar problems, with 20% of businesses closing entirely or pausing trading. A post-Brexit exodus of continental European citizens and the U.K. government's refusal to give EU-based drivers temporary skilled-worker permits has left the U.K.'s entire supply chain facing a major crisis, ParcelHero says. "This is yet another problem Brexit has created for British importers and exporters," ParcelHero's David Jinks says.

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BOE's Tightening Message Signals Growing Inflation Concerns, says Aberdeen SI

1212 GMT - The Bank of England's policy message suggests the central bank sees a stronger case for tightening monetary policy, signaling growing concerns over the inflation outlook, says Luke Bartholomew, senior economist at Aberdeen Standard Investments. "The most striking message in the Bank's statement today was that it believes the case for tightening monetary policy has strengthened since August. This is despite the fact that the Bank also downgraded its growth forecasts," he says. "It therefore seems clear that it is becoming more concerned about the inflation outlook." He says investors should prepare for the prospect of interest rates increasing next year.

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Fuller Smith & Turner's Estate Still Facing Covid-19 Challenges

1153 GMT - Fuller Smith & Turner's results show that customers are heading back to pubs in decent numbers, Russ Mould of AJ Bell says. Whereas food-led rural and out-of-town venues lead the way, helped by the surge in domestic tourism, the performance of city-center establishments is still foggy, Mould says. Still the pubs-and-hotels business's central London estate shows signs of an improvement in the situation, Mould says. "However, there is no escaping the reality that the whole sector could face a difficult few months of uncertainty given the specter of reintroduced restrictions or even just increased levels of infection reducing peoples' ability or willingness to go out and have a few pints," Mould says.

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UK Recession Risk May Weaken Case for Rate Rise for Another Year, says Raymond James

1146 GMT - The risk that the U.K. might slide back into recession is likely to weaken the case for the Bank of England to raise interest rates at least for another year, says Jeremy Batstone-Carr, part of European Strategy Team at Raymond James. "The bigger risk for the Monetary Policy Committee is not prevailing inflationary pressure so much as the possibility that the U.K. economy might slide back into recession, likely rendering the case for a base rate hike irrelevant for at least another year," he says. The BOE decided to leave current interest rates and asset purchases unchanged, as economic growth fizzles out due to supply shortages and Brexit complications, he says.

Contact: London NewsPlus, Dow Jones Newswires; Write to Sarka Halas at sarka.halas@wsj.com

(END) Dow Jones Newswires

09-23-21 0917ET

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